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The improved production in the supply chain was probably the most important and complicated step. The challenges came from the way LEGO organized its production facilities and the complexity of manufacturing operations. In some way chaotic production operations resulted in low 70 percent of overall capacity utilization. There were hundreds of independent production units within the facilities that could place their orders in any manner. This was often without balancing supply capabilities, inventory levels and demand needs. Consequently, such fragmented system did not support long-term planning and resulted in high costs and low efficiency. Moreover, the production sites were located in high-cost countries as Denmark, United States and Switzerland, while just 10 percent of production was outsourced to China. Production sites mainly operated according the branding strategy, where, for example, Swiss factories only manufactured DUPLO and Technic products. One of the first steps was to set clear production cycles for machines instead of having them available to produce any element at any time. This approach helped to reduce constant and costly retooling as well as balance production operations. Furthermore, orders were set in the monthly meetings in that way eliminating the number of changeovers. However, the major decision concerning production operations was to outsource large part of the production to external packaging and manufacturing service providers. One of the reasons was to cut the costs by moving the production from high-cost countries. Another reason was to reduce the number of subcontractors and utilize the economies of scale, having in mind that LEGO was producing about 24 billion bricks per year.


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