What Is Just in Case (JIC)?
Just in case (JIC) is an inventory strategy where companies keep large inventories on hand. This type of inventory management strategy aims to minimize the probability that a product will sell out of stock. A company that uses this strategy typically has difficulty predicting consumer demand or experiences large surges in demand at unpredictable times. A company practicing this strategy essentially incurs higher inventory holding costs in return for a reduction in the number of sales lost due to sold-out inventory.
- Just in case (JIC) is an inventory strategy where companies keep large inventories on hand.
- This strategy minimizes the probability that a product will sell out of stock.
- A company that uses this strategy typically has difficulty predicting consumer demand or experiences large surges in demand at unpredictable times.
- The main disadvantage of this strategy is higher storage costs and wasted inventory if all stock does not sell.
How Just in Case (JIC) Works
The JIC inventory strategy differs from the more recent "just in time" (JIT) inventory strategy, where companies try to minimize inventory costs by producing the goods after the orders have come in.
The JIC strategy is more common in less industrialized countries where poor transportation infrastrucuture, natural disasters, poor quality control, and vulnerability to other suppliers' production problems are concerns. Such instabilities in the supply chain could lead to costly production inefficiencies. Therefore, a manufacturer may decide to pay for excess inventory to avoid production shutdowns.
For JIC, manufacturers reorder stock before it reaches the minimum level to continue to sell inventory while the suppliers are supplying the goods. The time from when the firm reorders the stock to the time the supplier provides the new stock is known as lead time. A JIC inventory system tries to keep a minimum level of inventory in case of emergencies. JIC is typically more costly than JIT because it can lead to waste if not all of the inventory is sold and there are additional storage costs due to the additional inventory.
Why Choose the More Costly JIC Strategy?
One major reason for practicing a more costly JIC system is the potential losses, such as permanent loss of major customers, loss of suppliers, and supply-chain collapse. If the JIT response contingencies are too slow or fail to keep production flowing, additional costs may be incurred. The additional costs due to maintaining extra storage and resources may be more cost effective than using a more efficient JIT system.
In a recent turn of events, some companies have started understocking their inventories on purpose. Makers of particular popular items for which buyers are not willing to accept substitutes can use this strategy.
The "just in case" strategy is used by companies that have trouble forecasting demand. With this strategy, the companies have enough production material on hand to meet unexpected spikes in demand. Higher storage costs are the main disadvantage of this strategy.
Real World Examples of Just In Case (JIC)
An example of JIC buyers are the military or hospitals. These types of organizations must maintain large inventories because waiting for JIT producers to ramp up production for needed supplies may result in lost lives and even wars.