Consider Multi-Echelon Inventory With Centralized Hubbing to Pool Inventory and Risk

One common way to pool risk and reduce overall inventory is to use a hub with good air and sea connectivity like Singapore.

However, this considers just variability of demand and lead time from a central location to meet customer demand and service level at customer market locations. The cost of under stocking and not meeting customer demand may be more than what we think. Similarly, the cost of overage may be higher and lower. Taking both the cost of overage as underage into account will tell us the stock levels we need to maintain. This is the news vendor approach.

Better still, we can extend the news vendor approach to multi-echelon (or multi-site) inventory allocation problem for stochastic demand and lead time variability. This is especially interesting for Asia where you have manufacturers and transhipment hubs located close to each other. You can measure the service level from cost of under and overage along to set coordinated service levels along supply chains.

Calculating from risk and inventory pooling and multi-echelon approach will help you reinforce the right inventory levels for your supply chain. What's more, you can also use your model to identify areas of capacity, lead time variability and even manufacturing weakness to prioritize improvement.