Arizona State University (ASU) SCM355 Supply Management Test 1 Practice

'Just-in-case' inventory refers to a strategy where businesses maintain excess stock to mitigate risks associated with supply chain uncertainties, such as sudden demand spikes, supplier delays, or unexpected disruptions. By holding additional inventory, companies can ensure that they have enough goods on hand to meet customer needs even when unforeseen circumstances arise. This approach prioritizes customer satisfaction by preventing stockouts and maintaining service levels.

The rationale behind this strategy is that, while it can incur higher holding costs, the benefits of being prepared for fluctuations in demand or supply disruptions often outweigh these expenses. Rather than relying solely on lean inventory practices, which aim to minimize stock levels to reduce costs, the 'just-in-case' strategy embraces a buffer approach ready to address uncertainties.

Understanding this concept is essential for supply chain management as it highlights the balance between cost efficiency and the necessity of reliability in fulfilling customer orders, particularly in volatile markets.