...L.L Bean, Inc. Item Forecasting and Inventory Management 2012/24/11 Q1. How do LL Bean use past demand data and a specific item forecast to decide how many units of that item to stock? Evaluate the LL Bean's forecasting system (i.e., merits vs. shortfall). One of the most important decision making process in business is forecasting. It can help to make your business more profitable. You should be able to guess how many units of that item to stock based on your past data and predicting future demand. Following two processes used by L.L. Bean, to find how many units of that item to stock: First, they used forecasting to predict for that specific item for upcoming season, which is named “frozen forecasting”. It is based on the book forecast and past demand data, which provided by forecasting department. Second, they used historical forecast errors, namely the A/F rations, which mean actual demand multiplied past season’s forecast. L.L. Bean estimates the range of inventory that the product will be in the upcoming season after converting the point forecast into demand distribution. For instance as the article shows that if last year new products had this ration between 0.7 and 1.6 then where frozen forecast is 1000 that means the new product could have an actual demand for the upcoming year of 700 to 1600 units. In order to find out how much profit each unit brought in compared to how much the unit would lose if it was liquidated, they used profit margin calculation....
Words: 852 - Pages: 4
...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 over...
Words: 932 - Pages: 4
...L.L. Bean, Inc. SINGH Varun M1, GR21 L.L. Bean is a privately owned mail-order, telephone, retail and online catalog company with headquarters in Freeport, Maine in the United States. It was founded in 1912 by Leon Leonwood Bean, and is currently worth US$1.5 billion. The major problem faced by the supply chain of the firm is the over reliance of initial forecasting on estimates and speculations. 1. How does L.L. Bean use past demand data and a specific item forecast to decide how many units of that item to stock? The forecasting team at L.L. Bean decides how many units of an item to stock using the following methodology: i. Divide the past demand data by the forecast demand to compute historical forecast errors, expressed in the form of A/F ratios, for each individual item. ii. The frequency distribution of these errors is compiled across items. iii. The frequency distribution of past forecast errors is used as a probability distribution for future forecast errors. iv. The cost of understocking an item is calculated by subtracting the cost price from the selling price. v. The cost of overstocking an item is computed by subtracting the liquidation price from the cost price of the item. vi. The critical ratio CU / (CU + CO) is calculated, which gives the optimal order size as the quantile of the item’s probability distribution of demand. vii. The commitment quantity is calculated as the product of the critical ratio quantile...
Words: 812 - Pages: 4
...Supply Chain Management L.L Bean Inc October 27, 2011 Presented by: Ahsan Khawar Fahd Iqtidar Mir Nabeel Siraj Umair Babar Chishti 12020378 12020367 12020325 12020157 Q.1 L.L. Bean uses several different calculations in order to determine the number of units of a particular item it should stock, whether it is a new item or a never out item. It first freezes a forecast for its demand for the upcoming season. This figure is a result of a consensus between the product people, buyers and inventory managers. Once the predicted demand is frozen, L.L. Bean uses its historical demand and forecast data to analyze the forecasting errors. The forecast errors are calculated for each individual item and a frequency distribution of these is made, which is further used as a probability distribution for future errors. Thus, if 50% of the errors were within 0.7 and 1.6, the forecast for this year would be adjusted accordingly. Next, each item commitment quantity was tabulated using its individual contribution margin and salvage value if any. For e.g. if an item had a margin of $15 if sold, and $5 loss if not sold, the commitment value would be 0.75. Hence the optimal stock to keep would be 0.75 fractile of the probability distribution of demand. If for instance, the corresponding error for 0.75 is 1.3, the optimal stock to keep for that item would be 1.3 * frozen forecast. Hence, this value is the stock for that item. Q.2 We explain different scenarios to determine relevant costs...
Words: 1364 - Pages: 6
...1. Target Company & Marketing Program L.L Bean, Inc. is an American brand founded in 1912 by Leon Leonwood Bean, beginning as a one-man operation making a signature Bean Boot in the basement of his Freeport, Maine home. The signature boot was produced, shipped, and soon 90% of the initial batch was returned as damaged. With Leon’s firm belief in keeping customers satisfied as a guiding principle, the company’s lifetime guarantee quickly got its start. A satisfied customer is the company’s main mission, which has been the reason the global organization has accumulated annual sales of $1.61 billion. L.L Bean expanded its product line, and now prides itself as being customers one stop shop for quality outdoor and indoor apparel, outdoor equipment, footwear as well as bags and luggage. Their products are recognized around the world for their practical design and high quality with over 140,000 items stocked for catalog, web site and stores. The company devotes significant time and energy to product research, testing and development including lab field testers and employee and customer feedback. There is no surprise the company is praised for its quality since prototypes for new products are tested, revised and retested until they meet not only customers requirements but also company standards. L.L Beans marketing strategy that started with updated product catalogs mailed directly to customers has now been modified to meet the demands of consumers and take advantage of...
Words: 2803 - Pages: 12
...Logistics and Distribution unit of Xerox's Business Systems Group was gaining 3% to 5% a year in productivity not good enough in light of industrywide price cuts in business machines. One solution, benchmarking, measures L&D's warehouse and distribution performance against comparable activities in other industries. Comparing oneself with competitors (as well as with internal units) is useful, but doesn't necessarily get the benefit of the best practice, not to mention the benefit of cooperation. Benchmarking against non-competitors is the answer. After a search, L&D found the best warehousing and materials handling organization was at L.L. Bean, the outdoor-clothing retailer and mail-order house. With Bean's cooperation, L&D benchmarked its operation against the best and learned a lot. By looking closely at the operation of Bean and other noncompetitors, L&D has raised its productivity 10% each year and gained a better position against its real competition. BODY: One way to judge the performance of an organization is, of course, to compare it with other units within the company. But these measurements often merely reinforce complacency or generate "not invented here" excuses. Comparisons with outsiders, however, can highlight the best industry practices and promote their adoption. This technique is commonly called "benchmarking," a term taken from the landsurveying practice of comparing elevations. When Xerox started using benchmarking in 1979...
Words: 1952 - Pages: 8
...operate a business to achieve success in the marketplace and earn those profits” (Ibid., pp. 6). Profits are the central focus of any business; a company could not survive without it; Leon L. Bean was one of those people. Leon L. Bean, named by Fortune Magazine, as “1of 200 best entrepreneurial for 2011” (Gale Encyclopedia, Und.). An avid outdoorsman, Leon Bean started out by creating a comfortable, functional boot for exploring the Maine woods. His idea came as a result of him returning from a hunting trip with cold, damp feet. While Bean had to refund money on “90 of the first 100 pairs of shoes, when the shoes developed cracks” (Ibid., Und.), it did not stop him; it led to the creation of “the Maine Hunting Shoe” which changed outdoor footwear forever and began one of the most successful family-run businesses in the country (Ibid., Und.). Treating customer well became a “hallmark of Bean’s business strategy; guaranteeing his product to give perfect satisfaction in every way” (Ibid., Und.). He kept his company open 24 hours a day, aware that hunters and fishermen frequently needed equipment or a license in the middle of the night. He listened to and addressed every complaint about the quality of his merchandise. As noted on the L.L. Bean, Inc. website, his approach, often called “L.L. Bean’s golden rule” to his dealings with customers was simple: “sell good...
Words: 1820 - Pages: 8
...University/Faculty Regulations No plagiarism in report/academic work and writing (MerriamWebster’s Collegiate Dictionary, Eleventh Edition, USA, 2003) to steal and pass off (the ideas or words of another) as one’s own to use (another’s production) without crediting the source to commit literary theft to present as new and original an idea or product derived from an existing source No cheating in examination Grade: E Instructor & Teaching Assistant Puspa I. Sandhyaduhita (p.indahati@cs.ui.ac.id) Build. A Room Nb. 1232 Ika Chandra Hapsari (ikahapsari24@gmail.com) Consultation: With appointment (office hour, weekdays) TA See Scele Introduction to Supply Chain Management Learning Objectives Understand the basic concepts of supply chain Identify the supply chain decision phases and know the significance of each decision phases Understand the goal of a supply chain and the impact of supply chain decisions on the success of the firm What is a Supply Chain? All stages involved, directly or indirectly, in fulfilling a customer request Includes manufacturers, suppliers, transporters, warehouses, retailers, and customers Within each company, the supply chain includes all functions involved in fulfilling a customer request product development, marketing, operations, distribution, finance, customer service What is a Supply Chain? [2] Includes movement of products from suppliers to manufacturers...
Words: 1738 - Pages: 7
...Process | 550,000 | Finished Goods | 180,000 | Total | 1,600,000 | Inventory turns = 14,800,000/1,600,000 = 9.3 Weeks of supply ------------------------------------------------- 1,600,000 (14,800,000)/(52) = 5.6 weeks Supplier 1 has the best supply chain performance according to inventory turns and weeks of supply. The company might also consider different suppliers SCORcards and/or metrics in comparison with one another. 11-14 “For some manufacturing companies, transportation costs can be as much as 20% of total production costs and run as high as 6% of revenue. For some retail companies primarily involved in the distribution of goods, like L.L. Bean and Amazon.com, transportation is not only a major cost of doing business, it is also a major determinant of prompt delivery service. L.L Bean ships almost 16 million packages in a year” (Russell & Taylor, 2011, p 460). I think that both...
Words: 790 - Pages: 4
...[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
...that UPS will take in handling this matter, it might perform actions against federal, state or local laws. The organization will try to meet minimum law requirements during the negotiations in order to maintain competitive advantage. In general, these negotiations will be generalized for the international union across the nation. This means, depending on he state where each facility exists in, it might violate some state and local laws. References Berman, B. (2011). Competing in Tough Times. Business Lessons from L.L. Bean, Trader Joe’s, Costco, and Other World-Class Retailers.Upper Saddle River, NJ:Pearson Education Inc. Cascio, W. F. (2006). Decency Means More than "Always Low Prices": A Comparison of Costco to Wal-Mart's Sam's Club. Academy Of Management Perspectives, 20(3), 26-37. doi:10.5465/AMP.2006.21903478...
Words: 473 - Pages: 2
...[pic] Cabela’s 2012 Strategic Marketing Plan Johnson Lee Integrated Marketing Strategy Table of Contents Executive Summary 3 Situation Analysis 3 The Internal Environment 3 The Customer Environment 7 The External Environment 9 SWOT Analysis 12 Developing Competitive Advantages 12 Developing a Strategic Focus 13 Marketing Goals and Objectives 13 Marketing Strategy 13 Primary and Secondary Target Markets 13 Product Strategy 14 Pricing Strategy and Distribution/Supply Chain Strategy 14 Promotion Strategy 15 Marketing Implementation 16 Structural Issues 16 Tactical Marketing Activities 16 Evaluation and Control 16 Executive Summary Cabela’s, Inc is a multi-channel retailer of outdoors products focusing on the hunting, fishing, and camping industries. This company has experienced significant growth since becoming a public company, and is currently striving to increase revenue, improve retail store profitability, and increase market share to surpass competitors, namely Bass Pro Shops and REI. Cabela’s focus on a high-quality product and excellent customer service is an important part of both its history and its potential for future growth. To further the company’s mission and achieve statistical goals, Cabela’s must grow its loyal customer base by attracting a younger target market. Merchandising teams must extend growing and profitable product categories and expand advertising...
Words: 5421 - Pages: 22
...Cabela’s, Incorporated Marketing Plan MBA 652 Marketing Strategy Bellevue University Table of Contents Executive Summary 3 Situation Analysis 3 The Internal Environment 3 The Customer Environment 7 The External Environment 9 SWOT Analysis 12 Developing Competitive Advantages 12 Developing a Strategic Focus 13 Marketing Goals and Objectives 13 Marketing Strategy 13 Primary and Secondary Target Markets 13 Product Strategy 14 Pricing Strategy and Distribution/Supply Chain Strategy 14 Promotion Strategy 15 Marketing Implementation 16 Structural Issues 16 Tactical Marketing Activities 16 Evaluation and Control 16 Executive Summary Cabela’s, Inc is a multi-channel retailer of outdoors products focusing on the hunting, fishing, and camping industries. This company has experienced significant growth since becoming a public company, and is currently striving to increase revenue, improve retail store profitability, and increase market share to surpass competitors, namely Bass Pro Shops and REI. Cabela’s focus on a high-quality product and excellent customer service is an important part of both its history and its potential for future growth. To further the company’s mission and achieve statistical goals, Cabela’s must grow its loyal customer base by attracting a younger target market. Merchandising teams must extend growing and profitable product categories and expand advertising...
Words: 5707 - Pages: 23
...Chapter 1 Preliminaries Questions for Review 1. It is often said that a good theory is one that can be refuted by an empirical, data-oriented study. Explain why a theory that cannot be evaluated empirically is not a good theory. A theory is useful only if it succeeds in explaining and predicting the phenomena it was intended to explain. If a theory cannot be evaluated or tested by comparing its predictions to known facts and data, then we have no idea whether the theory is valid. If we cannot validate the theory, we cannot have any confidence in its predictions, and it is of little use. 2. Which of the following two statements involves positive economic analysis and which normative? How do the two kinds of analysis differ? a. Gasoline rationing (allocating to each individual a maximum amount of gasoline that can be purchased each year) is poor social policy because it interferes with the workings of the competitive market system. Positive economic analysis is concerned with explaining what is and predicting what will be. Normative economic analysis describes what ought to be. Statement (a) is primarily normative because it makes the normative assertion (i.e., a value judgment) that gasoline rationing is “poor social policy.” There is also a positive element to statement (a), because it claims that gasoline rationing “interferes with the workings of the competitive market system.” This is a prediction that a constraint placed on demand will change the market equilibrium...
Words: 1959 - Pages: 8
...eCEMP: Corporate Environmental Program The University of Michigan Sustainable Enterprise Program A program of the World Resources Institute DEJA SHOE (A): Creating the Environmental Footwear Company Recognizing the changing role of the corporation in society, the University of Michigan’s Business School and the School of Natural Resources created the Corporate Environmental Management Program (CEMP). The program is designed to develop leaders, executives, and managers – whether they work in the private sector, public sector, or for an environmental non-profit – with the skills and knowledge required to create economically and environmentally sustainable organizations Permission to reprint this case is available at the BELL case store. Additional information on the Case Series, BELL, and WRI is available at: www.BELLinnovation.org. Julie Lewis’ interest in recycling began in the early 1960’s when recycling wasn’t fashionable. Recycling in her home was done out of necessity. She helped her mother crush aluminum cans and return them to the local recycling center. She became concerned with environmental issues as a high school student when national attention was focused on the first Earth Day and water restrictions made news in her native California. With the encouragement of her teacher, Lewis made a video on the “State of the Environment” for a class project. Combining her environmental awareness with her instilled habit of recycling, she endeavored to launch a program...
Words: 5358 - Pages: 22
