Question

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.

A.True
B. False

Answer 1

Answer: (A) True

Step-by-step explanation:

Yes, the given statement is true that the risk pooling is one of the type of strategy which basically helps in explaining about the demand variability and also decrease the aggregate demand variance in the market.

The main objective of the risk pooling is to maintain the inventory stock level and also avoiding the out of stock situation in the management.

By using the risk pooling strategy the various types of warehouse and companies are reduce the level of safety stock in the supply chain management and also transferring their risk to another organization such as insurance company.

Therefore, the given statement is true.