L.L.

Bean Case Study

Summary

• 1. L.L. Bean is a retail company that specializes in outdoor clothing and outdoor equipment. Leon
Leonwood Bean started in Freeport, Maine at 1912 offering his leather rubber bottom waterproof boot.
As of the 1990s, the business has transformed through the nationwide mail-ordering business system.
They are now a cataloging, manufacturing and retailing company.

• 2. They have great customer service and treatment, as the case highlighted in their golden rules, “treat
your customers like human beings”. This, in addition to them being on the top companies with one of
the highest overall satisfaction, symbolizes a positive reputation they have.

• 3. L.L. Bean suffers from stock issues, firstly, they have situations of stockouts, as good product’s actual
demand exceeds forecasted. As a result, they must cancel the order that was placed, which hurts the
company’s reputation. Furthermore, they also have bad products that fall below expected demand.
Overall, their forecasting records have been struggling. The cost of the damage from annual costs lost
sales, and backorders are $11 million. On the other hand, having too much of the wrong inventories,
salvage costs, carrying costs result in $10 million.

Strengths/Weakness

• 1. The strength of this company is that they have great methods of gaining information on their
customer’s demand and behavior through the catalog business. On the other hand, they have a good
relationship with vendors that produce good quality items.

• 2. L.L. Bean’s weaknesses are their overwhelming selection of products, approximately 6000 items.
This result in higher cost, and resources required to maintain them. This is evident with their lost sales
and backorder costs burdening the company at around $11 million. Additionally, holding this much item
causes problems for inventory management. L.L. Bean has been dealing with enormous storage and
costs associated with having too much of the wrong items, salvage, carrying costs. Moreover, catalogs
require too much time and money. Each new catalog is completed within a year. Therefore, data will be
less accurate, and styles will have to compete in the market. This adds to the catalog’s 152 pages, adding
a burden to the cost to produce and transport to their customers. Lastly, their way of forecasting is
uncollaborative. Forecasting resource and time is used towards every new item, they must discuss it.

Recommendations

There are numerous recommendations to solve L.L. Bean’s cost and inventory. Firstly, having an online
catalog system will reduce the printing and mailing of the catalog books. The online system can easily
show the entire catalog to anyone conveniently. Secondly, they can decrease the number of items so it
will be easier to manage, reduce the risk and cost of having to maintain numerous items in the catalog.
Thirdly, forecasting management should change up. For instance, a method that L.L. Bean can be using
are the collaborative forecasting with analytical methods, instead of using subjective insight to predict.
To add on, inventory analyst should be working with other departments that can offer knowledge to
forecast demands. Fourth, the catalog of the new item being introduced to the market could be moved
back to create time for the customer’s 2nd order. Fifth, L.L. Bean should seek out close-by vendors to
reduce lead times.