CPIM Practice Exam

What is the formula for calculating net requirements including safety stock?

1. Gross Requirements - Scheduled Receipts + Safety Stock

2. Gross Requirements - Scheduled Receipts - Prior Projected Available

3. Gross Requirements - Scheduled Receipts - (Prior Projected Available - Safety Stock)

4. Gross Requirements + Safety Stock - Scheduled Receipts

The correct answer is: Gross Requirements - Scheduled Receipts - (Prior Projected Available - Safety Stock)

The correct formula for calculating net requirements, including safety stock, is grounded in the need to determine how much inventory is actually needed to meet demand while considering any existing inventory levels, including safety stock. The formula correctly incorporates the relationship between gross requirements, scheduled receipts, and the necessary safety stock to establish a clear overview of the net amount needed. In this case, gross requirements represent the total demand for a product within a specific period. Scheduled receipts refer to inventory that has been ordered but has not yet been received, and prior projected available represents the stock available at the start of the period. By subtracting both scheduled receipts and the adjusted prior projected available (which includes safety stock) from the gross requirements, the formula accurately reflects the net requirements necessary to ensure that the inventory levels not only meet demand but also compensate for uncertainties that the safety stock covers. This systematic approach effectively ensures that safety stock is factored into the availability calculations, leading to more precise planning and fulfillment strategies in supply chain management.