B School presentation on LL Bean Inc. If useful, do not forget to share and comment.

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. Agenda
 Introduction of the Company
 Forecasting process adopted
 Problem Statement
 Possible Solutions

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. 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. 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. 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. 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. 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. Problem Statement
Wide dispersion in forecast errors for Never out
items and New items
Items for
Forecasting
New Item
Never out
item

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. 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. 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. 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.