Posted in Operations and Supply Chain Terms, Total Reads: 727
Definition: Just in Case (JIC)
Just in case refers to an inventory strategy that is mainly followed by companies to minimize the probability that any product that is sold by the company will sell out of stock. It is very intuitive that what company needs to do is have large inventories at hand if it wants to reduce the probability of any product it sells to be over before the demand of the product is over.
The main cost that the company’s face who follow the just in case strategy is obviously the inventory holding costs. Inventory holding costs are the costs that are incurred by the company concerned to store and preserve the product till the product is sold. But this costs that are incurred by the company ensures that there is almost no sales lost due to the non-availability of the product. Mainly, companies need to do the cost benefit analysis before choosing to go for just in case strategy. If the costs that is inventory holding costs are too high and the loss in sales does not amount to much in customer’s loyalty or if there is strong pull for the given product than the company might rethink its strategy.
This strategy is very old and now a new strategy called Just in time is taking its place. But, Just in time is almost opposite to the just in case strategy. Just in time strategy says that the inventory is empty and is filled only after the customer orders have arrived for real not in forecast terms. This strategy substantially reduces the inventory holding costs that is otherwise incurred in case of companies following the just in case strategy. The just in time strategy is mainly for companies who have shorter production cycles and requirement of high efficiency and customization might be important to customer or for that product.
The just in case strategy os for companies having large production cycles, standardized product or generally have trouble doing forecasting of the demand. Just in case strategy can tackle with unexpected spikes in demand in a better way as compared to just in time strategy but the former has considerable added cost.