{"id":26010,"date":"2017-11-15T22:57:53","date_gmt":"2017-11-16T03:57:53","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/l-l-bean\/"},"modified":"2017-11-15T22:57:53","modified_gmt":"2017-11-16T03:57:53","slug":"l-l-bean-digitalizing-and-thriving","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/l-l-bean-digitalizing-and-thriving\/","title":{"rendered":"L.L.BEAN: DIGITALIZING AND THRIVING"},"content":{"rendered":"

The New Normal<\/strong><\/p>\n

The old paradigm of apparel sourcing focused on obtaining cheap labor from less-developed countries. Having nearly exhausted the profitable opportunities from these supplier markets, retailers have shifted focus to supply chain digitalization in order to \u201clower costs, shorten lead times and increase transparency.\u201d[1] In an information-rich, technology-driven world, the power has shifted to the customer. To remain competitive and relevant, apparel retailers must cater to a more demanding customer base. According to a McKinsey study, \u201cgreater agility and flexibility are critical if companies are to offer savvy customers what they want, when they want it, where they want it, and at the right quality.\u201d[2] L.L.Bean is an outdoor apparel retailer that has fully embraced the shift to digitalization in order to reach this goal. It is servicing its customers by identifying slow-moving items, evaluating seasonal demand, spotting market trends, and offering products with short lifecycles.<\/p>\n

L.L.Bean\u2019s Response<\/strong><\/p>\n

Historically, catalog retailers have had control over which products were available and when they were available with considerable predictability. With the presence of digital channels, customers are now calling the shots and deciding what they want. L.L.Bean is evolving in order to thrive in this new customer-driven environment. According to Kirsten Piacentini, VP of Inventory Management, \u201cit\u2019s a lot harder to predict to what and when [customers] are going to react, and in what quantities.\u201d[3] When the number of channels grew to include catalog, phone, in-store, and e-commerce, L.L.Bean developed multiple independent forecast systems, which hindered its ability to share information across the organization. This resulted in conflicting forecast information. By integrating company departments, and connecting with vendors and suppliers via a digital supply chain, L.L.Bean is positioning itself to quickly react to changing trends, resulting in optimal lead times, reduced expenses, improved quality, and maximized profits.<\/p>\n

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Stepping Ahead<\/strong><\/p>\n

The full digital transformation at L.L.Bean will involve a multi-year process. The forecasting and inventory purchasing elements are in various stages of piloting and implementation. Historically, only chain-level inventory data was available for product ordering. With the inclusion of store-level data, Piacentini says that L.L.Bean has observed improvements in customer service levels of \u201c10 percentage points\u201d as well as \u201ccut lead times.\u201d[4][5] Data is now downloaded nightly for every product across every channel, fostering increased transparency and improved decision-making. L.L.Bean is positioned to forecast over an 18-month period and to share data with vendors. With data in hand, vendors will be able to do more advanced planning, including booking capacity in factories, committing to fabric or raw materials with vendors, responding to information about out-of-stocks and backorders, and re-prioritizing productions. Next, L.L.Bean will shift its focus to enterprise planning.[6] By connecting enterprise planning to forecasting and buying tools, it can better leverage real-time demand signals and market forecasts to create a time-phased inventory plan. Longer term, L.L.Bean will commence work on the assortment planning phase, which will serve to align products with demonstrated customer needs.[7] This phase will remove guesswork by linking buying decisions to actual customer profiles.<\/p>\n

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Digitalization of the Apparel Supply Chain (Fung Global Retail & Technology)<\/p>\n

Further Considerations<\/strong><\/p>\n

L.L.Bean should incorporate additional planning tools to address inventory optimization as well as promotions and markdowns. Digitalization of inventory will accommodate customer demands for speed and service. However, over-investing in product inventory is an expensive proposition. Digitalization will balance speed and responsiveness with inventory costs to ensure that the right products are in the right place at the right time, seamlessly matching orders to available inventory. This initiative will directly decrease costs associated with excess inventory and improve customer satisfaction and loyalty. Digitalization of promotions and markdowns will permit the retailer to evaluate promotional and markdown opportunities for slow-moving items. The digital supply chain can exploit the data to determine the optimal pricing and promotional strategies for every product at every point along its lifecycle, from launch to promotion to markdown to phase-out. The retailer will be well-positioned to provide differentiated and competitive offers to its customers.<\/p>\n

L.L.Bean has embraced the digital supply chain to satisfy the modern customer whose shopping style does not tolerate long lead times and renders big-batch production infeasible. In so doing, it has started the journey to improve returns, efficiently allocate production capacity, and spot bottlenecks earlier.<\/p>\n

Open Questions<\/strong><\/p>\n