Risk Pooling Interactive Model

Risk pooling, as discussed in Chapter 18, is accomplished when the demand variability among a large number of supply chain entities is combined by storing inventory centrally, rather than at individual sites. The Risk Pooling Interactive Model demonstrates the effects of risk pooling on the inventory level of a simple distribution system that manages inventory with re-order point systems at each storage point. The distribution network has one central distribution center, two regional distribution centers and four retailers. The user can investigate the inventory level required at each storage alternative by selecting from the choices on the pull-down list. The service level can be adjusted using the sliding bar to see how it affects inventory levels at different locations. The user can also edit the weekly demand and demand variability (standard deviation) for either product in first table for each retailer, and then press the Solve button to solve the new risk pooling problem. Press the Reset button to restore the default settings.