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. This is really a statistical concept that suggests that aggregation reduces variability and uncertainty.
For example, if demand is aggregated across different locations, it becomes more likely that high demand from one customer will be offset by low demand from another.
This reduction in variability allows a decrease in safety stock and therefore reduces average inventory. Your customer value and business needs are the main drivers of your product offering, procurement and manufacturing strategy, and delivery methods. You also need to balance the tradeoffs of various strategic and tactical decisions using the appropriate analytics software. But the concept of risk pooling helps you comprehend the impact of adding more products, options, warehouses, and any other complexity into your operations.
As the forecast demand data might get distrupted due to this unforeseen event of COVID Pandemic making risk pooling a big risk how are companies implementing risk pooling in the COVID pandemic?
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