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
 Items sequences
Merchandise Groups Demand Centers Items

 LL Bean’s Product line was classified as hierarchical.

Items Items
 Items classifiedSprings
as New

Never
Fall
out

All year

 The typical lead time for domestic orders was 8 to

12 weeks.
  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.
An example of
Conceptualization
for the fall of 1991

Initial conceptualization October 1990

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