Risk pooling involves combining risks across locations or products to reduce variability and improve service levels. It plays a key role in inventory optimization by lowering the amount of safety stock needed. Centralizing inventory or creating flexible fulfillment options allows businesses to pool demand variability, thus making forecasting more accurate and reducing total inventory. Platforms that enable multi-echelon inventory optimization often apply risk pooling principles. By analyzing network-wide demand variability, they recommend optimal stocking points and quantities that achieve cost-efficient service levels.
