Lego Supply Chain Analysis
The Lego Group went through a transformation of strategy and structure in 2004 because of issues with its supply chain.
Describe and assess the previous structure of and strategies inherent in this supply chain, and determine how any vulnerability associated with this supply chain were mitigated. Contrast their previous structure and strategies to the current business model today.
The following group discussion should guide your writing:
‘With Lego Group, they had a pretty rough patch in the late 90s up until 2004 when they decided to change from their long-time CEO and bring in a younger guy (Knudstorp), who had experience in consultancy and change management. As such I propose writing about their previous structure, strategies and vulnerabilities that led to their changed business and supply chain model in 2004, followed by writing about their current structure, strategy and vulnerabilities. I think the contrast between the two should be pretty distinguishable and good to write about.
The article by Oliver et al (2007) provides a good initial summary of what initially was the problem with Lego Group followed by how they addressed change in 2004. The initial problems identified include the follow:
Product Development. There was a disconnect between the innovation/creation/design branches and the true cost of creating new designs. Too many colours in their range became a big issue. Focus on diversification into video-game market was also a main cause of their falling profits.
Sourcing An increased amount of suppliers (11,000), which is double that which Boeing has to make a plane. There was a lack of procurement compliance procedures and ad hoc relationships with suppliers leading to waste.
Manufacturing. An overall fragmented organisation, with many smaller teams leading in different organisational direction. Created inefficient use of mould machines.
Distribution. A focus on Lego stores over the supply chain to 3rd party distributors, which accounted for more than two thirds of revenue. Distribution and inventory management in their distribution centre was poor.’
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