The need during supply chain disruptions

In a supply chain network, inventory is stored at almost every entity.

Under the current case of decentralized planning, it is often impossible to see the whole network inventory at once. This also can lead to inventory unbalance.

This is true in the case of partially centralized planning as well.

While adopting a fully centralized planning system can be very daunting, “inventory pooling” can help reap some of the benefits of centralized planning without actually adopting it.

Inventory pooling refers to the consolidation of multiple inventory locations into a single one. Inventory locations may be associated with different geographical sites, different products, or different customers.

Inventory pooling differs from centralization (centralized order decisions) where the managers still decide the order quantity for their own store (retail), whereas their inventories are pooled together.

During Supply Chain Disruption

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– Inventory pooling is less beneficial than centralization, however, centralization is much more complex, and it cannot be readily implemented in short time. Whereas, inventory pooling strategy can be.

– Inventory pooling increases product availability in comparison to regular planning in case of a disruption.

– It facilitates a more demand-driven replenishment.

– There is also possibility of Virtual Stockpile/Inventory Pooling (VSP) which does not require physical inventory to be accumulated but, provides similar benefits as inventory pooling.

Want to go a little deeper ? Check out our other Supply Chain articles !