APICS Certified Supply Chain Professional (CSCP) — Question 171

Risk pooling is a concept that suggests:

Answer options

• A. demand variability is increased if demand is disaggregated across locations.
• B. demand variability is reduced if demand is disaggregated across locations.
• C. demand variability is increased if demand is aggregated across locations.
• D. demand variability is reduced if demand is aggregated across locations.

Correct answer: D

Explanation

The correct answer is D because risk pooling helps to smooth out fluctuations in demand by aggregating it, which leads to a reduction in overall variability. Options A and B incorrectly suggest that disaggregating demand affects variability positively, and option C contradicts the concept of risk pooling by stating that variability increases with aggregation.