Warehouse Location
Decisions concerning the location and number of warehouses should consider the risk of pooling effects. Simichi-Levi added that by centralizing a product in one location, you can take advantage of the aggregated demand. On the other hand, you need to consider proximity to customers and other factors that may push towards maintaining more warehouses. The characteristics of each product also comes into play here as high demand products with low variability are not impacted as much by the risk pooling effect while low volume high variability products are highly vulnerable.