Gross to Net MRP — The Formula Explained (With a Worked Example)
Gross to net MRP calculations tell you exactly how much material to order. Here's the formula, a worked example, and how to apply it to your small manufacturing business.
Gross to net MRP calculations answer one question: do I have enough materials to fill my orders? That’s it. Everything else is just the maths to get there.
In this post, we’ll walk through the formula, break down each component, and work through a real example. No manufacturing degree required.
Last updated: April 2026.
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What is MRP?
Manufacturing Resource Planning (MRP) is a planning system that helps manufacturing businesses figure out what to make, when to make it, and what materials they’ll need to do it. It takes into account your orders, your stock on hand, your supplier lead times, and your production capacity. The result is a clear picture of what you need to source and when.
If you’re a small maker who needs to understand why MRP matters, start there first. This post focuses specifically on the gross to net calculation: the core maths inside any MRP system.
What is a gross to net MRP calculation?
A gross to net MRP calculation tells you how much raw material you still need to order, after accounting for what you already have and what’s on its way. It takes your total production requirements, subtracts available and incoming inventory, and gives you the actual shortfall.
The objective of any MRP system is to produce enough to meet orders while keeping inventory lean. Gross to net is how that works in practice.
Without it, you’re guessing. Too little stock and production stalls: orders get delayed, customers get unhappy, reviews drop. Too much stock and cash gets tied up in materials sitting idle on a shelf. Neither is great for a small manufacturing business.
The gross to net MRP formula
The formula itself is simple:
Net Requirements = Gross Requirements − (Scheduled Receipts + On Hand Inventory)
That’s the whole thing. Let’s pull it apart.
Gross Requirements
The total amount of materials needed to fulfil your planned production orders. This comes from your bill of materials multiplied by the number of units you need to produce, based on placed orders and forecasted demand.
On Hand Inventory
The raw materials you currently have in stock, available to use in production.
Scheduled Receipts
Materials already on order from your suppliers that haven’t arrived yet. They’re coming, but aren’t available for production right now.
Net Requirements
What you still need to source. Your gross requirements minus what you already have and what’s arriving. If this number is positive, you need to place an order. If it’s zero or negative, you have enough.
Calculating your Gross Requirements
To get your gross requirements, you need three things:
- The number of units you need to produce (from placed orders and demand forecasts)
- How many raw materials are needed per unit (from your recipe or bill of materials)
- The lead time for each material (so you know when to order)
You’ll want a master production schedule (MPS) to map out when each product needs to be made. The MPS accounts for lead times and available capacity, then drives the timing of when materials are required.
You’ll also need a bill of materials (BOM) for each product: the list of every material and component, in the exact quantity needed. BOMs can be defined per unit or per batch, depending on how you work.
Once you have both, you can calculate gross requirements for any given period.
Check out our free BOM template for Excel and Numbers →
On Hand Inventory and Scheduled Receipts
Once you know your gross requirements, you look at what you already have to offset them.
On Hand Inventory is what’s sitting in your workshop right now. That covers finished goods, raw materials, and work in progress.
Scheduled Receipts are materials on order that are expected within your planning horizon. The key thing here is lead time: a scheduled receipt only helps if it arrives before you need to use it. An order arriving two days after your production run starts doesn’t count.
Subtract both from your gross requirements, and you have your net requirements.
Safety Stock Levels
Safety stock is a minimum buffer: the floor below which you don’t want your inventory to drop. It protects against demand spikes, late supplier deliveries, and production surprises.
When doing gross to net calculations, your safety stock matters in two ways:
- Your net requirement calculation tells you how much to order to fill orders. But if filling those orders depletes your stock below safety stock, you’ll need to order more to restore the buffer.
- Safety stock effectively acts as an additional demand in your planning. Think of it as inventory that must always be kept in reserve.
The factors that go into setting a safety stock level include demand variability, supplier lead time reliability, and your acceptable risk of stockout. It’s not a one-time calculation. Review it as your business grows.
For a deeper look at the maths, see our guide on how to calculate safety stock.
A worked example — soap maker gross to net MRP calculation
Let’s make this concrete. You’re a small soap maker. You need to produce 50 bars this week to fill current orders.
Your recipe uses 100g of lye per 10 bars. So your gross requirement for lye is:
50 bars ÷ 10 bars × 100g = 500g of lye
Here’s your current situation:
- On hand inventory: 150g of lye in your workshop
- Scheduled receipts: 100g arriving from your supplier in 2 days (within your 3-day production lead time)
- Safety stock target: 200g (a buffer to cover around 20 bars if something goes wrong)
Step 1 — Apply the formula:
Net Requirements = 500g − (100g + 150g) = 250g
You need to order at least 250g of lye to fill this week’s orders.
Step 2 — Check your safety stock:
After production, your remaining lye will be:
(150g + 100g + 250g order) − 500g used = 100g remaining
But your safety stock target is 200g. So you’re 100g short of where you want to be. To restore the buffer, you’d order an additional 100g, making your total order 350g rather than 250g.
The takeaway: the formula tells you what you need for orders. The safety stock check tells you what you need for peace of mind.
Since your supplier lead time is 3 days, place the order today to meet this week’s run.
Systems to automate your gross to net MRP calculations
You can do these calculations in a spreadsheet. For a single product with a handful of materials, it works well enough. But it gets complicated fast. Especially when materials appear in multiple recipes, when scheduled receipts span different lead times, or when you’re managing orders across multiple production runs at once.
ERP (Enterprise Resource Planning) systems integrate manufacturing, accounting, sales, and inventory into one platform. They’re built for larger businesses with complex operations.
MRP (Materials Resource Planning) software focuses specifically on production planning: tracking materials, managing BOMs, calculating requirements, and flagging when to order. It’s more accessible for small manufacturers who don’t need a full ERP.
If you’re just starting out, we’d recommend getting into an MRP system earlier than feels necessary. Rebuilding formulas by hand every time your orders change is the kind of task that expands to fill your evenings. An automated system gives you your net requirements in real time, without the manual work.
Frequently Asked Questions
What is the gross to net formula in MRP?
The gross to net formula for MRP is: Net Requirements = Gross Requirements − (Scheduled Receipts + On Hand Inventory). Gross requirements are the total materials needed to fill your production orders. Scheduled receipts are materials already on order from suppliers. On hand inventory is what you currently have in stock. The result tells you exactly how much additional material you still need to source.
What is the difference between gross requirements and net requirements?
Gross requirements are the total amount of materials you need to fulfil all your planned production orders, calculated from your bill of materials and production schedule. Net requirements are what you still need to source after accounting for what you already have on hand and what's on order. For a small maker, net requirements answer the practical question: how much do I actually need to buy right now?
How does safety stock affect gross to net calculations?
Safety stock acts as a buffer in your gross to net calculations. After calculating your net requirements, check that your remaining on-hand inventory (after production) stays above your safety stock threshold. If it doesn't, order enough to cover both your net requirements and restore the buffer. Otherwise you risk running short mid-production run.
Can small makers do gross to net MRP calculations without specialist software?
Yes, a spreadsheet handles the basic formula for a small product range. The challenge comes when you have many products, complex recipes, or multiple materials that appear across different items. At that point, tracking on-hand quantities, scheduled receipts, and safety stock manually becomes error-prone and time-consuming. Craftybase automates these calculations in real time, so you can see your net requirements at a glance without rebuilding formulas every time your stock changes.
How do you calculate MRP net requirements step by step?
To calculate MRP net requirements: (1) Use your bill of materials and production schedule to determine your gross requirements for each material. (2) Note your current on hand inventory and any scheduled receipts arriving before production starts. (3) Apply the formula: Net Requirements = Gross Requirements − (Scheduled Receipts + On Hand Inventory). (4) Check if the result covers your safety stock buffer — if not, add the shortfall to your order quantity.
How Craftybase helps you track net requirements in real time
Craftybase is an MRP software system designed specifically for small makers and manufacturing businesses. Rather than maintaining spreadsheets and manually working through gross to net MRP calculations each time orders come in, Craftybase tracks your raw material stock levels in real time. You’ll always know exactly what you have on hand, what’s on order, and what you still need to source.
When you create a recipe (bill of materials) in Craftybase for each of your products, the system tells you immediately whether you have enough materials to fulfil an order, and flags when stock drops below your minimum levels. It handles the production planning maths so you can focus on making.
We offer a free 14 day trial so you can try out our features for yourself. Why not sign up today and see how Craftybase can help your small manufacturing business?
