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

 LL Beans Product line was classified as hierarchical.

Merchandise Groups Demand Centers Items sequences

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.

Creation of Catalogue
Each catalogue has a gestation period of 9 months and involved merchandising, design, product, and inventory specialist.

An example of Conceptualization for the fall of 199a

Initial conceptualization Preliminary forecast at sale Preliminary forecast by books

Layout and Pagination

1st vendor committee Forecast repeatedly revised in between Catalogue Frozen B&W version available internationally

October 1990 December 1990 December 1990 March 1991 January 1991 January to February 1991 May 1991 Early July 1991 July 1991 August 1991 January 1992

Product manager to inventory manager

Complete catalog with customer Catalog Active period till

Forecasting the sales of item

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 Step5 - Check total forecast for reality and adjust according 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)

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.

Thank you