Supply Chain Management and Lego

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Case Write-Up: LEGO Group-An Outsourcing Journey

Q1 LEGO’s main expectations and learnings from the relationship with Flextronics LEGO’s main expectation was to optimize its global supply chain by saving cost and reducing production complexity from the cooperation with Flextronics. However, the contract between those two lasted for only 3 years. In the end, LEGO re-took control of plants in Czech Republic, Hungary and opened a new site in Mexico Lessens LEGO received from this unsuccessful relationship are 1) LEGO understands its own process and structure better than before. They realize the importance and value of documentary and standardization, especially in offshoring production circumstance. 2) Even though all the facts seem that outsourcing is a good way to get rid of crisis, a firm still needs to analyze different options carefully and goes for the one which fits best with the company’s culture, general strategy and specific situation.

Q2 Key challenges in maintaining a relationship like the one between LEGO and Flextronics Different business model is the fundamental reason why it is hard to maintain a relationship with supplier. In LEGO case, both LEGO and Flextronics are successful in their industry and have their already solid service model, mission and business goal. Flextronics has the reputation of standardizing and documenting work routines as well as processes to move business activities from site to site. In Flextronics business model, standardization and documentary is fundamental, perhaps the priority in offering service. However, LEGO has been in Billund for 40 years and owns a large number of experiences employees. So in LEGO’s plant, normalization of work processes, communications, and interfaces between different departments in production is not emphasized. Therefore, when LEGO handed over production to Flextronics, Flextronics definitely has issue on producing LEGO’s brick and can’t meet LEGO’s high requirement of reduce complexity....
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