Case Study On L.l.bean
Case Study On L.l.bean
GROUP MEMBERS
Mohit Sharma (B26) Q2203 Ruchika Gaba (B27) Q2203 Shreya Sharma(B28) Q2203
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
Items
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
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
Creation of Catalogue
Each catalogue has a gestation period of 9 months and involved merchandising, design, product, and inventory specialist.
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 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 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.