Essay about Lego Case

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1. What were LEGO’s main expectations and learnings from the relationship with Flextronics?

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
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Possible oversights include; change in lead times; exchange rate fluctuations, and increased documentation. LEGO supply chain manager Michael Vaag summarized the documentation process by stating, “Production in another country—even within the same company—requires ten times more documentation in the company that it is moved from” (Larson 16). One plus from the Flextronics experiment was the effect the move had on global expansion. Flextronics was able to provide much needed operating bases in Hungary and Mexico which “provided the Danish company with the necessary impetus for altering its global production network” (Larson 16). 2. What are the key challenges in maintaining a relationship like the one between LEGO Flextronics?

Ideally, the only thing that should change when outsourcing a process is the cost at which the products are produced. Everything else should be in sync. Lead times must be coordinated, proper documentation should be completed, and most importantly, quality should remain the same. While LEGO did not have problems with the quality of the products, they struggled with coordinating very fixed manufacturing cycles with constantly changing demand cycles. Flextronics’ business model had traditionally been characterized by a “more stable and predictable operations” while the LEGO Group needed “flexible and market responsive business solutions” (Larson 14). LEGO was accustomed to “plus/minus 30% in demand fluctuation

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