The Lego Group: an Outsourcing Journey Case Analysis
The LEGO Group: | An Outsourcing Journey | | | 8/2/2012 |
Introduction
2004 began an especially difficult period for The LEGO Group, which entered into a financial crisis resulting in a deficit of 1.8 billion DKK ($294.9MM USD). The internal turmoil lasted through 2009 as the leading toy manufacturer, famous for the signature LEGO brick, nearly went bankrupt. This experience was a first-hand lesson in the negative effects of not having a stable and organized supply chain design. Effective supply chain management is essential for a manufacturing firm to successfully coordinate the flow of materials and information with demand (Krajewshi, Ritzman, & Malhotra, 2010). A fundamental element of supply chain management is supply chain design, which is particularly important for major activities such as plant or capital investments and divestments, product mix portfolio, inventory and outsourcing, suppliers, vendors, and distribution. The LEGO Group recognized the significant inefficiencies and costs within the design of their supply chain and focused much of their restructuring efforts on this aspect of their organization as they struggled to return to profitability.
Background
The LEGO Group is a privately held Danish multinational corporation founded in 1932 by Kirk Kristiansen and still owned by the founding family. Its name is derived from an abbreviation of the Danish words “leg godt” meaning “play well (Delingpole, 2009).” The organization is primarily focused on the development of children’s creative potential through play and learning. With over 11,000 employees and sales in over 130 countries, LEGO Group is the third largest toy manufacturer after Mattel and Hasbro(The LEGO Group, 2012).
Following World War II, plastics became available in Denmark. LEGO purchased a plastic injection molding machine in 1947 to create the plastic version of LEGO bricks (they were originally wooden), and then expanded to pursue the idea of a toy system
Introduction
2004 began an especially difficult period for The LEGO Group, which entered into a financial crisis resulting in a deficit of 1.8 billion DKK ($294.9MM USD). The internal turmoil lasted through 2009 as the leading toy manufacturer, famous for the signature LEGO brick, nearly went bankrupt. This experience was a first-hand lesson in the negative effects of not having a stable and organized supply chain design. Effective supply chain management is essential for a manufacturing firm to successfully coordinate the flow of materials and information with demand (Krajewshi, Ritzman, & Malhotra, 2010). A fundamental element of supply chain management is supply chain design, which is particularly important for major activities such as plant or capital investments and divestments, product mix portfolio, inventory and outsourcing, suppliers, vendors, and distribution. The LEGO Group recognized the significant inefficiencies and costs within the design of their supply chain and focused much of their restructuring efforts on this aspect of their organization as they struggled to return to profitability.
Background
The LEGO Group is a privately held Danish multinational corporation founded in 1932 by Kirk Kristiansen and still owned by the founding family. Its name is derived from an abbreviation of the Danish words “leg godt” meaning “play well (Delingpole, 2009).” The organization is primarily focused on the development of children’s creative potential through play and learning. With over 11,000 employees and sales in over 130 countries, LEGO Group is the third largest toy manufacturer after Mattel and Hasbro(The LEGO Group, 2012).
Following World War II, plastics became available in Denmark. LEGO purchased a plastic injection molding machine in 1947 to create the plastic version of LEGO bricks (they were originally wooden), and then expanded to pursue the idea of a toy system
References: Benner, M. J., & Tushman, M. (2001). Process Management and Technological Innovation: A Longitudinal Study of the Photography and Paint Industries. Best Paper Proceedings of the Academy of Management, Business Policy and Strategy Division Delingpole, James. (18 December 2009). “When LEGO Lost its Head”. Mail Online. http://www.dailymail.co.uk/home/moslive/article-1234465/When-LEGO-lost-head--toy-story-got-happy-ending.html. Larsen, M., Pederson, T., Slepniov,D., . LEGO Group: An Outsourcing Journey. Case Study. Boston. Harvard Business Publishing, 2010. 12 November 2010 Krajewshi, L. J., Ritzman, L. P., & Malhotra, M. K. (2010). Operations Managment: Processes and Supply Chains. Upper Saddle River: Pearson Education Inc. Schwartz, Nelson D. (5 September 2009). "Turning to Tie-Ins, LEGO Thinks Beyond the Brick". The New York Times. http://www.nytimes.com/2009/09/06/business/global/06LEGO.html