LL Bean Inc

Group 5: Jinesh Rambhia (PGP10225)

Siddharth Gautam (PGP10233) Rohan Kamath (PGP10167) Gaurav Garg (PGP10203)
Santosh Mishra (PGP10228) Prashant Kumar Tanvi Karguppikar (PGP10242)
 1912- Leon Leonwood Bean Invented the Maine Hunting Shoe
1967- LL Bean died and the business was $4.75 Million and
600000 mailing list
1967- Leon Gordman decided to modernize
1986- Installed phone order ‘800”
1991-$528 million by mailing order and $71 million store sales
1991- 80% orders by telephone orders
Timeline of
Progress
Golden Rule of Business
Sell of good merchandise at reasonable profit
Treat customers as human being for retention

2
Specific Item
Forecasting

3
 • Firstly historical forecast errors (expressed as A/F ratio of
actual demand to forecast demand)
• The frequency distribution of past forecast errors was then
used as a probability distribution for the as yet unrealized
future forecast errors
• Each item’s commitment quantity was determined by

Item costs and balancing the individual item’s contribution margin

revenues are Summary

relevant to Stock a. The buying cost of item
b. The selling price of item
c. Liquidation cost of item
 • Number of different items in stock
• Actual and forecasted demand for the new item
• Inventory cost for that, commissions have provided for sales,
Information stock outs and backorders cost
for demand • Existing market trends for that new item
forecast • Level of buffer stock he should have to avoid stock outs by
matching stock out costs and over-stocking cost
• Cannibalization of existing product by launch of new

5
 • L. L. Bean inc. Takes into account the cost of
overstocking, but not the cost of understocking
• It compares the cost of overstocking with the profit it
makes by selling ( Overstocking loss is $5 where as
UnderStocking understocking is $15)

- Mark’S • It should compare the cost of overstocking with the cost

of understocking
Concern • As the cost of understocking is more than that of
overstocking
• Demand usually exceeds the forecast quantity
• Solution to order higher quantity
 ◦ Fashion industry is a fast-changing industry and product
demands change very rapidly
◦ Updating their forecasts based on latest data as well.
◦ Experts in the whole process, with experts and the data
combined they would be better able to forecast.
Improving ◦ L.L bean should try to introduce catalogues earlier so that
the demand could be more easily assessed
Forecasting process ◦ Better insights inside the consumer behaviour and thus
predict demand in a better way
◦ Long-term plan should be to reduce dependence on foreign
vendors and have more local vendors who can supply
quickly
◦ L.L bean can plan a second order too based on the new
forecast.

7
THANK YOU