CPIM Practice Exam

What is the Net Requirements Formula?

1. Gross Requirements + Scheduled Receipts - Available Inventory

2. Scheduled Receipts - Gross Requirements + Safety Stock

3. Gross Requirements - Scheduled Receipts - Prior Projected Available

4. Projected Available + Gross Requirements - Scheduled Receipts

The correct answer is: Gross Requirements - Scheduled Receipts - Prior Projected Available

The Net Requirements Formula is foundational in the context of material requirements planning (MRP). It helps organizations determine the actual quantity of items needed for production after accounting for existing inventory and incoming supplies. The correct formula for calculating net requirements is based on the necessary inputs: gross requirements, scheduled receipts, and prior projected available inventory. The gross requirements represent the total demand for an item. Scheduled receipts are the orders that are expected to arrive, which will increase available inventory, while the prior projected available inventory reflects what is already available for use. Thus, the correct formulation—gross requirements minus scheduled receipts and prior projected available—gives the actual net requirements needed to meet production demands. This approach ensures that businesses only order what they genuinely need to fill in the gaps created by current inventory and expected incoming resources, optimizing their inventory management and reducing excess stock costs. By understanding this formula, professionals can effectively plan for production and procurement needs, ensuring they have the right materials when they are needed without overstocking or creating shortages.