Introduction

LEGO is a Danish phrase that means “Play well” (LEGO, n.d.). The company was established in the year 1932 at Billund, Denmark by Ole Kirk Christiansen (LEGO, n.d.). The case study will describe LEGO’s internal and external challenges through the development of short-term objectives. The paper will provide insights into the functional tactics required for LEGO’s implementation and outsourcing proposition.

SWOT Analysis

At the end of this case study, I have provided a summed up SWOT analysis of the company.

Internal and External Challenges Issues

After performing a SWOT analysis of LEGO, the following are the challenges we identified.

Internal Challenges

Currently, LEGO is under-utilizing its inventories leading to material wastage. Also, there is a problem with the designer of the company. The designers cannot conduct factoring regarding the cost of production or price of materials used. Another issue is that the company has approximately more than ten variant of each of its product. Besides, each variant requires the use of different molding equipment. Lastly, LEGO faces the problem in the management of the company. The management of company lacks a well-defined service policy.

External Challenges

First, the market challenge company is facing includes the unavailability of the right product for the target consumers in its distribution centers. Second, the supply chain of the company is adjusted for customer deliveries and even smaller retailers. Moreover, the company lacks a well-defined procedure for procurement compliance.

Solution

Outsourcing of the manufacturing process is the best solution to the internal and external problems the company is facing. Outsourcing entails transferring portion of work to outside to a third party to reduce costs (Rolstadås, Henriksen & O’Sullivan, 2012). In this case, LEGO needs to outsource its manufacturing process. By outsourcing, the company can now focus on critical activities that will enhance its growth and reduce operational and overhead costs.

Implementation for Outsourcing

Regarding the implementation of LEGO’s outsourcing proposition, there are three steps that the company should consider and they include the following.

The first step entails documentation. The management of the company will have to develop a complete documentation of the supply chain process where they will perform the outsourcing. Additionally, the management will provide clear communication regarding the integration of the work processes. They will use the help of sales and operation planning to perform the procedure. With this, the company can coordinate and integrate all roles and the production facilities.

The second step is standardization. The company will implement enterprise resource planning in plants it outsourced the manufacturing process. The ERP will help LEGO to standardize the levels involved in the manufacturing process. Also, with ERP, the company will reduce inventories and the likelihood of having duplicated information (Rolstadås, Henriksen & O’Sullivan, 2012).

The third step involves building competencies through training programs and education. The company will hire experts with skills and knowledge of their culture. The local experts will also have information regarding the company the outsourcing is being done. The process will also involve benchmarking and measuring of outcome using key performance indicators. The measurement will be helpful to ensure transparency.

Recommendation

LEGO can increase the availability of the product by implementing the following strategies. First, the company should partner with websites such as Snapdeal and Flipkart to sell its products. Second, the company should contact local retailers and convince them to sell their products in their stores. LEGO should offer local retailers incentives for each product they sell.

References

LEGO. (n.d.). About us. Retrieved from https://www.lego.com/en-us/aboutus/lego-group

Rolstadås, A., Henriksen, B., & O’Sullivan, D. (2012). Manufacturing outsourcing: A knowledge perspective. London: Springer.

Appendix

The following is the SWOT analysis of LEGO.

Strengths

1. The company has a strong brand name
2. Diversified into TV and movies, and video games
3. Incorporates educational features

Weaknesses

1. Product unavailability
2. Stiff competition
3. Offers only one product

Opportunities

1. Expansion by diversifying into other segments
2. Competitions in schools
3. Brand promotion in more areas

Threats

1. Stiff competition from similar companies
2. Internet
3. Outdoor games

 
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