MBA 600 – Production & Operations Management
Final Project Report - June 2, 2003
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
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:
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
It will enhance our liquidation effort by improving product assortment and quantities in
the Factory Store Division with well-margined brand relevant product.
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 initiatives in the full price brand divisions. The
focus of my project report is how do I plan for and find alternate supplies of brand appropriate
product for the L.L.Bean Factory Store Division?
Proposed Method –
My proposed method of solving this problem is multi-faceted and requires Factory Store
Division initiatives that will link to the overall Corporate Strategies and Initiatives of L.L.Bean,
Inc. in order to be adopted and successful. These initiatives involve Strategy and Work Flow
changes, Process Management improvements, Work Force shifts in job focus and responsibilities
and increased internal and external communication to enrich the brand appropriate product
The proposed initiatives are as follows:
• Balance of Sales – Shift the balance of sales from Mail Order to the Outlet and E-Commerce
sub-channels to effectively liquidate inventory without cannibalizing any full price sale efforts.
• Centralized Merchandising – Improve the merchandising process by changing from a
channel focus to a product focus in order to better manage and liquidate inventory.
• Inventory Management – Improve inventory by applying inventory management best
practices to the liquidations process to improve sell-through, margin and quality/age of inventory.
• Outlet Store Productivity – Improve productivity in the Outlet sub-channel to achieve
increased cost recovery and ensure its viability as the major liquidation vehicle of L.L.Bean, Inc.
• L.L.Bean On Sale – Manage and coordinate the two major L.L.Bean sale periods across all
channels – full and off price.
How Methods Would Be Used –
Current State –
In order to understand the proposed initiatives, it is important to first understand the goals
and current situation of the L.L.Bean Factory Store Division. The Factory Store Division is
responsible for liquidating all L.L.Bean discontinued merchandise and Second Quality...
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