LEGO-notes.docx - 1 What were LEGO's main expectations and learnings from the relationship with Flextronics LEGOs expectations from the relationship

LEGO-notes.docx - 1 What were LEGO's main expectations and...

This preview shows page 1 - 2 out of 2 pages.

1-What were LEGO's main expectations and learnings from the relationship with Flextronics? LEGO’s expectations from the relationship with Flextronics were to decrease the complexity of their supply chain, decrease the number of suppliers being used, and decrease cost of goods sold by outsourcing to a lower cost country for production. It was a time when the majority of competition was doing the same thing. As the case says, 95% of the global toy production was in China at the time, making it very difficult to keep a competitive advantage without the lower cost labor. To help ensure more simplicity with logistics and keep lead times lower, LEGO chose to get low-cost labor in countries closer to where the locations that make up the bulk of their sales. Outsourcing a large part of the production to Flextronics would also give LEGO a chance to focus on the individual pieces needed in a LEGO set. Many of the licensed and themed products contain a high percentage of pieces that are unique to those sets. Reducing the number of unique pieces for a higher percentage of “evergreen” pieces, which LEGO calls pieces used in multiple sets, will help to reduce number of parts needed and therefore streamline the supply chain.2-What were the key challenges in maintaining a relationship like the one between LEGO and Flextronics?The number one issue with maintaining the relationship between LEGO and Flextronics is their difference in production capabilities versus needs. Flextronics is streamlines to be a very lean production company, taking advantage of steady demand and economies of scale to maximize profits. LEGO on the other hand has much more agile needs. Their demand is higher in the second half of the year than the first, and even the average demand has a potential to fluctuate by 30% which can be quite significant. On top of this, LEGO has a very diverse number of parts needed and demand for the individual parts can fluctuate even more greatly, which proved extremely difficult for Flextronics to handle. This major issue of agile vs lean supply chain structure was not the only challenge faced. Other problems included the speed at which LEGO tried to outsource such a large
Image of page 1
Image of page 2

You've reached the end of your free preview.

Want to read both pages?

  • Fall '17
  • Flextronics

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

Stuck? We have tutors online 24/7 who can help you get unstuck.
A+ icon
Ask Expert Tutors You can ask You can ask You can ask (will expire )
Answers in as fast as 15 minutes