Risk pooling is a strategy that attempts to use fewer warehouses to decrease the required safety stock levels since the negatively correlated market demands reduce the overall demand variance across the markets which the centralized warehouse services.

Question

Quizplus · Accepted Answer

This statement accurately describes the concept of risk pooling. By using a centralized warehouse to serve multiple markets, the variability of demand across those markets is reduced, allowing for lower safety stock levels and potentially lower overall inventory costs.

Risk Pooling Is a Strategy That Attempts to Use Fewer