L. L. Bean is a retailer of high quality outdoor goods and apparel. Twenty percent of their goods are sold through mail orders, 15% through in-store transactions, and 65% through phone orders. Because L. L. Bean receives 18% of its annual call volume in the three weeks prior to Christmas, this season makes or breaks the year financially. During this three- week period, the number of telephone agents is increased from 500 to 1,275, and the number of telephone lines is expanded from 150 to 576.
In 1988, management was confronted with these problems: On average, 80% of callers received a busy signal when they used L. L. Bean's 800 number to place an order, and those customers who got through waited an average of 10 minutes for an available agent. In addition, L. L. Bean's 800 number long distance charges from potential customers waiting in the queue often amounted to $25,000 per day. This expense does not account for the loss in sales from customers who hung up while waiting for an agent.
After a consulting team examined the situation, L. L. Bean used queueing theory to develop a model that focused on improving the efficiency of its telemarketing operations. To improve efficiency, the model determined optimal levels for:
- the number of phone lines carrying incoming calls to telephone agents;
- the number of agents scheduled; and
- the queue capacity; i.e., the number of wait positions for calls.
As the busy season approached, management had to consider "building-up" the number of phone lines and agents; similarly they also had to "build-down" these areas after the Christmas season.
The queueing analysis process cost L. L. Bean $40,000, but they conservatively estimated an increased profit of $10,000,000 in 1989. This model improved service rates and call volume throughout the year, and especially during the three week peak period just before Christmas.