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G R O U P 5
H A R S H V A R D H A N S E T H I
P R A T E E K P A R S H W A
S A I F M E E R
S A N K E T G O L E C H H A
LL B...
Agenda
 Introduction of the Company
 Forecasting process adopted
 Problem Statement
 Possible Solutions
About the Company
 L.L. Bean was founded in 1912 by Leon Leonwood Bean of
Greenwood.
 Specializes in:
 Outdoor equipmen...
Company Background
 In 1912, Leon Leonwood Bean invented the Marine hunting
shoe
 Leon obtained a list of non-resident M...
No Stock Situation
Excessive stock – end of
season
 Demand persisting in
the market
 Cost of Goodwill lost
 Buying cost...
Forecasting Process
 List the items, for which forecasting is to be done
 Rank the items in terms of Expected Dollar Val...
Forecasting Process contd…
 Find overage cost and underage cost
 Each items C.M. & salvage value was calculated
 Find C...
Timeline
October 1990
Initial
conceptualization
November 1990 December 1990
Preliminary
Forecast
January 1991
Final layout...
Problem Statement
Wide dispersion in forecast errors for Never out
items and New items
Items for
Forecasting
New Item
Neve...
General Solution
 Always consider Forecasts are not going to be fully accurate
 Keep improving the Forecasting methods t...
Solution for New Item
 Collect actual and forecasted data for new items
previously introduced
 Gather info on Selling Pr...
Solution for New Item contd…
 Promotion cost of each item
 Space required in catalogue to get noticed
 Determine the se...
Solution for Never Out Item
 Look at upcoming demand in the fast changing
industry by using qualitative forecasting metho...
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LL Bean Case Study

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B School presentation on LL Bean Inc.
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LL Bean Case Study

  1. 1. G R O U P 5 H A R S H V A R D H A N S E T H I P R A T E E K P A R S H W A S A I F M E E R S A N K E T G O L E C H H A LL Bean, Inc
  2. 2. Agenda  Introduction of the Company  Forecasting process adopted  Problem Statement  Possible Solutions
  3. 3. About the Company  L.L. Bean was founded in 1912 by Leon Leonwood Bean of Greenwood.  Specializes in:  Outdoor equipment (canoes, tents, camping gear etc)  Outdoor and Indoor Apparel  Footwear  Luggage and Bags
  4. 4. Company Background  In 1912, Leon Leonwood Bean invented the Marine hunting shoe  Leon obtained a list of non-resident Marine hunting license holders and started a nationwide mail-order business  By 1991 L.L. Bean, Inc was a major cataloguer manufacturer, and retailer in the outdoor sporting specialty field  By 1991, 80% of all orders came in by telephone
  5. 5. No Stock Situation Excessive stock – end of season  Demand persisting in the market  Cost of Goodwill lost  Buying cost from vendors  Carrying cost  Marketing cost of that item in the catalogue  Salvage cost Costs and Revenue involved
  6. 6. Forecasting Process  List the items, for which forecasting is to be done  Rank the items in terms of Expected Dollar Value  Freezes a forecast for its demand by consulting  Compute the forecasting error  Forecasting error calculated for each item & a frequency distribution is made  If 50% errors are within 0.6 & 1.7 , the forecast is adjusted accordingly
  7. 7. Forecasting Process contd…  Find overage cost and underage cost  Each items C.M. & salvage value was calculated  Find Critical Ratio say 0.75  Find the corresponding error say 1.3  Multiply 1.3 by frozen demand to get the optimum stock level
  8. 8. Timeline October 1990 Initial conceptualization November 1990 December 1990 Preliminary Forecast January 1991 Final layout of the book February 1991 March 1991 April 1991 May 1991 Updating ForecastUpdating Forecast Updating Forecast Final Forecast June 1991 March 1991 April 1991 Handover to Inventory Manager Print B/W layout of the book Delivery to customers
  9. 9. Problem Statement Wide dispersion in forecast errors for Never out items and New items Items for Forecasting New Item Never out item
  10. 10. General Solution  Always consider Forecasts are not going to be fully accurate  Keep improving the Forecasting methods to better predict demand over time  A proper cost benefit analysis of costs associated while liquidating the unsold inventory and costs associated in case of stock outs  Introduce them in the catalogues to get an idea before introducing them in the market
  11. 11. Solution for New Item  Collect actual and forecasted data for new items previously introduced  Gather info on Selling Price  Gather info on cost of sales, commissions provided, stock-outs and back orders  Gather sales info of a new catalogue by comparing similar items with competitors  Have sufficient buffer stock to avoid stock-out situation
  12. 12. Solution for New Item contd…  Promotion cost of each item  Space required in catalogue to get noticed  Determine the service level based on profit margin calculation  Observe demand of existing products, once new products are launched
  13. 13. Solution for Never Out Item  Look at upcoming demand in the fast changing industry by using qualitative forecasting methods not only at the historical data alone  Float the catalogue earlier in the timeline so that customers can place a second order  Have fewer vendors close-by and build strong relationship with them to shorten lead times and process a second order.

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