Essay about Lego, Consolidating Distribution

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Lego, Consolidating Distribution 02 October 2015 ------------------------------------------------- Case Questions 1. What was the rationale behind the original distribution setup? The company’s focus on creativity, innovation and superior quality had, over time, created high complexity in the supply chain. LEGO’s motto – “Only the best is good enough” – had contributed to an emphasis on creating, selling and delivering toys at any cost, without regard for practicalities. Lego tried to establish itself as a just-in-time delivery company, but at a cost to itself. It accepted customer orders with immediate or next day delivery. Of these orders, 67% were for less than a full carton and only 62% could actually be…show more content…
Support customer requirements. Having all services under one roof allow to focus properly on each service of the “customer brief”: Standard orders, value-added services, and customized orders. 2. What are the critical changes that Moller Nielsen made or pushed outside distribution that allowed him to substantially improve the performance of the supply chain? One of Møller’s first actions was to establish solid logistics cost baseline. This allowed him to identify that yearly logistics cost were roughly 10% of sales or DKK 650 million ($110.5). Transportation costs accounted for half of total cost. His research drove the critical change to reduce from 55+ transportation companies to a maximum of 7 global suppliers. This had the direct effect of substantially improve the financial performance of the supply chain by saving DDK 45 million ($7.65M) in transportation related costs. He also established a direct communication link with LEGO’s key customer base to understand their real requirements. Thru questionnaires and interviews Møller learned that most customers did not require daily or next-day deliveries. Immediate delivery required higher inventory levels and closeness between DCs and customers. This discovery coupled with the key corporate driver to build a sustainable profitable platform allowed Møller to consolidate all logistics and distribution operations to a single central DC managed by a

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