Final answer:
Lot-for-lot ordering in MRP is a technique used in inventory management to order exactly the required quantity of materials based on forecasted demand. It helps minimize inventory levels and ensures production meets expected demand.
Step-by-step explanation:
Lot-for-lot ordering in MRP (Material Requirements Planning) is a technique used in inventory management. It involves ordering exactly the required quantity of materials to meet the forecasted demand for a certain number of periods. This technique ensures that inventory levels are minimized and allows for flexibility in adjusting inventory levels based on demand fluctuations.
For example, if a company determines that it needs to produce 100 units of a product in the next four periods based on forecasted demand, lot-for-lot ordering would involve placing an order for exactly 100 units. This helps in avoiding excess inventory or shortages.
Lot-for-lot ordering uses forecasted demand to extend beyond the orders already received for those periods, ensuring that production meets the expected demand, and unnecessary inventory is avoided.