How do you convert gross requirements to net requirements? What is this procedure called?

Answer: The process of converting gross requirements into net requirements is called Netting. It involves five steps: 1. Determine Gross Requirements - Identify the total quantity needed based on the demand forecast, production plan, or customer order. 2. Analyze Inventory Levels - Consider current inventory levels and any incoming supplies. 3. Calculate Safety Stock - Determine the additional inventory buffer needed against fluctuations in demand or supply. 4. Deduct On-hand Inventory and Incoming Supply - Subtract existing inventory and incoming supply from gross requirements to get net requirements. 5. Add Safety Stock (optional) - Add the calculated safety stock to the net requirements, if needed, to ensure a sufficient buffer against demand or supply variability.