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Lego, Consolidating Distribution

In: Business and Management

Submitted By stephanebriand
Words 1378
Pages 6
Lego,
Consolidating
Distribution
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 delivered “on time”.

to be close to the customer, LEGO used four regional DCs: two in France, operated by a third-party logistics provider and serving primarily the UK and southern European markets; one in Germany for the Central and East European markets; and one in Denmark for Scandinavia and the Benelux. The last two, also the largest, were operated by LEGO and employed just over 200 people. Almost 14,000 customers received direct deliveries from these four DCs.

What are the advantages of a fully integrated centralized distribution in an Eastern European location?

Proximity. A location in Eastern Europe allowed being close (16 to 18 hours’ drive) to LEGO’S main production facilities and largest single markets, Germany and the UK. For Moller Nielsen, the focus was on distribution to customers in Europe and Asia.

Cost savings. A fully integrated centralized DC would help reduce its transportation companies from 55+ to a maximum of 7 global suppliers brining all finish goods in Europe. The centralized DC concept already exist in the US and Canada and have proven its efficiency. Furthermore, reducing the number of

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