L.L. Bean was considering a multimillion-dollar investment in a new distribution center, to help manage a dramatic growth in sales. However, an “aggressive stance” in managing inventory allowed the company to delay those plans, says Perkins.
The effort proceeded in multiple stages. First up was a close look at SKU rationalization. The company eliminated “fringe items” that weren’t generating a sufficient profit, Perkins says. Second was scrutiny of the “ebb and flow of product, to make sure it’s there on time, but not sooner.” Bean utilized a just-in-time approach to streamline shipments and cut down on inventory levels. Third, it became more aggressive about in-season markdowns, for products that weren’t selling at forecasted levels. In the process, says Perkins, Bean improved its gross margins, inventory turns and sales volume.
The level of analytics that was required to achieve those goals had been available for years. But Bean was intent on following its company philosophy of always having product on hand, based on a “one-price policy.” As the market changed, however, and the company became more concerned about its inventory position, it sought to adjust its supply chain strategy.
At the outset, there was some concern that tighter inventories might have a negative impact on customer service. That hasn’t happened so far, says Perkins. Backorders have declined, over-buying has been curbed, and Bean has managed to maintain “the right inventory at the right time.” It addition, it has found itself better able to take care of seasonal customers.
The program also saw the elimination of some traditional corporate silos. For the first time, managers found themselves able to work on the same projects in a cross-functional manner. “This is a great example of a multi-disciplinary approach,” says Perkins.
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Keywords: supply chain, supply chain management, inventory management, inventory control, logistics management, supply chain planning, retail supply chain