2. Agenda
1. Origins of raw materials
2. Components of LEGO
3. Final products of LEGO
4. Distribution Strategy
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3. Agenda
5. Rationale of supply chain
6. Difficulties of
Implementation
7. Overcoming difficulties
8. Conclusion
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4. Raw Materials: Where are the origins
of raw materials used to make Lego?
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5. Plastic Rubber
•Processed from crude oil •Main producers are Malaysia and
•Produced in Saudi Arabia, Kuwait Thailand
•Processed in countries like •Processing required
Singapore, Korea etc •Shipped to rubber trading centers
•Transported to LEGO •Then reaches LEGO
manufacturing factory manufacturing factory
6. Components: Where are the
components manufactured? Are
components produced or bought?
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7. Final Product: Where is the final
product manufactured/assembled?
How is it distributed?
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9. Design & Development
Designers come up with concept
of designs for LEGO SETS
Competitive advantage:
interlocking bricks
8 pieces of brick = 900
combinations
10. Moulding
Every tile comes with specific
mould
Mould created based on needs
of shape of the tile
Mould can cost up to $250,000
Currently produces 7000
different components
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11. Painting & Decorating
Mainly manufactured in
Billund, Denmark
60 tonnes of plastic granules used
per day
Holds a week’s supply of raw
materials on-site
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12. Painting &Decorating
500 bricks per second
300,000 per minute
21 billion per year
Only 12 out of 100,000 bricks are
faulty
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13. Packaging
Machines deployed for efficiency
Bricks produced packaged into
boxes that are stored in holding
area
Each product requires different
combination of bricks
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14. Packaging
Bricks are packaged into bags by
product need
Packages checked for accuracy
based on the weight
50,000 packages produced in a
day
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15. Distribution
Final products packed into boxes
and shipped to distribution
centres
Cranes sort 500 boxes in an hour
Partnership with DHL to form
single warehouse
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16. Distribution
Single warehouse is a competitive
advantage
Entire process from moulding to
distribution takes 10 days
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22. Past operations of LEGO
Continual profit loss from 1998 to
2004
Loss of profit up to -30%
In 2004, decided to cut logistics
by 20%
Previous strategy focused on
small retailers
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23. Current Supply Chain Strategy
Product
development, Sourcing, Logistics &
Distribution, Delivery
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24. Product Sourcing
Development
Long term
Simplification contracts
Logistics &
Distribution Delivery
Single Extended delivery
Distribution interval
Centre
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26. Difficulties in Implementation
1. Outsourcing logistics strained
relationship with DHL
2. Lower than forecasted
delivery frequencies
3. Relocation of distribution
centre to Prague
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