Untitled Slide

LEGO GROUP

AGENDA

• LEGO History, Vision, and Products
• LEGO Financial Crisis
• LEGO's New Strategy
• Flextronic Partnership
• Lessons Learned and Conclusion

LEGO'S HISTORY

• Ole Kirk Christiansen
• Founder of the LEGO Group
• 1934 - Leg godt
• Danish phrase for "play well"
• 1947 - Christiansen started making plastic toys

LEGO'S HISTORY

• 1949 - Early version of LEGO Brick Created
• 1958 - Ole Kirk Christiansen dies
• 1958 - modern LEGO Brick created

LEGO'S VISION

• "Inspire children to explore and challenge
• their own creative potential"
• Motto: "Only the Best is Good Enough"
• "It is in the philosophy that 'good play' enriches
• a child' life - and its subsequent adulthood"

LEGO'S PRODUCTS

• 1958 - Modern LEGO brick
• 1969 - LEGO DUPLO
• 1977 - LEGO Technic

LEGO'S PRODUCTS

• 1997 - LEGO Video games
• 2009 - LEGO board games
• 2014 - The LEGO Movie

LEGO CRISIS

HOW?

• Declining demand of traditional product
• Massive diversification of new products
• Multitude of suppliers amounting to 11,000
• High costs associated with new ventures
• More products brought complexities

A NEW STRATEGY

• New CEO Jorgen Vig Knugstrop
• Backed by Founding Family
• Handle finances carefully
• Analyze the supply chain
• Analyze distribution and production operations

STRATEGY IMPLEMENTATION

• Forecast demand fluctuations
• Manage inventory levels more efficiently
• Reduce investments on specialized molds
• Analyze profit margins from retail partners
• Focus on more profitable retail partners

DISTRIBUTION

• Distributed products from Germany, Denmark, and France
• Centralize European distribution centers in Czech Republic
• Reduce complexity of managing multiple distribution centers
• Reduce costs of running the centers simultaneously

PRODUCTION PROCESS

• Develop the necessary mold
• Mold the required shapes
• Assemble the parts
• Pre/Post-Package the products
• Assembly and Post Package were the most costly

PRODUCTION

• Produced products at high cost countries
• Denmark, the US, South Korea, and Switzerland
• Incentivized to outsource their production

ASIA?

EUROPEAN MARKET

• The Biggest market for LEGO
• Served 60% of the sales
• Move to cheaper countries and have proximity
• Move to Czech Republic and Hungary
• Closed the Switzerland and South Korean plant

AMERICAN MARKET

• Second biggest market
• Served 30% of sales
• Produced in Enfield, Connecticut
• Transfer production to Mexico

FLEXTRONICS

• Based in Singapore and established a strong reputation
• Developed manufacturing facilities in 30 countries
• Partnered with major companies such as Cisco, HP, etc
• Managed most of the outsourcing for LEGO Group 80/20
• Relied to reduce complexity, standardize, and document routines

FLEXTRONICS

• Collaboration ended after 3 years
• Complexity increased even further
• Extreme pace of transition made collaboration difficult
• Incompatibility in terms of business models
• Demanded flexibility from a more stable operation

LESSONS LEARNED

• Importance of documenting processes
• Importance of communication throughout all activities
• Importance of standardizing their processes and products

LESSONS LEARNED

• Importance of managing the complexity of their supply chain
• Developed a Sales and Operation Planning process(S&OP)
• Used the S&OP to coordinate different production facility
• roles, capacities, and responsibilities in relation to supply
• Installed this policy to have a constant overview of operations

CONCLUSION

• LEGO Brick became the "Toy of the Century"
• LEGO had fallen into trouble by overextending their product
• LEGO decided to outsource most of their product with Flextronics
• LEGO learned valuable lessons after their failed partnership