What is Risk Pooling?
Risk pooling is the merger of small warehouses at various locations together to form a single central warehouse
Risk Pooling Framework:
- Decision making: Whether to employ risk poling or not?
- Demand for the product is uncertain
- Known marginal profit and salvage values
- Goal : Maximize expected profit and inprove service level
Examples where the Risk Pooling can be employed:
- Goods with highly uncertain demand
- Clothes
- Electronics