Prior to the Flextronics offshore outsourcing project, LEGO had a very tight control of all the elements of the value chain. Their production plants were expansive and specialized which, in theory, would create a higher degree of standardization. Their Swiss factories only produced DUPLO toys and Technic products, their Danish factory solely produced LEGO System products, and the U.S. facility focused on American demands, while only 5 to 10 percent of the LEGO Group’s total production was outsourced to Chinese manufacturers. The main goal in creating the partnership with Flextronics was to hopefully reduce costs across the board. LEGO Group’s …show more content…
In a perfect world, LEGO would have liked “just enough” stock to supply the demand. This was obviously difficult to do considering Flextronics could not rapidly adjust their manufacturing processes based on LEGO’s seasonal demand. 3. How can LEGO handle the supply chain complexity to improve knowledge sharing, flexibility and coordination?
After terminating their contract with Flextronics after only 3 years, LEGO had to find another solution. They realized that while there needs to be a coordination of the different production facility roles based on their capacity and individual responsibilities that best suits the supply chain. They also realized that this could be more easily accomplished through standardization of ideas, and production. Perhaps outsourcing wasn’t the best solution for LEGO so much as understanding one’s own processes to manage the constant flux in demand. In 2005, LEGO Group created a sales & operations planning process to coordinate the production roles of each facility in relation to the supply. This was a great start in properly managing internal production as efficiently as possible. One way LEGO Group sought improvement of their supply chain was by simplifying their components. Since developing new molds and molding machines for new components can be very expensive, they cut their component portfolio from 12,000 in 2004 to about ½ of that in 2008. In keeping with the in-house