Your supply chain can deliver more if you are equipped with the right operations strategy. When you have a concrete and solid operations plan, your supply chain will surely be at the top of the game!Risk Pooling is a theoretical concept that every supply chain manager needs to understand. A better understanding of risk poolingwill strengthen your supply chain.According toOpsrules, risk pooling is a statistical concept that suggests that demand variability is reduced if one can aggregate demand, for example, across locations, across products or even across time. Through risk pooling aggregation reduces variability and uncertainty.Edith Simchi-Levi sited that if the demand is aggregated across different locations, it becomes more likely that high demand from one customer will be offset by low demand from another. The reduction in variability allows a decrease in safety stock and therefore reduces average inventory.Here are some of the situations where risk pooling should be considered in making decisions:1.TransportationWhen the products as well as the warehouses are consolidated, the transportation costs becomes cheaper because the shipments can be sent in larger batches.
- Product Design
- Postponement
- Warehouse Location