LL Bean methodology Essay Example for Free

LL loft methodology EssayLL Bean utilizes a probability distribution methodology to help estimate the optimal order size of a specific item. The probability distribution is driven by a series of calculations that will predict forecast errors. One of the study concerns is that LL Bean tends to order more inventory than what was predicted in the frozen forecast. Their logic for doing this is that the cost of understocking exceeds the cost of overstocking. According to Marck Fasold (CFO), this methodology leads to major discrepancies with forecasting the demand for their products. Also, this leads to buyers being challenged that products are being ordered that do not align with their forecasting predictions. In addition, Rol Fessenden eludes to the fact that the methodology has issues because they cannistert find any real distribution errors among products and he is not convinced about the estimating contribution margins and liquidation costs.In summary, there are many challen ges to LL Beans club fulfil. LL Bean tends to be okay with just overstocking rather than focusing on making accurate predictions. This approach leads to unwarranted costs that can be eliminated if they focused on refining their ordering process and methodology. Secondly, it seems that buyers make forecasts that are not being applied by the company which turn leads to insatiable buyers because they feel their judgments are not being respected. Lastly, LL Bean should allow the distribution forecast errors to be handled by the buyers during their initial forecasting discussion.The typical forecasting process for LL Bean involves various individuals (including the Inventory Buyer and product people) meeting together to make forecasts of items by book. Specially, an Excel spreadsheet is utilized to rank items by judge dollar sales and discussions are involved to make adjustments. The buyers tend to use their own face-to-face judgment where they invent a rule of the thumb to surface forecasts. Furthermore, they use personal feelings in their forecasting predications which in turn can lead to errors without hard data. The issue with the forecasting process is that it is purely focused on an individuals personal thoughts rather than the usage of historical sales data as a benchmark.Also, according to Barbara Hamaluk (a buyer for mens crumple shirts) there tends to be a variancewith the item forecasts and the dollar target of that book. In summary, by having a forecasting process that is based on personal judgment versus actual data can lead to issues such as over and understocking items. Also, this can further lose money for LL Bean due to the inaccuracies of ordering too much or too little based on personal opinion forecasts. LL Bean can improve this process by having their buyers hail a standardized process that requires them to use historical and valid data to predict forecasts.