Supply Chain Management - L.L. Bean
Mark Cronin
MBA 600 – Production & Operations Management
Final Project Report - June 2, 2003
Supply-Chain Management
Executive Summary – By adopting five new proposed initiatives, the L.L.Bean Factory Store Division can
provide brand appropriate product to customers and it can also improve its in-stock position and
inventory turns while reducing costs in the Supply-Chain and management of corporate
inventory. If we leverage a Special Purchase strategy and negotiate with existing vendors to sell
us all their manufacturing defects of existing L.L.Bean products at an agreed upon reduced rate,
we can provide better costs for the full price products and higher cost recoveries for deleted
merchandise. Vendor partnerships improve by means of knowing that they have an outlet to sell
their defects and overruns (with further reduced price penalties for not falling within specific
L.L.Bean quality and production guidelines). These initiatives and strategies will provide three overall benefits to the company:
1.) It will protect the L.L.Bean brand by controlling the liquidation of vendor seconds,
quality assurance rejects and vendor overruns that might otherwise be offered on the open
market.
2.) It will enhance our liquidation effort by improving product assortment and quantities in
the Factory Store Division with well-margined brand relevant product.
3.) The manufacturing costs of defects and overruns will be separated out from full priced
products and not passed onto L.L.Bean or it’s customers in the form of higher prices.
Therefore, we can remain competitively priced in the market for our goods and services.
Background: Statement of Problem
Inventory sources of product for the Factory Store Division are dwindling as L.L.Bean,
Inc. improves its forecasting, purchasing processes and lowering of the overall corporate return
rate through improved copy and customer fit
MBA 600 – Production & Operations Management
Final Project Report - June 2, 2003
Supply-Chain Management
Executive Summary – By adopting five new proposed initiatives, the L.L.Bean Factory Store Division can
provide brand appropriate product to customers and it can also improve its in-stock position and
inventory turns while reducing costs in the Supply-Chain and management of corporate
inventory. If we leverage a Special Purchase strategy and negotiate with existing vendors to sell
us all their manufacturing defects of existing L.L.Bean products at an agreed upon reduced rate,
we can provide better costs for the full price products and higher cost recoveries for deleted
merchandise. Vendor partnerships improve by means of knowing that they have an outlet to sell
their defects and overruns (with further reduced price penalties for not falling within specific
L.L.Bean quality and production guidelines). These initiatives and strategies will provide three overall benefits to the company:
1.) It will protect the L.L.Bean brand by controlling the liquidation of vendor seconds,
quality assurance rejects and vendor overruns that might otherwise be offered on the open
market.
2.) It will enhance our liquidation effort by improving product assortment and quantities in
the Factory Store Division with well-margined brand relevant product.
3.) The manufacturing costs of defects and overruns will be separated out from full priced
products and not passed onto L.L.Bean or it’s customers in the form of higher prices.
Therefore, we can remain competitively priced in the market for our goods and services.
Background: Statement of Problem
Inventory sources of product for the Factory Store Division are dwindling as L.L.Bean,
Inc. improves its forecasting, purchasing processes and lowering of the overall corporate return
rate through improved copy and customer fit