What is Net requirements?

Net requirements stops you from over-ordering. If you only look at forecasted demand without checking stock on hand and incoming inventory, you will place purchase orders for stock you already have coming.

For a small Shopify store, this means checking three numbers before you reorder: what you need in total for the period, what sits on your shelf right now, and what is already sitting on a supplier's purchase order. Subtract the second and third from the first and that is what goes on your next order.

Formula

Example

A candle store forecasts it needs 300 units of a lavender candle for next month. It has 80 units on hand and 60 units already on order from its supplier arriving next week. Net requirements = 300 - 80 - 60 = 160 units. That is the quantity to put on the new purchase order.

Common mistakes

• Forgetting to subtract on order inventory, which leads to duplicate orders for the same stock.
• Using gross demand instead of net demand when setting reorder quantities, which inflates order sizes.
• Not updating on hand numbers after a sale spike, so net requirements are calculated against stale stock counts.

Net requirements and SteadyShelf

SteadyShelf calculates net requirements for you by combining its demand forecast per variant with current stock and incoming purchase orders, then suggests an order quantity rounded to case packs.

SteadyShelf is launching on the Shopify App Store. Join early access to get the install link first.

Related terms

Demand forecasting · Reorder quantity · On hand inventory · On order inventory · Purchase order

Full inventory glossary

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