Gross to net explosion is the process that translates using assembly requirements into component requirements, taking into account existing inventories and scheduled receipts.

Component due dates are offset from the due date of the using assembly by the lead time of the assembly. The gross to net explosion process determines, for each item, the quantities and due dates of all components needed to satisfy its requirements.

 

The planned order for the end assembly in period 2 becomes the gross requirements for the component in period 1.
In period 1, the gross requirements (100) and the safety stock level (50) represent the total demand. The scheduled receipts (110) and quantity on hand (20) represent the total supply. The net requirements, total demand (150) minus total supply (130), equals 20. The planning process suggests a planned order in period 1 of 20 to meet the net requirements. There is no recommendation for safety stock in each period unless the demand in that period is driven less than the safety stock level. Note: Planned orders in period 4 are not suggested since the projected on hand is at the safety stock level.