LEGO-Group.docx - LEGO Group An Outsourcing Journey Luke...

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LEGO Group: An Outsourcing Journey Luke Sardella Jevon Bisschop Nayla Hamid Omar Hassouneh Yasmine Mansour Nicole Berra
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1. LEGO’s expectations from the relationship with Flextronics were to decrease the complexity of its 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 its main markets. 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, a term for pieces used in multiple sets, would help to reduce number of parts needed and therefore streamline the supply chain. 2. The main issue in maintaining a relationship like the one between LEGO and Flextronics rested in differing production capabilities and goals. Flextronics is streamlined 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. Its 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. Additionally, LEGO has a very diverse number of parts needed for varying toy sets, and demand for these individual parts can fluctuate even more greatly, proving to be extremely difficult for Flextronics to manage. Inefficiencies quickly began to take shape as
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  • Fall '17
  • Lego Group, Billund, Denmark, Legoland Windsor

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