CASE STUDY ON L.L.BEAN,INC.

(ITEM FORECASTING AND INVENTORY MANAGEMENT)

Sachin Sharma Section

11211396 Q1204A02

CASE FACTS
Started with the sale of the Maine Hunting Shoe in 1912 via mail order LL Golden rule Sell good merchandise at a reasonable profit, treat your customers like human beings, and they will always come back for more Used both Telephonic and Mail Orders In 1990 the company had 22 Catalogues,$528 million earning from catalogue sales,$71 million revenue from Retail Sales,6 million Active users,6000 items/catalogue By 1991, 80% of orders came through telephone

 LL Beans Product line was classified as hierarchical.

Merchandise Groups Items sequences Items

Demand Centers

Items classified as

Items
Springs Fall All year

Items
New Never out

 Only 1 Retail store(at Freeport) to prevent dilution of business models

The typical lead time for domestic orders was 8 to 12 weeks.

QUICK RESPONSE initiative to place second order, which would be delivered in sufficient time to meet the late season demand

SATISFACTION LEVEL

FORECASTING THE SALES OF ITEM

Step1- The inventory buyer, product people sit together and rank various items in terms of expected dollar sales. Step2 - Assign Dollars in accordance with the ranking.

Step3 - Discussion
Step4 - Set it up on excel sheet Step5 - Check total forecast for reality and adjust according

All the above steps are repeated for each item. Adjustments are made to accommodate the new items(Total Item Forecast is at variance with dollar target of catalogue so forecast of some items reduced)

CREATION OF CATALOGUE
Each catalogue has a gestation period of 9 months and involved merchandising, design, product, and inventory specialist.

AN EXAMPLE OF CONCEPTUALIZATION FOR THE FALL OF 1991

Initial conceptualization 1990 Preliminary forecast at sale 1990 Preliminary forecast by books 1991 Layout and Pagination 1991 1st vendor committee 1991 Forecast repeatedly revised in between Catalogue Frozen 1991 B&W version available internationally 1991 Product manager to inventory manager 1991 Complete catalog with customer 1991 Catalog Active period till 1992 October December December 1990 March January January to February

May Early July

July
August January

ISSUES
Wide dispersion of forecast errors for never outs and new items. Estimation of Contribution Margin and Liquidation Cost not accurate. Implication of the methodology If cost associated with under stocking > the cost Overstocking leading to more than frozen forecast. For new items the organization know little and the excess over the frozen forecast is even greater than for never outs.

 The buyer gets upset when the organization commits more than the forecast
Sum of the items forecasts for a catalog was often at variance with the dollar target for that book With many domestic and many offshore vendors, lead time was sufficiently long and, it was impractical to place a second commitment order in the course of the season.