Ll Bean Inc. Analysis

L.L Bean, Inc.

Item Forecasting and Inventory Management

Analysis and Solution

L. L. Bean is a catalog business that lacks ability of matching demand with supply. They are bearing additional cost of 11 million dollars due to lack of stock and 10 million dollars due to having wrong inventory. It is obvious that these problems occurred because the firm is not able to forecast exactly what their customers demand.

The firm usually places the order around 12 or more weeks before when their consumers receive they catalogs due to the production of the product takes around eight to twelve weeks, and the firm cannot change the commitment after that. The procedure of the early season demand is forecasted by deliveries against commitment in order to make predictions about what will be demanded next season. Therefore, it a challenge for LL Bean to forecast how much and exactly what their customers want.

L.L Bean have a crucial forecasting issue in which they are in need to find an immediate solution for this issue, because their customers desire is what matters to them the most and if they are not precise in what they order and customers don’t get what product they want in the exact time they can lose customers, also, if they sell their excess stock at a discounted price, then it would be against their philosophy of selling good merchandise at a reasonable profit.

With the frozen forecast, the firm always observed that the sum of the items forecasted remains higher than the dollar targeted to the book so they were always uncertain about which item forecasting should be reduced or even reducing the whole in some percentage so this is one of the results of under stocking inventory.

They take historical errors of each product to determine the range of quantity demanded for any new item. By using the A/F ratio multiplied by the frozen forecast, they can determine the range of quantity forecast demand for the current year and number of units added to the stock....