Chapter 14, Problem 1DQ

What is the difference between a gross requirements plan and a net requirements plan?

Summary Introduction

To determine: The difference between gross requirements and the net requirements plan.

Introduction:

Gross requirements plan:

The gross requirements plan is the plan where the independent and dependent demand for a product or a component before the on-hand inventory and the scheduled receipts are netted with.

Net requirements plan:

The net requirements plan is the plan which is established on the gross requirements plan formed by deducting the stock on hand and the scheduled receipts. If the total requirement is below the safety stock levels, a planned order is made based on the given lot sizing technique.

Explanation of Solution

Difference between gross and net requirements concept:

Gross requirements plan	Net requirements plan
It is the plan which is made prior to subtraction of inventory on hand and scheduled receipts.	It is the plan which will take into considerationof the scheduled receipts and inventory on hand before the plan is made.
The plan is the requirement which needs to be made and the production to be started.	If the requirement is fewer than the stock, the planned order release will be made for the item.