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Question 428 - CSCP discussion

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Risk pooling is a concept that suggests:

A.
demand variability is increased if demand is disaggregated across locations.
Answers
A.
demand variability is increased if demand is disaggregated across locations.
B.
demand variability is reduced if demand is disaggregated across locations.
Answers
B.
demand variability is reduced if demand is disaggregated across locations.
C.
demand variability is increased if demand is aggregated across locations.
Answers
C.
demand variability is increased if demand is aggregated across locations.
D.
demand variability is reduced if demand is aggregated across locations.
Answers
D.
demand variability is reduced if demand is aggregated across locations.
Suggested answer: D

Explanation:

Risk Pooling Concept: This involves consolidating demand across different locations to reduce variability and uncertainty.

Disaggregated Demand (Options A and B): Disaggregating demand increases variability because each location faces its own demand fluctuations independently.

Aggregated Demand (Options C and D): Aggregating demand smooths out the peaks and troughs by combining demand from multiple locations, reducing overall variability.

Correct Interpretation (Option D): Aggregating demand across locations allows for a more stable and predictable demand pattern, which simplifies inventory management and improves service levels.

asked 16/09/2024
rashid Elamin
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