INTRODUCTION

L.L. Bean began in the basement of Leon Leonwood Bean’s home in 1912. His
golden rule for the company is “Sell good merchandise at a reasonable profit, treat
your customers like humans beings, and they’ll always come back for more. The
story goes that Leon Leonwood Bean came back from a hunting trip unhappy
because of his cold, damp feet. Bean hit upon the idea of stitching leather uppers to
workmen's rubber boots to create more comfortable, water-resistant footwear for
tramping through the Maine woods. In 1912 he founded the company bearing his
name to sell his unique "Maine Hunting Shoe," working out of the basement of his
brother's apparel shop. He sold 100 pairs of this new, lightweight boot to fellow
outdoorsmen through the mail, only to receive 90 pairs back after the stitching
gave way. This was the genesis of the 100% satisfaction guarantee that has made
L.L. Bean so famous today. Leon repaired all 90 shoes and returned them to the
original owners with the promise that they would last a lifetime and meet all
satisfaction requirements that the company had. And thus began L.L. Bean, now a
major outdoor clothing supplier.

A century later, the company still sells the original hunting boot (a 16-foot
sculpture of one stands outside its flagship store in Freeport). Today L.L. Bean also
offers hundreds of other products, including apparel for men, women, and children,
footwear, and, of course, outdoor gear for camping, fishing, hiking, and other
sports. Sales reached about US $1.5 billion in 2010. L.L. Bean still produces its
signature boots in the United States. It has two manufacturing facilities in Maine
that make boots and tote bags and perform some customization of other
manufactured products. Although the retailer sources 10 percent to 12 percent of
its merchandise in the United States, the rest of its goods are made in Asia and
Europe. "We try to source as close as we can (to Maine) where it makes economic
sense to do so," says Vice President for Fulfillment Mike Perkins. L.L. Bean
recently opened eight retail stores in Japan and watches happily as these stores
become more and more popular. Several factory stores are spread throughout New
England with a few others in Oregon, and Delaware. As the L.L. Bean phone
representatives place as many as 180,000 orders a day, the customers of L.L. Bean
have confidence that they will be treated with value, and honesty; qualities which
have made L.L. Bean famous.

The heart of all the action at L.L. Bean is the Distribution Center located in
Freeport, Maine. While the retail store is a fabulous place to visit and purchase
merchandise, the majority of L.L. Bean’s sales are through the catalog and the on-
line ordering system. Once an order is placed, the representative processing the
order uploads it to the main system to let the distribution center know how, where
and when the order should be shipped. In 1996, realizing that business was
growing too rapidly to expand the current distribution center, L.L. Bean opened the
new Order Fulfillment Center, or OFC. The building was designed for “no-
exceptions processing” to speed the process of filling orders for the customers.
This meant that every order would be processed the same way: pick waves would
be formed, the items would be picked from the shelves, sent to the main tray sorter,
and down to packing chutes to be packaged appropriately and shipped. L.L. Bean
has contracted FedEx to work inside the new OFC to even further speed the
process of packing and shipping customer orders.

L. L. Bean is a widely known retailer of high-quality outdoor goods and apparel.

The majority of its sales are generated through telephone orders via 800-service,
which was introduced in 1986. Ten percent of its $870 million in 1993 sales was
derived through store transactions, 18% was ordered through the mail, leaving the
bulk (72%) from orders taken at the company’s call center. Calls to L. L. Bean’s
call center fit into two major classifications, telemarketing (TM) and telephone
inquiry (TI), each with its own 800-number. TM calls are primarily the order
placing calls that generate the vast majority of the company’s sales. TI callers are
mainly customers who ask about the status of their orders, report problems about
orders, and so on. The volume of calls and average duration of each call are quite
different for these two classes. Annual call volumes for TM are many times higher
than those of TI, but the average length is much less. TI agents are responsible for
customer inquiries in a variety of areas and thus require special training. Thus it is
important to accurately forecast the incoming call volumes for TI and TM
separately to properly schedule these two distinct server groups. The real focus of
these forecasts is on the third week ahead. Once the forecast is made, the
schedulers can make up a weekly schedule for their workers and give them two
weeks’ advance notice. Inaccurate forecasts are very costly to L. L. Bean because
they result in a mismatch of supply and demand. Understaffing of TM agents
increases opportunity costs due to diminished revenues from lost orders (a
percentage of customers who don’t get through immediately, abandon the call, and
never call back). Understaffing of TI agents decreases overall customer satisfaction
and erodes customer loyalty. In both cases, understaffing leads to excessive queue
times, which causes telephone-connect charges to increase dramatically. On the
other hand, overstaffing of either group of agents incurs the obvious penalty of
excessive direct labor costs for the underutilized pool of agents on duty. The staff-
scheduling decisions would be quite routine if it were not for the erratic nature and
extreme seasonality of L. L. Bean’s business. For example, the three-week period
before Christmas can make or break the year, as nearly 20% of the annual calls
come during this short period. L. L. Bean will typically double the number of
agents and quadruple the number of phone lines during this period. After this
period, there is, of course, the exact opposite problem, the build-down process. In
addition, there is a strong day-of-week pattern throughout the year in both types of
calls, with the volume in the week the highest on Monday and monotonically
decreasing down to the low on Sunday. Other factors that must be considered by
the forecasting model is the effect of catalog mailings or “drops.” These are
generally done so that the bulk of the catalogs arrive around Tuesday, which
disrupts the normal pattern of calls tremendously. Many eager customers order
immediately, which creates a surge of new calls around the time of the “drop.” The
new forecasting model that was developed had much greater forecast accuracy than
L. L. Bean’s previous approach and was able to produce a mean absolute
percentage error of 7.4% for the TM group and 11.4% for the TI group on five
years of historical data. So far, on future 3 week ahead forecasts, the new
forecasting model has had about the same accuracy as that demonstrated on the
historical data. The increased precision afforded by these models is estimated to
translate into $300,000 annual savings for L. L. Bean through more efficient
scheduling. The only problem that could arise by using this forecasting model is if
the buyers at L.L. Bean made a mistake in their forecasting methods. All humans
make errors no one is perfect. You would need some way for them to justify why
they have decided to order this amount and how they came up with the amount they
have chosen to order. Then have an upper team member or another division double
check and approve the order if their numbers seem to be correct.
In this case study LL Bean administration is confronting a few difficulties
concerning its forecasting and stock management. For fashion and article of clothing
business, regularity is a trademark that makes forecasting and stock administration
more basic. In the wake of breaking down the circumstance it gave the idea that LL
Bean receives a solitary requesting inventory administration framework for all stock
things. This puts them under the weight of coming up short on stock or being
screwed over thanks to leftover portion toward the finish of the season. They
additionally utilize top-down estimating, in which they choose forecasting deals for
the entire list at that point determining is improved the situation every thing. What's
more the thing anticipating process has no clear procedure. Eventually this
circumstance brings about forecasting mistake excitement.