L.L. Bean is an outdoor gear and apparel merchant whose mission is to inspire youth and families to engage in outdoor recreational activities. With $1.6B in net revenue split among catalog, e-commerce, and brick-and-mortar sales channels all experiencing year-over-year growth, one might say they’ve succeeded. From its modest beginnings in 1912 when founder Leon Leonwood Bean sold his signature, hand-crafted boots out of one room, until present day, L.L. Bean has always stood behind the same value principles: a focus on the customer, continuous product improvement and innovation, and a 100% satisfaction guarantee. L.L. Bean has delivered on its customer promise through operations that involve Design Thinking, Supply Chain Management, and exemplary Customer Service.
When it comes to innovation, IDEO has demonstrated that it pays to interact with the heaviest users of products for idea generation purposes. L.L. Bean has taken that concept a step further by partnering with elite athletes like Seth Wescott who not only ideate innovative concepts but also test prototypes in extreme situations that will guarantee functionality and durability for the mass market. L.L. Bean complements this experiential testing with scientific analysis of materials, construction, and design in its own independent lab.
As many brick-and-mortar retailers have scrambled in recent years to build out e-commerce platforms, L.L. Bean’s established e-commerce presence has allowed it to go the other way. Sometimes it pays to be a contrarian. The “Outdoor Discovery Schools” in the above video are run out of every retail store and are more than just a prime opportunity to increase brand visibility and demonstrate the quality of L.L. Bean products. From a design thinking perspective, the Schools are an ingenious way to organically create customer focus groups. School attendees are more than happy to unwittingly serve as sources of feedback on products while snowshoeing, kayaking, and paddleboarding.
Supply Chain Management
L.L. Bean has a history of leveraging data analytics to streamline its supply chain. In 2007, its distribution network was approaching capacity. Excess seasonal inventory had been crowding shelves. Instead of investing in a new distribution center, they invested in inventory management systems to increase throughput. Aligning inventory policy to customer demand meant separating SKUs into “core” and “non-core” items. Core items experienced consistent demand regardless of the time of year while non-core items experienced seasonal demand. L.L. Bean responded by developing product-specific inventory lifecycles for its seasonal items.
Inventory characteristics also differed by sales channel. As a result, L.L. Bean split its two distribution centers, both in Freeport, Maine, into a retail distribution center and a catalog/online sales distribution center, optimizing for both. Doing so has empowered the retail channel to own its inventory management through improved forecasting and sourcing product to stores.
Completing the vertical integration of its supply chain, L.L. Bean tightly couples its distribution centers with its manufacturers and suppliers. The company-owned manufacturing facilities are located a stone’s throw from Freeport in Brunswick and Lewiston, Maine. Core items, such as boots and tote bags, are still made in those facilities. Non-core items are received in small, frequent batches from suppliers. Sales transparency with suppliers has obviated the need to engage in the guesswork involved in ordering large quantities of non-core items for an entire season.
A better understanding of product lifecycles, the channel-specific distribution centers, and the just-in-time relationship with suppliers has led to less overstock of seasonal inventory, more of the products customers buy all year long, and a reduction in warehousing costs.
L.L. Bean’s Customer Satisfaction department operates out of 3 customer service centers in Maine, 24 hours a day, 365 days a year. Problem? Customer representatives are practically on the site of operations to fix it, not in an international call center.
In their words, “our guarantee is based on something as simple as a handshake – the deal that you’ll be satisfied with your purchase, and if you’re not, we’ll make it right.” If a customer does not have a receipt, L.L. Bean will do its best to locate a record of the purchase. If unsuccessful, L.L. Bean reimburses the customer with a gift card. Even if a product was customized, embroidered, or monogrammed, a customer can still return it at any time. Customers and employees alike know they are in safe hands with L.L. Bean. The company regularly wins awards for customer loyalty and customer service.
This past year, L.L. Bean made a $78.5M investment to both fully fund its defined benefit pension plan and pay 8% bonuses to its 5,000 permanent employees. Though the financial information for this private company is unavailable, these actions speak volumes to L.L. Bean’s profitability and what can be accomplished when business and operating models are aligned.