CASE STUDY ON

L.L.BEAN,INC.
(ITEM FORECASTING AND
INVENTORY
MANAGEMENT)
Group -1
  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"
Case Facts  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 Bean’s Product line was classified as hierarchical.

Items sequences
Merchandise Groups Demand Centers Items
 Items classified as

Items Items
Springs New

Never
Fall
out

All year
 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
  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
Forecasting  Step5 - Check total forecast for reality and adjust
the sales of according
item
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)
  Each catalogue has a gestation period of 9 months
Creation of and involved merchandising, design, product, and
Catalogue inventory specialist.
 Initial conceptualization October 1990
December 1990
Preliminary forecast at sale December 1990 – March 1991
Time Line January 1991
Preliminary forecast by books January to February 1991
Layout and
Pagination
1st vendor May 1991
committee Early July 1991
Forecast repeatedly revised in
between July 1991
Catalogue Frozen
August 1991
B&W version available
internationally January 1992
Product manager to
inventory manager
Complete catalog
with customer
Catalog Active period
till
  Wide dispersion of forecast errors for “never outs”
and “new” items.
 Estimation of Contribution Margin and Liquidation
Cost not accurate.
 Implication of the methodology
Issues “If cost associated with under stocking > the cost of
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.
Continued..

 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.
  Continuously updating their forecasts based on
latest data as well
Recommendation
 Involve experts in the whole process of forecasting
 L.L bean should try to introduce catalogues earlier
so that the demand could be more easily assessed
 Gain customer insights through surveys especially
on ‘never out’ items so we know how customers
rank the new products in comparison to the new
products we proposed
 Have demand forecast at Demand Centers level
also
 Develop close relationship with suppliers so that
they have an incentive to collaborate
THANK YOU