Lego, Consolidating Distribution Essay

1393 Words Dec 24th, 2015 6 Pages
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
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Møller Nielsen also created a new “customer logistics” team. It was his organization’s direct link with the customers and responsible for reducing the complexity of customized orders, while also focusing on improving customer delivery satisfaction.

Once the DHL demonstrated their incapability to control the flow and communication with the carriers, the “carrier room” was created to take back the management and control of the carriers. Improvement were seen after only 3 weeks and a new web based tool was created to show the turnaround time of trucks being loaded and off loaded, color coded and in real time.

Outsource production from its factory in Switzerland to a contract manufacturer (CM). The same CM would also take over the management and control of LEGO’s packing facility in Kladno, in the Czech Republic, which would further be expanded to meet roughly half of the total demand.

3. What were the key learnings/surprises realized during the implementation of Phase 1?

a. The Czech DHL team had never managed an operation of this size before. For starters, there were not enough trained people. b. DHL’s main IT system turned into a bottleneck. It was not designed to handle so many different customer delivery “rules” and also could not cope with the volume of transactions provided by

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