A decade after the just-in-time system became entrenched in the inventory operations of retailers and manufacturers, many are reverting to an old-fashioned alternative: leasing lots of space to store products for a rainy day.

Reasons for the change to what one transport veteran calls the "just-in-case" system are numerous. Labor unrest at West Coast ports, massive congestion on access roads to the docks and other disruptions in the logistics chain have importers--retailers in particularly--looking to ways to ensure their goods reach their destination on time.

"They

are hedging their bets," said Guy Fox, executive vice president for Redondo Beach-based Stonepath Logistics Inc. "They are building inventory where they didn't do that before."

The trend began quietly about a year ago, when the unionized dockworkers and the steamship lines were locked in a bitter contract dispute. It became more evident this spring.

In the Inland Empire, the West Coast's warehouse hub, 10.5 million square feet of new space has been completed or under construction so far this year, compared with 11 million square feet of completed space in all of 2002, according to Grubh & Ellis Co.

Inland Empire brokers project that 14 million square feet of new space will be complete by the end of the year.

Los Angeles County is also poised for an increase, with 1.4 million square feet of new space coming onto the market so far this year. In all of last year, 2.4 million square feet was completed in the county.

"The percentage of retail users in the warehouse/distribution market has increased in the last six months," said Mary Sullivan, client service manager for Grubb & Ellis.

Among them is the Holmes Group, a Milford, Mass.-based kitchen and home appliance maker, which signed a lease in March for 828,000 square feet of warehouse space in Fontana.

With big box retailers demanding their products based on seasonal conditions, Holmes can't afford any logistics hassles.

"The customer can't afford to have stock not on the shelves," said David Reilly, Holmes' senior vice president for supply chain. "The plan is to be able to service the customers' requirements on maintaining their in-stock levels."

Insurance policy

The additional overhead costs are small compared with missing deliveries during the peak shipping season of August through mid-October.

"There's no question they are trying to stay ahead of the curve of consumer demands," said Chuck Belden, senior director of industrial development for Cushman & Wakefield of California Inc. "It's death for these guys not to have parts on the shelves."