LL Bean Case Study Example | Topics and Well Written Essays - 750 words

LL Bean - Case Study Example Beyond that maximum physical number, there is no way for the physical store to find out what the real demand is if all customers potential customers were provided with the amount that they want. If the inventory runs out, then the store can re-order, but there is really no way of knowing whether while the good is out of stock more people want that particular good or not, because there is no catalog or mechanism for the store to demonstrate what an out of stock good looks like, unless there is a physical sample and the physical stores have an supply on demand option. Moreover, in a physical store, the audience for a particular good is limited to those who physically go to the stores to view the merchandise, limiting the potential demand to the shop frequenters. In contrast, LL Bean, by making the catalogs available for the duration of a season, and allowing for orders, is able to capture the demand for a larger subset of potential customers. In this case this demand is more real or co mprehensive than the more limited demand subset that the physical store is able to address/cover. On the other hand, one can also say that the audience for the good is limited to those who receive the catalogs. In this sense this demand is arguably not universal enough. Moreover, from the point of view of being able to satisfy all demand, the statement needs to be qualified. Demand forecasting is part art in LL Bean, as has been demonstrated in the study, and even with the use of A/F and probability distributions for probable demand there are many opportunities to overshoot targets. This is especially true when the costs associated with overstocking on an item are larger than the costs of understocking, or being conservative on demand projections. In the case where stocks on hand turn out to be larger than the actual demand, then one can say that LL Bean is indeed able to capture the true demand, with the caveats on the limits of catalog marketing being able to capture all possible demand as discussed above (Schleifer, 1992, pp. 1-5). Question 2 Recording demand for an item that is out of stock may not have much of a bearing in that current season, given that for many of the items there is a long lag time for deliveries that replenishing out of stock items during the current season is often not feasible. First if it were feasible to restock within the season, obviously not being able to capture demand for an item that is out of stock means that the company misses out on any additional sales tied to that non-captured demand. The company is unable to know how many of that out of stock item to reorder. Second, for most items that cannot be replenished during the season, the implications for LL Bean are with regard to being able to record future demand and factor them into the forecasts. This is so because from the case itself, LL Bean uses historical actual demand and forecast demand figures as a weighting factor to determine how many to order of individual items for the coming seasons. If LL Bean is unable to record demand for items that are out of stock, then they are no different from operations that are purely based on physical stores, and their future demand forecasts then become continuously flawed and inaccurate Such inability to record out of stock demand translates to perpetual misses in future forecasts for the demand for that out of stock item. This has consequences for the company’s profits obviously (Schleifer, 1992, pp. 1-5). Question 3 The marginal unit profit for a sale of the shirt is $ 25. This is selling price minus cost. The marginal unit loss for a non-sale is $15. This is cost minus liquidation price per shirt. The most