What Is Just in Case?
Just in case (JIC) is an inventory strategy in which 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. The company that utilizes this strategy likely has a hard time 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.
Understanding Just in Case (JIC)
The just in case (JIC) inventory strategy is much different than the newer "just in time" (JIT) strategy, where companies try to minimize inventory costs by producing the goods after the orders have come in.
In a recent turn of events, some companies have started understocking their inventories on purpose. Makers of particular cult items for which buyers are not willing to accept substitutes can utilize this strategy. The company Lululemon Athletica (LULU) is a prime example of a company utilizing this strategy. They produce less than the expected demand of a particular item in a particular pattern. This creates a sense of urgency among its customer base to buy immediately when they find something they like because it probably won't be around very long. This strategy will not work with companies that produce goods for which the customer base feels there are readily available substitutes.
The older '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.