Benefits of Sourcing Shirt Flannel On-Shore
Version 1.0

Carolyn Wimple and Ernest Vosti
Lawrence Livermore National Laboratory

Demand Activated Manufacturing Architecture
Enterprise Modeling and Simulation

UCRL-ID-128742
DAMA-G-11-97
September, 1997

1. Introduction

1.1 Purpose
The primary purpose of this report is to document L.L. Bean's successful decision to source lightweight flannel fabric for Northwoods shirts onshore so that others in industry can see how moving manufacturing of textiles from offshore to onshore can be a win for all companies involved.

This report also briefly describes how DAMA technology can be used to facilitate reduction of stockouts and markdowns for the retailer and reduction of wasted inventories for the manufacturer and the mill. The technology is currently being tested in a pilot with all three companies.

1.2 Background
L.L. Bean has been selling flannel products for many years. From 1991 and 1995, L.L. Bean purchased roughly half of the fabric for these products from Portugal; the other half was purchased from Cone Mills. One of these flannel products is the Northwoods line of fashion plaid flannel shirts, made from a lighter weight flannel. After Christmas of 1995, due to a combination of L.L. Bean's offshore sourcing practice and demand being well below planned, L.L. Bean was left with a large inventory of unsold Northwoods shirts after the Christmas season, when most of these shirts are sold. This caused L.L. Bean to reconsider its flannel sourcing options.

L.L. Bean now obtains flannel for the Northwoods shirt collection from Cone Mills. Cone has been a longtime supplier of various flannels for L.L. Bean, including Northwoods flannel used in other products. L.L. Bean's decision to go to Cone for the Northwoods shirt flannel has benefited both companies. Details are described in the following sections.

2. Previous Fabric Sourcing Model

Prior to 1996, L.L. Bean purchased yarn-dyed plaid flannel for their Northwoods shirt line from a supplier in Portugal. This flannel, which had many desirable characteristics over most domestic products (deeper nap, higher quality), was shipped to the US and cut and sewn into shirts by a United States shirt manufacturer. Long lead times for this fabric would typically require L.L. Bean to order most of the necessary flannel well in advance of needed inventory at L.L. Bean.

Such early ordering would ensure that all Northwoods shirts were on hand in L.L. Bean's inventory in time to satisfy customer orders. Ordering additional product later in the season when demand is high and turnaround must be very fast was risky due to long lead times for this type of fabric. At the time, L.L. Bean's decision to source offshore did not seem unwarranted, even given the long lead time, since both domestic and Portuguese yarn-dyed fabric manufacturers typically require 10-14 weeks to produce and ship product (70 - 98 days). Unlike domestic producers, Portuguese production facilities shut down for the month of August, requiring even more advance planning.

Another difficulty with sourcing from Portugal was the difficulty of ensuring that the right flannel colors in the right quantities would be available to the consumer. L.L. Bean's early season order had to predict the percentage of each pattern and color to be purchased by consumers. This is especially difficult in the Northwoods line which, as a fashion product, has significant variances in color and plaid pattern every year.

In 1995, L.L. Bean used normal established procedures for ordering Northwoods shirt flannel targeted for sale in the 1995 Christmas season. The flannel shirt business had been growing nicely up to that time. However, in Christmas of 1995, the flannel shirt market collapsed, leaving L.L. Bean with nearly a year's worth of inventory at the close of the season. L.L. Bean was forced to not order flannel from the Portuguese supplier. The Portuguese supplier needed to sell his production capacity for the upcoming year, and told L.L. Bean it would be difficult for L.L. Bean to source from them again in the future once their capacity was sold to someone else. L.L. Bean then began looking for another source for Northwoods shirt flannel.

3. Current Fabric Sourcing Model

L.L. Bean now sources Northwoods flannel for all their Northwoods products, including shirts, from Cone Mills. Because Cone Mills is an onshore supplier, delivery time is drastically reduced from the 30 days shipping from Portugal to 1-2 days from Cone Mills. In addition, Cone Mills has dramatically reduced yarn-dyed fabric production time from that of the typical manufacturer down to 4-5 weeks. These two factors have allowed L.L. Bean to adjust its model for purchasing Northwoods shirt flannel. Currently, L.L. Bean orders per the following rough replenishment schedule:

Order Date Current Replenishment Schedule Old Replenishment Schedule

4. Benefits of Current Model

4.1 L.L. Bean
The shorter lead time and new fabric replenishment schedule allow L.L. Bean to make decisions later in the season. These later decisions are generally more informed decisions based on early-season product sales. Later decisions can help L.L. Bean better manage Christmas inventory based on off-Christmas sales. L.L. Bean typically sends early catalogs to their best customers. Based on the reaction of these customers, inventory requirements later in the season can be better predicted. L.L. Bean gains knowledge as time passes, and with shorter lead times, L.L. Bean is better able to react to that knowledge.

L.L. Bean's ability to make better decisions earlier in the season should lead to improved sales and service level, that is, having the right product when the customer needs it. Performance of the 1997 Fall and Christmas seasons will provide a more definitive indicator of the success of this new program.

4.2 Cone Mills
Cone Mills now supplies all shirt flannel for all L.L. Bean shirt lines. The addition of the Northwoods shirt line has effectively doubled Cone's business with L.L. Bean. In terms of capacity, it is equivalent to more than one month's capacity in one of Cone's flannel plants. L.L. Bean's increased confidence in Cone's ability to deliver has caused L.L. Bean to order more flannel than originally planned, further benefiting Cone's business. Cone made a slight price concession to get all of L.L. Bean's light flannel business, and anticipates Portugal to respond with a more competitive offer next year.

5 Future Plans

5.1 Refining the Business Process
L.L. Bean and Cone Mills are currently involved in a DAMA pilot intended to improve their business relationship through electronic data sharing. Through this pilot project, exchange of timely product, order, and inventory information should lead to easier fine-tuning of L.L. Bean's July, August, and September replenishment decisions. It is anticipated that in 1998, the entire year of purchases would be managed based on the information these companies will share. Information sharing should shorten the time to manage the product pipeline, and allow L.L. Bean to make faster purchasing decisions. A third company, the Thomas Bradford Shirt Company, which manufactures Northwoods flannel shirts for L.L. Bean, is also participating in this pilot.

This pilot utilizes DAMA-developed software designed to enable the secure exchange of information over the Internet. This software, called TEXNET, allows data to be pulled from one company's corporate databases and file systems to a desktop at another company. The software allows data sharing among multiple companies simultaneously; each company that is providing data to others retains complete control over the access to that data.

According to L.L. Bean, information sharing benefits everyone in the supply chain by helping each member make better decisions. The strength of this TEXNET pilot is that information about the product line is being shared by and with all three companies, which encourages conversations and mutually beneficial decisions. In traditional Quick Response relationships with suppliers, it is very difficult to maintain agreements, because when individuals who have made those agreements leave their companies or are reassigned, the agreements are lost. It is hoped that TEXNET's standard architecture will provide a framework for capturing and maintaining such agreements.

6. Acknowledgments

We would like to acknowledge Dennis Gilram of Cone Mills and Rol Fessenden of L.L. Bean for providing the information presented in this case study.

NOTICE: This report was prepared as an account of work sponsored by an agency of the U.S. government. Neither the U.S. government nor any agency thereof. nor any of their employees, nor any of their contractors, subcontractors, or their employees, makes any warranty, express or implied, or assumes any legal liability or responsibility for the accuracy, completeness, or usefulness of any information, apparatus, product, or process disclosed, or represents that its use would not infringe privately owned rights. Reference herein to any specific commercial product, process, or service by trade name, trademark, manufacturer, or otherwise, does not necessarily constitute or imply its endorsement, recommendation, or favoring by the U.S. government, any agency thereof, or any of their contractors or subcontractors. The views and opinions expressed herein do not necessarily state or reflect those of the U.S. government, any agency thereof, or any of their contractors.

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