Lego Case Study

Contract manufacturing is a process that established a working agreement between two companies. In our case it is between LEGO and Flextronics. As part of the agreement, one company custom produces parts or other materials on behalf of their client. In most cases, the manufacturer also handles the ordering and shipment processes for the client. As a result, the client does not have to maintain manufacturing facilities, purchase raw materials, or hire labor in order to produce the finished goods.

Despite of the contract manufacturing with Flextronics, LEGO was still involved global and complex network production facilities.

LEGO was having difficulty in transferring production knowledge to Flextronics.

Despite of reducing the in-house production capacity from 90/95% to 20%, the company tried to retain molding and packaging in-house which created problematic later delaying the production delivery to the customer.

The company was having great challenge in transitioning the production know-how to the external partners.

LEGO Company had the challenges in reducing firm's resources on the other elements of value chain.

LEGO decided to a larger extent to focus on internal production solution by phasing out the existing outsourcing agreement with Flextronics.

The LEGO thought it would be more optimal for the company to manage its its global manufacturing set up.

Production know-how knowledge transfer was always a key issue between the two companies.

LEGO Company felt that by controlling its own production will give flexibility to the company to meet the changes to in demand for its ironic toys.

It was problem for LEGO in aligning