If projected on-hand = ending inventory of last week + receipts – gross requirements, then a negative result means:

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BlackTom AI · Accepted Answer

To approach this question, I’ll examine what a negative projection on-hand implies in the context of material requirements planning.
Option 1: The Bill of Materials is incorrect. While an incorrect BOM could lead to wrong material quantities, a negative projected on-hand specifically signals a shortage relative to requirements, not an error in BOM structure itself. So this option misattributes the problem.
Option 2: Master Production Schedule must be reduced. A negative projection on-hand doesn’t directly indicate that the MPS must be reduced; it signals that inventory is expected to dip below requirements, which is a quantity issue rather than a scheduling adjustment of the entire master schedule. This is not the most direct consequence of a negative projection on-hand.
Option 3: Excess inventory. A negative projection on-hand cannot indicate excess inventory; it would indicate insufficient stock relative to demand or planned needs. Excess would correspond to a positive projection on-hand greater than needed, not negative. This makes this choice incorrect.
Option 4: A planned order is needed. This is the correct interpretation: a negative projection on-hand means there will be a shortfall in inventory to meet gross requirements, so a planned order should be generated to cover the gap and avoid stockouts. This directly aligns with how MRP signals shortages.
Thus, after evaluating all options, the reasoned conclusion is that a negative result points to a needed planned order to satisfy upcoming requirements.

MGS3100W05 25 Fall OM Exam 3 - Requires Respondus LockDown Browser

If projected on-hand = ending inventory of last week + receipts – gross requirements, then a negative result means:

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