# Ll Bean Case

Submitted By moupia22nd
Words 1177
Pages 5
L.L. Bean has adopted a two stage ordering process for products with “one-shot” commitments
(i.e. products that they get to order only once because of long supplier lead times). First they determine a forecast for an item and then they have a process for converting that forecast into an order quantity.

Questions
1. How significant (quantitatively) of a problem is the mismatch between supply and demand for L.L. Bean?

From the first page of the case we have an estimate of \$11 million cost of lost sales and backorders and \$10 million associated with having too much of the wrong inventory. These costs are stated as being a conservative estimate.

2. On the course website is an Excel file that contains demand and forecast data for a collection of items. Suppose those are the data L.L. Bean will use to plan their next season. Consider an item that retails for \$45 dollars and costs L.L. Bean \$25 dollars. The liquidation price for this item will be \$15. The sales forecast for this item is 12,000. What order quantity would L.L. Bean choose for this item?

Using L.L. Bean’s current methodology, our first step is to understand the frequency distribution of past forecast errors. We compute the error by dividing the actual by the forecast such that a number above 1 represents that the item was under forecasted. The plot below provides a histogram of these errors. As an example, from this plot, 50% of the errors are between 0.49 and 1.04 or 66.6% of the errors are between 0.49 and 1.17 Our second step is to compute the contribution to margin against the liquidation value if not demanded. From the information above we have the margin contribution as \$45 - \$25 = \$20 and the liquidation value as \$25 - \$15 = \$10. This gives us a 20/(20+10) = 0.66 fractile.

From the chart above we assume that forecast error for any item at the 0.66 fractile is 1.17
This means L.L....

### Similar Documents

#### Mgmt Consulting Case Ll Bean

...[pic] Item Forecasting and Inventory Management MANAGEMENT CONSULTING CASE 2: L. L. BEAN INC. Q1. How do L.L. Bean use past demand data and a specific item forecast to decide how many units of that item to stock? Ans. L. L. Bean use two main methods based on past demand data to determine on the quantities to be ordered for specific items to stock. Method One The First Method of forecasting is based on quite a conservative approach, primarily manual. Product related people sit together and decide on the basis of previous/book record. They look for dollar sales of each item and rank them on this basis. They also look for the forecasted quantity of items and check it with real sold quantity. But when they have to add a new item, they find that this item will create incremental demand or will cannibalize the sales of any other item. If they find cannibalization then they adjust the quantity of items accordingly. But this method is not the same all the time and can be changed accordingly, as per the need. Method Two The Second Method of forecasting uses historical forecast errors which is called the A/F Ratio i.e. (Actual Demand / Forecast Demand). |A/F Ratio |Remarks | |A=F |Forecast was perfect | |A>F ...

Words: 1179 - Pages: 5

#### All Case Studies Busn 258

Words: 1316 - Pages: 6

#### L.L. Bean

...chosen for my research for this assignment is L.L. Bean. L.L. Bean was founded in 1912 by Leon Leonwood Bean as a one-man operation. L.L. Bean is a source for apparel, outdoor equipment, and expert advice. The company’s headquarters is in Freeport, Maine and just down the road from their original store. Keeping their customers satisfied is their principle. L.L. Bean is a privately-held, family-owned company. They do not release any financial or operational information other than what is on their website, and they do not release an annual report, either. They have annual sales of \$1.52 billion. Year round, L.L. Bean employs about 5,000 people. During the 2012 holiday season, they had roughly 9,400 employees. They offer free shipping to the U.S. and Canada with no minimum purchase. The company’s website, www.llbean.com, was launched in 1995, and it is one of the top-rated e-commerce sites in the industry. They also offer direct to business. They have been doing that since the late 1970s. They use state of the art equipment to customize products for its business customers. Their distribution is quite phenomenal! In 2007, their ability to fill orders was improved with their technologically advanced Order Fulfillment Centers located in Freeport, Maine. Their fulfillment centers have the capacity to store over 10 million units of merchandise and process an average of 50,000 customer orders a day. In 2012, L.L. Bean shipped over 15 million packages including......

Words: 932 - Pages: 4

#### Ch. 7scm

...Collaborative forecasting requires all supply chain partners to share information regarding parameters that might affect demand, such as the timing and magnitude of promotions. Dell could share with their components suppliers all of the promotions, e.g., holiday, back-to-school, etc., they have planned. These suppliers could, in turn, notify their suppliers of discrete components that a spike in demand is anticipated. These demand forecasts for end items determine the demand for components and coupled with knowledge of fabrication times, allows all members of the supply chain to provide the right quantity at the right time to their customers. 3. What role does forecasting play in the supply chain of a mail order firm such as LL Bean? LL Bean has historically operated almost exclusively in a make-to-stock mode and with very few exceptions, stocked products that did not go out of style as rapidly as many other clothing and accessory lines. A pre-worldwide web existence would have relied on communication with manufacturers about what products might be featured on the front of their catalog. The lead times involved in printing and distributing the catalog and producing the product line were such that elaborate planning and forecasting tools were not required. A quick visit to the web site demonstrates that...

Words: 1495 - Pages: 6

#### History of Starbucks

...teacher as well as a writer. The names of the three individuals are Jerry Baldwin, Zev Siegl and Gordown Bowker. The fist store of Starbucks was opened in Seattle, Washington, with the store selling only one thing, fresh roasted coffee beans. The partnership and creation of Starbucks began when the trio frequented as well as work for a store named, Peet’s Coffee, located in Berkley, California. The owner of Peet’s Coffee, Alfred Peet, was dubbed the “grandfather” of the specialty coffee industry. Alfred Peet, shared his style of roasting beans to the trio and from then, is where the idea of Starbucks originated from. By the early 80’s, a man by the name of Howard Shultz, a drip coffee maker salesman, came on board as the Director of Marketing for the Starbuck organization. In Seattle, he had advised the members of Starbucks to sell coffee and espresso drinks because of his experience traveling in Milan. Through Shultz experience, he observed that the cafe businesses in Italy were served as a meeting place and became a central part of the societal fabric. He sought to bring this experience back home and develop it with the Starbucks brand. But Schultz was rejected and it is then he decided to open his own coffee chain called. ll Giornale. ll Giornale became a big success and eventually acquired the Starbucks chain and their roasting techniques for \$3.8 million, in 1987. In the 1990's, Starbucks began opening a new store every workday, a pace that continued into the......

Words: 1141 - Pages: 5

#### The Corporate Information Management System for L.L.Bean

...L.L.Bean is the industry leader in providing to its customers, outdoor equipment and apparel. With growing competition and a stagnant economy, the company must continually work to maintain sales, profits, and customer loyalty. L.L.Bean does this by focusing on the competitive forces prevailing throughout the business environment. These forces include new market entreats, the power of the buyer and the supplier, the growing threat of substitute products, and their competition. L.L.Bean’s Competitive Forces L.L.Bean works hard to reduce the threat of new entrants to the marketplace by erecting barriers to entry. L.L.Bean accomplishes this by offering products or services that are difficult to displace in the eyes of customers. L.L.Bean products are recognized around the world for their practical design and high quality. L.L.Bean has built its brand by maintaining customer perceptions of quality and service. The company conducts business with the belief that the brand should reflect the values of L.L.Bean, along with the products it sells (Reed et al., 2009). The company devotes significant time and energy to product research, testing and development. This process includes lab tests, field testers and employee and customer feedback. L.L.Bean operates its own independent test lab for scientific analysis of materials, construction and design. Prototypes for new products are tested, revised and retested in a continuous cycle until they meet customer requirements and L.L...

Words: 1675 - Pages: 7

Free Essay

#### Jelly Belly Case Study

...Jelly Belly, Case Study Jorge Nolasco and Jason Ilarraza Operations and Supply Chain Management Naval Postgraduate School February 28, 2013 This Case study is based on Jelly Belly and the actions taken by the founder, to grow the Company, and loose the company to Goelitz Inc. The focus of the case study will address Jelly Belly's strategy and sustainability, strategy and capacity management, and sales and operational planning. At 18 David Klein was in business selling popcorn with his uncle while attending UCLA. He worked his way through law school by selling popcorn. David decided not take the bar exam but pursue a career he was captivated by, making and selling candy. David Kline a quirky and creative candy maker has invented over 450 types of candy. His most famous candy was Jelly Belly. David first opened and operated a wholesale nut and raisin business and attained experience and a reputation in the Los Angelos Area with local distributors of nuts, raisins, and candies. While operating and maintaining the wholesale nut and raisin business, David developed a gourmet jelly bean, he coined Jelly Belly. Jelly Belly’s competitive dimension was quality. David’s vision was to create a high-end jelly bean, with a premium quality, flavor, and a unique shape. David created the original 8 flavors in 1975. David approached Herman Goelitz, president of the Goelitz Candy Inc., a generational candy business, founded in 1869,...

Words: 1147 - Pages: 5

Free Essay

#### E Comerce

...Name: Mohamed Ahmed Ouamer Class: E-commerce and Web Design MG 448 Professor: Marcus Conclaves Case study 3: Akamai Technologies BU fall semester 2012 Akamai Technologies, Inc. is an Internet content delivery network headquartered in Cambridge, Massachusetts. U.S. Akamai's network is one of the world's largest distributed-computing platforms. The company was founded in 1998 by Daniel M. Lewin (then a graduate student at MIT) and MIT Applied Mathematics professor Tom Leighton. Akamai is a Hawaiian word meaning smart or intelligent with connotations of insightful, wise or skillful. 1) Akamai need to geographically disperse its servers to deliver its customer`s web content much faster and closer to end user, so a user in New York city for instance will be served LL Bean pages from new york metro area Akamai server and vice versa. 2) Yes I would sign up for Akamai`s service because it has more than 73000 servers and provide a good service. There many other alternatives like blue coat, lime light and mirror image internet. 3) Akamai also offers a product line called advertising decision solution, which provides companies with intelligence generated by the internet`s most accurate and comprehensive knowledge base of internet network activity. Advertiser can deliver ads based on country, region and city .marketing and information service will benefit a lot from the Akamai service. 4) Major business do not distribute their video through p2p networks......

Words: 335 - Pages: 2

#### Capstone

...Management Reference Books Sr No R-1 R-2 Other Reading Sr No OR-1 OR-2 OR-3 OR-4 OR-5 OR-6 OR-7 OR-8 OR-9 OR-10 OR-11 OR-12 Journals articles as Compulsary reading (specific articles, complete reference) The four things that a service Business must get right HBR Article , Bang & Olufsen Design Driven Innovation : HBR , Smart Product Design : HBR , Mishina, Kazuhiro. Toyota Motor Manufacturing, U.S.A., Inc. HBS Case No. 9-693-019. Harvard Business School Publishing, Boston, 1995. , Hammond, Janice H. BarillaÃ‚ SpA (A). HBS Case No. 9-694-046. Harvard Business School Publishing, Boston, 1994. , Latour, Almar. Nokia Handles Supply Shock with Aplomb as Ericsson of Sweden Gets Burned. The Wall Street Journal. Dow Jones & Company, Inc., 2001. , National Cranberry Cooperative HBS #688122. From Case Map , John Crane UK Ltd Case : The CAD CAM Link . HBS #691021,24p , To Move or not to Move .Case of Cathay Pacific Airways . University of Hong Kong HBS #HKU003,22p , Note on Quality: The Views of Deming, Juran, and Crosby HBS .687011 , Process Control at Polaroid , HBS, #693047 , LL Bean Item Forecasting and Inventory Management HBS, #893003, 5p , Johson Control Automotive Systems , HBS,#69308623p , Title Operations Management Concepts, Techniques & Applications Operations Management Author Evans & Collier Edition 1st Year Publisher Name Cengage Learning Tata McGraw Hill Author Norman Gaither,Greg Frazier Edition 9th Year Publisher Name Cengage Learning William Stevenson Taylor......

Words: 3895 - Pages: 16

Free Essay

#### Child Labor

...Child Labor: Threatening the economy and well-being of children Child labor has existed throughout American history and throughout the world for many years. A quote from Lewis Hine in 1980 states: "There is work that profits children, and there is work that brings profits only to employers. The object of employing children is not to train them, but to get high profits from their work.” As factories started to assemble, most owners preferred children as their workers because the owners thought them as “more manageable, cheaper and less likely to strike.” The industries children usually worked for were mines, glass factories, textiles, agriculture, canneries, home industries, newsboys, messengers, bootblack and peddlers. During the Industrial Revolution, children at four years old were employed and dealing with dangerous and sometimes fatal working conditions. Now, because of new child labor laws in the United States, industries are going overseas to produce their product in countries that still use child labor. Developed countries consider these actions to be human rights violations and are illegal, while some undeveloped countries will allow or tolerate child labor. These children who are in these factories in different countries are costing the company less because of their wages, when they could have their factories in the States, producing jobs and cash flow in our economy. Child labor violates the common good by threatening the long-term growth of the economy and the......

Words: 3347 - Pages: 14

#### Case Study on Fedex

Words: 1943 - Pages: 8

#### Ref for Fdx

Words: 1970 - Pages: 8

Free Essay

#### Case Vtb

...Introduction Bob Stetzel, Vice President of Information Technology (IT) at Vermont Teddy Bear (VTB), walked a tranquil path from his car to his Shelburne, Vermont office early one morning in mid-February 2010. The landscape outside his office, and the White Mountains beyond, were blanketed in a coating of fresh snow. Just a few days before, the scene was not tranquil at all; a small army of nearly 2000 temporary employees had descended on the company’s multi-building campus to help process and pack gifts ordered by tens of thousands of customers for delivery to their sweethearts for Valentine’s Day. Bob and his seven person IT organization had worked feverishly behind the scenes, ensuring that the company’s information systems could handle the surge in orders for pajamas, custom teddy bears, ﬂowers and other gifts, placed via telephone, mail-order, and the Web. There were a few tense moments when the system - comprising a mix of homegrown and packaged applications from a variety of vendors, and knit together with middleware - occasionally ‘paused’ when its capacity was strained. Fortunately, his team - veterans of past Valentine’s Day ‘peak experiences’ - helped patch things together and ensured that nearly all orders were processed and delivered on time. Recognizing that customer retention was an important goal, Stetzel was relieved that most customers were happy with the service they received during the Valentine’s rush. Stetzel had been hired in November 2009 - just in...

Words: 4801 - Pages: 20

Free Essay

#### Essence of Salt

...Historically, the main reason for the addition of salt to food was for preservation. Because of the emergence of refrigeration and other methods of food preservation, the need for salt as a preservative has decreased, but sodium levels, especially in processed foods, remain high. The expected tastes and flavors associated to salt use is enormous coupled with the relative low cost of enhancing the palatability of processed foods, thus making it a key rationale for salt use in food preservation. However, taste is not the only reason for the continued use of high levels of salt in foods. For some foods, sodium still plays a role in reducing the growth of pathogens and organisms that spoil products and reduce their shelf life. In other applications, sodium levels remain high because salt plays additional functional roles, such as improving texture. A number of other sodium-containing compounds are also used for increasing the safety and shelf life of foods or creating physical properties. This work begins with a review of the non-taste or flavor-related roles of salt and other sodium-containing compounds in food. The second part will briefly discuss the role that sodium plays in various food categories and provides examples of the sodium content of various foods. ------------------------------------------------- FOOD SAFETY AND PRESERVATION ------------------------------------------------- As mentioned previously, the first major addition of salt to food was for taste......

Words: 3822 - Pages: 16