Essay about The Lego Case

1001 Words Nov 24th, 2012 5 Pages
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
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These two points made LEGO over-dependent on flexible production, which is totally against Flextronics’ operation style in which economies of scale is a key phrase. Since both LEGO and Flextronics require a profitable business model, it’s a great challenge to reach agreement that benefits both parties with difference emphasis. Also, LEGO has to consider how to communicate with Flextronics pertaining to making a clear plan for training and educating their staff so that they can be able to meet LEGO’s efficiency requirement quickly.
3.How can LEGO handle the supply chain complexity to improve knowledge sharing, flexibility and coordination?
LEGO introduce a sophisticated planning system called sales and operations planning (SO&P) to its daily operation. SO&P can help LEGO monitor and coordinate different parts in supply chain and provide LEGO the visibility of its global operation, which usually involve numerous outsourcing partners.
Besides, to maintain a good relationship with supplier over the long term, it’s reasonable to invest some resources to help the supplier achieve the level of performance required by LEGO. Through training and educating staff in Flextronics, LEGO can help Flextronics to build production capacity to meet the requirement of flexibility. Also, LEGO can put quality control personnel in factory to monitor production line and prevent quality variation. And frequent communication

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