What is just in case?
In case (JIC) is an inventory strategy in which companies keep large stocks on hand. This type of inventory management strategy aims to minimize the likelihood that a product will sell out of stock. The company using this strategy is probably having trouble forecasting consumer demand or experiencing strong demand surges at unpredictable times. A company that follows this strategy essentially incurs higher inventory holding costs in exchange for a reduction in the number of sales lost due to depleted inventory.
Understanding Just In Case (JIC)
The Just-In-Case (JIC) inventory strategy is very different from the new “Just In Time” (JIT) strategy, where companies try to minimize inventory costs by producing the goods after receiving orders.
Recently, some companies have started to voluntarily under-stock their inventory. Manufacturers of particular cult items for which buyers are unwilling to accept substitutes can use this strategy. Lululemon Athletica (LULU) is a great example of a company using this strategy. They produce less than the expected demand for a particular item in a particular model. This creates a sense of urgency among its customers to buy immediately when they find something they like, as it probably won’t last very long. This strategy will not work with companies that produce goods for which customers believe there are readily available substitutes.
The old “just in case” strategy is used by companies that have trouble forecasting demand. Thanks to this strategy, companies have enough production equipment to meet unexpected peaks in demand. Higher storage costs are the main drawback of this strategy.