Cutting Edge Bottom Line Evaluation

[Emily Hackett]

Amidst financial turmoil, LEGO set out to manage and overcome
complexity in their production network by outsourcing. However,
partnering with Flextronics was hasty and shortsighted because core
competencies between the companies did not align operationally. More
importantly, LEGO should never have embarked on the outsourcing
journey at the time that they did.

[snk...@yahoo.com]

Hi,

I like your evaluation a lot because I completely understand your
overall opinion/evaluation of the situation. The only thing missing is
what you feel needs to happen in order for LEGO to get back on track.
ie LEGO must develop a long term strategy that refocuses on core
competencies . . . . . From here, the evaluation becomes actionable
and persuasive. Without it, I am left to try to guess what you think
needs to happen until the action plan.

Thanks,
Shannon

[christi...@yahoo.com]

I like the mission statement Cutting Edge developed, however I agree
that it needs to include a plan of action that LEGO will take to
correct the issues that they are facing. Shannon brings up a good
point that LEGO needs to focus on their core competencies.

> > journey at the time that they did.- Hide quoted text -
>
> - Show quoted text -

[tiffany neff]

Cutting Edge I do agree with your evaluation; however what do you
think they need to do now as an organization? Also where do they need
to focus their core competencies? There should be a postion of where
they need to be today.

> > - Show quoted text -- Hide quoted text -

[rddiaperman]

Team Cutting Edge Position and Action Plan
Several lessons learned emerged from the failed partnering effort
between LEGO and Flextronics. First was the need for standardization
and reduction of inventory and SKUs. An example of this was reducing
the number of part counts held in stock. Another example of this would
be for LEGO to simply utilize the pieces they already have for new
kits etc. The other major lesson learned was seeing the value of
standardized processes and documentation. Flextronics helped LEGO
realize the value of consistent and organized documentation around
their production operations.
Outsourcing was not a panacea as LEGO had envisioned. In the end, it
made their global supply chain more complex. This alone outweighed
the benefits of moving manufacturing from high-cost countries. They
should have kept more people hired on during the transition to
facilitate the change process. These experienced employees could have
helped in areas like training, communication and collaboration between
the groups. The completion of knowledge transfer is critical in any
sourcing event.
In addition, outsourcing takes time and should never be rushed. Any
outsourcing of such a large percentage of production should have taken
much more time in the ramp-up phase. This would have allowed both
Flextronics and LEGO to see the issues on a smaller scale and enabled
them to address these issues before they affected 80% of production.
With such a large percentage of production being affected with the
problems, this venture lasted only three years before LEGO began the
back-sourcing of production.
LEGO should learn from the failed event. In the future, LEGO needs to
improve their cost position, keeping the work in house, and to focus
on keeping consumer confidence stable around their core products.
With regards to the high demand fluctuations, LEGO should also
continue working to create better forecasting models. They may later
still question this strategy of keeping the majority of production in
house. If so, they need to conduct an in-depth analysis of the
strategic goals, competencies and industry knowledge of any potential
outsource partner.

Now everyone should be happy the action plan has been posted. Sorry
about this was left off the original posting.

[Priscilla Scotland]

Just curious, how successful you think LEGO has been/could be in terms
of innovation? Choosing Flextronics as a partner is an interesting
choice and makes me wonder if they had thought about becoming more
than just a toy company...

[rddiaperman]

Wow, I TOTALLY missed that thought. Partnering with Flextronics was a
very odd choice as far as Flextronics only having manufacturing/
production experience in the electronics industry. Maybe LEGO had some
sort of advanced toys that were very technical in nature and they
would need Flextronics core competencies for the mass production. I
feel LEGO had been very innovative concerning their product in the
past but honestly there is only so much innovation to be accomplished
with a plastic brick. If the mouse trap works then no need to keep re-
engineering it. Thanks for the post as now I am curious to one hear
about the rest of the story. Maybe when the CEO of LEGO write his tell
all book upon retirement?
Mark

On Nov 22, 11:23 pm, Priscilla Scotland <priscilla.scotl...@gmail.com>
wrote:

[Jonathan Nutter]

Suggesting an action plan to pursue to correct things is a bit late
considering the last two quaters were finacial successes and
manufacturing has been transfered to low cost manufacturing centers in
Mexico and Hungry. The transition was not smooth, was poorly managed,
and Lego made the huge error of attempting to outsource one of their
core competencies, but at this point, the major mission was
accomplished.

[Amy Fassold]

Does anyone know what Lego ultimately did?

[r_nei...@yahoo.com]

Great insight Cutting Edge. I was going to ask the question Priscilla
asked, so the early bird gets the worm. I agree with your group's
assessment. Again, great job.

On Nov 22, 10:06 pm, rddiaperman <rddiaper...@gmail.com> wrote:

[Emily Hackett]

I think an evaluation doesn't necessarily need to contain an action
plan. That's what the paper is for. Going with how the book
structures a bottom line evaluation...I think ours was just fine. and
I agree with Priscilla, but am not sure where LEGO was with that and I
don't think its something that we are going to know...