LEGO 1

[robharris]

What were LEGO’s main expectations and learning from the relationship
with Flextronics?

[Curtis Lucas]

Lego has set out to find a way to effectively manage its global supply
chain. Lego desired to out source it production and packaging to
Flextronics. In the End Lego learned that it had outsource some of
its strongest core competencies. Lego has strong core competencies in
molding and packaging. Once lego documented all of the process that
they used It became appearent that with this documentation in place
bringing the processes back in house would prove to be the best way to
lego to Manage its supply chain.

[tiffany neff]

I have to agree with Curtis that they outsourced one of their
strongest core compentencies which was molding and packaging. LEGOs
main expectation of Flextronics was to cut cost and close down
production in high cost countries. However they realized as time went
on that this was not as beneficial as expected. There was lack of
training, education, and planning with Flextronics and the
understanding of know-how also lacked, which created lack of
communication and maintaining konwledge about production. LEGO
understood their processes the best, they just needed to document and
implement them on their own.

> > with Flextronics?- Hide quoted text -
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[Brent Bascom]

LEGO had faced the dire reality that they were hemorrhaging losses and
they needed to right the ship as quickly as possible. The market in
2004 was much different than any other period they had experience
before. It was much more cost driven due to the increase competition.
In 2004, there was a management philosophy developing that viewed
outsourcing as a key decreasing production costs. While this may often
be true, outsourcing should not have been viewed as a one-size-fits-
all answer to their economic problems. By outsourcing their core
competencies, LEGO's collaboration with Flextronics actually
demonstrated that the problem with LEGO was not the production costs
but rather, the supply chain and how fragmented it was. LEGO was able
to learn that their complacency with documentating their processes as
well as simplying their supply chain management were the problems that
plagued their company the most.

[JMB]

I agree with Curtis and Tiffany. Lego’s main expectations from its
relationship with Flextronics was to have its global supply chain be
more efficient and Legos thought outsourcing its molds and packaging
to Flextronic would be its best bet. Legos learned from its
collaboration with Flextronics that it was outsourcings its main core
competencies, molds and packaging, which should have been kept in-
house.

Jodi Baynum

[rddiaperman]

LEGO had just posted a deficit 1.8B DKK, at the 2004 currency
conversion rate to the U.S. dollar of 5.92 to 1, their deficit was
just over 304M USD. LEGOs "main" expectation was cost savings plain
and simple. Secondary expectations included addressing inefficiences
in their supply chain and centralization of production for the high
volume products.
LEGOs learnings were NOT to rush into any major business ventures
(LEGO made some moves in preperation for the outsourcing but too many
were not completed or completed well), pick your business partners
carefully and check to make sure your core competencies are aligned,
have an established agreed to detailed transition plan in place.

> > plagued their company the most.- Hide quoted text -

[r_nei...@yahoo.com]

I agree with the comments made by the members of 4 minds, 1 voice.
The outsourcing of production may not have been necessarily a bad
idea, but the volume in which they did (80%), was a bit much. If
outsourcing of packaging and production was a real goal for Lego, they
should have instituted this on a smaller scale. Also, pardon me for
saying it this way, but who's bright idea was to outsource production
of what I would consider a textile or toy manufacturing to an
electronic manufacturing company?

Neil Art

On Nov 20, 11:37 am, robharris <rob.harris....@gmail.com> wrote:

[Priscilla Scotland]

Do you think that providing Flextronics with better incentives would
have helped their partnership? It seems to me that LEGO and
Flextronics were more in cooperation than collaboration with one
another. I would think that providing Flextronics with incentives to
innovate new products with LEGO (like build your own miniature stereo)
instead of just manufacturing capabilities would help both companies
to further market share and possibly penetrate new demographic
segments...

[Emily Hackett]

yes and no. Eventually, that could have worked very well. But..with
such a large % of LEGO's production going to a company that WANTED
that core competency...what Flextronics could give them (a global
supply chain that was managed efficiently and significant cost savings
pretty much preempted any really cool collaboration they could have
done. If LEGO had either waited until it had its processes etc
together or simply given less of its total production to Flextronics,
I think that it could have been a successful partnership. But, they
didn't.

On Nov 22, 6:26 pm, Priscilla Scotland <priscilla.scotl...@gmail.com>
wrote:

[tiffany neff]

Emily I have to agree with you. The company went to Flextronics with a
large amount of production, somewhat blind-sided. They went to them
hoping to save money and in my opinion nothing more. I think if they
gradually would have built a relationship and started with outsourcing
one small piece of production at a time it may have worked much
better. I think Flextronics had so many other companies that they were
working with that LEGO was just another company. LEGO was unable to
provide them with adequate resources before outscoring to them.
Flextronics in my opinion was in the dark, they needed to prove
themselves to LEGO yes, but they also needed guidance before even
starting production. So if they would have built a strong reliable
relationship amount one another and understood what they were expected
to do, then Yes Priscilla I believe an incentive program may have
worked. But there was really no common ground or guidance to start.

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

[Jonathan Nutter]

I tend to agree with everyone else that their expectation was to save
money. The only reason to expect that is the movement of production
to a low wage nation. However their main learning was that they had a
completely skewed view of outsourcing. To be truely effective you
must outsource a non-core competency to a company that holds that task
as a core competency. For instance in Zappos case they outsource all
their outgoing shipping to UPS and a few local carriers, they do not
do it with their own trucks. Shipping is not a core competency of
Zappos. Lego learned there is no such thing as an Easy Turnkey
outsource solution. They also learned how they produce their block by
being force to Codify their many production techniques to give to
Flextronics, ultimately this codification is what allowed Lego the
knowledge transfer to its own new factories in low cost countries.