Preview

The Lego Case

Good Essays
Open Document
Open Document
1010 Words
Grammar
Grammar
Plagiarism
Plagiarism
Writing
Writing
Score
Score
The Lego Case
1.What were LEGO’s main expectations and learnings from the relationship with the Flextronics?
Expectations: a. Saving cost by outsourcing to low-cost countries: Prior to outsourcing, LEGO owned and operated production plants mainly in relatively high labor-cost countries, such as the United States, Switzerland and the South Korea. The main reason for this is that LEGO built plants close to its main markets to save transportation cost. But LEGO finally realized that the reduced labor cost in some labor-intensive countries outweighed the reduced transportation cost. Then they decided to outsource to Flextronics who has production capacity in low-cost regions; b. Subcontracting to Flextronics allowed LEGO to reach the economy of scale as well as reduce production complexity by combining its production with that of other Flextronics’ clients; c. Contracting production to Flextronics can help LEGO eliminate the risk of production price fluctuations.
Learnings: a. LEGO learned from Flextronics the importance of documentation and standardization of the production, which give LEGO Group transparency and often help LEGO manage the challenges of complexity and to identify the stronger and weaker parts and links of the production network. b. LEGO should consider more factors before they outsourcing. Things like Flextronics’ operation style, the cost and time of providing engineering support and training, and variable lead time incurred by global sourcing are really critical for making decisions.
2.What are the key challenges in maintaining a relationship like the one between LEGO and Flextronics.
The key challenge in maintaining a relationship between buyer and supplier is how to reach an agreement that benefits both parties. Take LEGO and Flextronics for example, it’s a big problem for LEGO to solve the conflict between its need for flexible and Flextronics’ more stable and predictable operations. LEGO had wide range of products, including many licensed products like

You May Also Find These Documents Helpful

  • Satisfactory Essays

    Furthermore, the illustration on the appendix 1 demonstrates that Mattel Inc., was in the leading position in market share among the members in the European Union in 2011. Followed by Lego which owns a total market share on 8.32 %, which is approximately 1.76 % lesser then Mattel Inc. Additionally, it was only a very short brief for Mattel Inc., to be in this position, as a recent article from September 2014 highlights Legos which has left their competitor, Mattel Inc. behind. With this in mind the success relies mainly on two reasons. Firstly, Lego achieved this position while inventing and launching “The Lego Movie” in February 2014, which became a huge hit. Secondly, in the same year Mattel Inc. experienced a weak sale on their Iconic…

    • 282 Words
    • 2 Pages
    Satisfactory Essays
  • Satisfactory Essays

    Mt460 Unit 6

    • 733 Words
    • 3 Pages

    After outsourcing to Flextronics, LEGO Group decided it was more cost effective to keep manufacturing setup in house. With this move, LEGO supply chain can develop much faster through the best, leanest and highest quality solution at all times (Pearce &Robinson, pg 12-2, 2011). Now that LEGO Group has regained the control of the manufacturing process, they decided to establish a slogan; “Only the Best is Good Enough”. In other words, they want…

    • 733 Words
    • 3 Pages
    Satisfactory Essays
  • Satisfactory Essays

    As it is stated in our book, outsourcing contributes to enhancing competitive business advantage as it allows organizations to remain focused on their core strategic activities. Instead of spending a lot of company’s money on learning, developing and producing some of the parts or whole products in the United States, organizations have a great opportunity to outsource it and concentrate on something what they are good at. They would not have to devote their time to all these elements of production, and instead they could work on their other important issues.…

    • 365 Words
    • 2 Pages
    Satisfactory Essays
  • Powerful Essays

    This dependency stems from the fact that the OEM wants to run profitably in a highly competitive environment by providing products and services to ever demanding customer at the right time, quality and price. This means getting it right the first time during product design and developmental stage, hence reducing waste and cost in the latter stages of production. This has made OEM’s take a critical look at their supply network, in a bid to align the design and developmental capabilities of their company with that of suppliers and transferring their capabilities onto their suppliers, forging a strong partnership that will be mutually beneficial for both parties.…

    • 2817 Words
    • 11 Pages
    Powerful Essays
  • Good Essays

    Lego Final

    • 1719 Words
    • 5 Pages

    Answer 1. Companies outsource production of their products for the following reasons: Lack of technical expertise, or expert labor in certain operations; reduce manufacturing costs due to the availability of cheap labor; make less investments in expensive equipment, staff and IT systems; optimize resource utilization and free up management time from outsourced routine supporting activities to focus on its core competencies; and when domestic manufacturing capacity is reached.…

    • 1719 Words
    • 5 Pages
    Good Essays
  • Powerful Essays

    Territo, L., Halsted, J.B., & Bromley, M.L. (2004). Crime and Justice in America: A Human Perspective (6th ed.). Upper Saddle River, NJ: Pearson Education, Inc.…

    • 4489 Words
    • 18 Pages
    Powerful Essays
  • Good Essays

    Lego

    • 659 Words
    • 3 Pages

    The short-term expenditure to get the sustainable product underway would be greeted with long-term benefits including greater innovation, quality improvement, energy savings, and revenue growth. Developing new manufacturing practices and product design synergizes the eco-efficiency efforts that can result in lower production costs and greater operational efficiencies, as well as reduced shipping and transportation costs. A sustainable product should have the five key elements: Social, Governance, Financial, Health and Safety, and Environment. In which the proposal for Lego Group does have those five key elements, the proposal gears towards all five in developing a plan that removes toxins from their plastics, a sustainable product that lowers the consumption of energy, a product that is safe for the…

    • 659 Words
    • 3 Pages
    Good Essays
  • Satisfactory Essays

    Case Study In 7

    • 329 Words
    • 1 Page

    Having worked in supply management for the past 7 years, Nolan was well aware of the general principle of involving suppliers in product development and manufacturing decisions and the frequently touted benefits of lower costs structures, faster product development cycle, and reduced operational inefficiencies. He believed, however, that not all suppliers needed to be or should be involved, especially in the early stages of the new product development process. Furthermore, involving suppliers should not be “lip-service”; the selected suppliers should be well integrated into…

    • 329 Words
    • 1 Page
    Satisfactory Essays
  • Good Essays

    Lego Case

    • 1291 Words
    • 6 Pages

    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.…

    • 1291 Words
    • 6 Pages
    Good Essays
  • Satisfactory Essays

    Supply Mgmt Case Studies

    • 1768 Words
    • 6 Pages

    A strategic alliance between Sunspot and its key suppliers will result in a relationship based on trust. It’s key for both parties to develop and manage this “institutional” trust or the alliance will fail. Trust will facilitate communication which will lead to less errors and higher quality, faster development times, and lower costs. Synergies created by alliances result in reductions of direct and indirect costs associated with labor, machinery, materials, and overhead. Other benefits are reduced time to market, improved technology flow from suppliers, and improved continuity of supply. With strategic alliances, all parties have a stake in the success of Sunspot’s business.…

    • 1768 Words
    • 6 Pages
    Satisfactory Essays
  • Better Essays

    Just in 2013, the United States outsourced 2.3 million jobs to a diverse range of countries around the world, to say that it’s a popular measure its an understatement (Statistic B, 2014). Outsourcing is the commission of a task to a secondary party, often located in a foreign country, in order to achieve a competitive advantage. The reasons behind the implementation of an outsourcing strategy vary upon each company’s individual circumstances. In the case of Boeing’s 787, the implementation of an outsourcing strategy provided a key manufacturing advantage and a substantial cost reduction maneuver. Competition among companies, is considered to be the main factor behind outsourcing and because of globalization, this practice has become ubiquitous in corporate environments. Airbus, the main competitor of Boeing, manufactures their aeronautical components throughout Europe and consequently assembles them at a single location; this method provided Airbus with a significant increase in production capabilities. Boeing, following the Airbus manufacturing strategy, intended to achieve the same productivity benefits through a globalized component manufacturing strategy for the 787 Dreamliner, the company’s latest model. As a result of the competition between this two aeronautical titans, Boeing adopted a true global manufacturing strategy in which they produce the components for the 787 in a diverse range of companies in ten different countries (Mouawad, 2014). As a result of Boeing’s heavy dependence on global outsourced manufacturing, they have achieved remarkable economic benefits for the 787 divisions, on the other hand, the unavoidable limitations of outsourcing has brought them severe repercussions do to subpar…

    • 1440 Words
    • 5 Pages
    Better Essays
  • Powerful Essays

    Lego Group

    • 3539 Words
    • 15 Pages

    To answer the problem we used a history of LEGO, made a Value Chain, a SW-model and organization structure.…

    • 3539 Words
    • 15 Pages
    Powerful Essays
  • Good Essays

    Constant product innovation from Lego's four development centre as a priority within its core business give Lego the advantage of moving out new products in time to meet the changing needs of the toy market and to take advantages of new technologies and maintain the interest of…

    • 751 Words
    • 3 Pages
    Good Essays
  • Powerful Essays

    Lego case study analysis

    • 1354 Words
    • 4 Pages

    By the end of 2003 Lego was already facing crisis owing to dipping profits and declining market pool for toys. Lego had planned to expand into markets beyond building toys and needed huge investment to be made in it. But it found difficult to compete when fad players and other toy manufacturers were giving them stiff competition in a market that already was supposed to be giving lesser returns every year. This was mostly due to factors out of the control of Lego and other toy companies because, firstly, a research suggested that the demand of children who were primary customers of these companies were changing rapidly to fashionable and electronic products. They had lesser attention span and looked for instant gratification, and were lesser inclined to play with toys involving physical activity. Also Lego found it difficult to be competitive when its manufacturing base was in European markets while toy companies were moving to Far East and Middle East where labor was comparatively cheaper.…

    • 1354 Words
    • 4 Pages
    Powerful Essays
  • Satisfactory Essays

    Under Flextronics’ industrial park strategy, key suppliers were required to establish their operations near a Flextronics assembly plant in low-cost locations near the customer’s end market. This strategy facilitated just-in-time inventory systems and reduced transportation costs, and also avoided the break-downs.…

    • 294 Words
    • 1 Page
    Satisfactory Essays