from strategy+business issue twenty four, Autumn 2007

Rebuilding Seglar, Brick by Brick For even more information: Keith Oliver, London: keith. [email protected] com Edouard Samakh, Greater london: edouard. [email protected] com Philip Heckmann, DГјsseldorf: peter. [email protected] com Booz & Organization

reprint amount 07306



Lego art by Sean Kenney Photographs simply by Matthew Septimus

by Keith Oliver, Edouard Samakh, and Peter Heckmann

features s+b case study

What sort of supply chain transformation helped put the much loved toymaker back again again.


features s+b case study

Keith Oliver ([email protected] com) is known as a senior vp in Booz Allen Hamilton's London business office. He previously headed the firm's work in global businesses and has specialized in supply chain supervision for more than 4 decades.


in the surface, the Lego

Edouard Samakh ([email protected] com) is a principal in Booz Allen's London workplace. His work focuses on procedures strategy, reorganization, rearrangement, reshuffling, and supply sequence management.

Philip Heckmann ([email protected] com) is a vice president in Booz Allen's DГјsseldorf workplace. He prospects the business's European businesses and focuses primarily on procurement and provide chain management.

Editor's Take note: The PROFANO Group spells its trademarked brand name as well as company name in uppercase words. We have implemented standard content style pertaining to company titles that are not shortened forms, and capitalized only the initial letter.

Also contributing to this post was Booz Allen Hamilton Senior Relate Georgina Grenon.

Group did not look as if it was in trouble. The fourth-largest toymaker in the world at the time (today it is fifth-largest), the Lego Group sold €1 billion dollars (US$1. thirty five billion) well worth of toys and games in 2005, ranging from it is snap-together bricks for children to Mindstorms, a type of do-it-yourself software kits pertaining to older children. Even inside the digital age, its toys taken care of a surprisingly firm grip on the market and seemed to adapt well to changing likes. The company's constant stream of new products regularly generated three-quarters of it is yearly product sales. Popular enthusiasm was so great that in 2000, the British Association of Plaything Retailers joined up with Fortune publication in naming the company's traditional bricks " the doll of the century. ” Nevertheless the Lego Group's financial functionality told one more story. Irrespective of its extraordinary hold on the imagination of children around the world, the Billund, Denmark, company was at trouble. The Lego Group had suffered losses four out of the seven years from 98 through 2005. Sales fallen 30 percent in 2003 and 10 percent even more in 2004, when income stood by –30 percent. Lego Group executives estimated that the organization was wrecking €250, 500 ($337, 000) in benefit every day. How can such a seemingly effective toymaker lose that much funds? Some observers speculated the Lego Group had overdiversified its product line with moves into such areas as attire and motif parks. Others blamed the exploding demand for video games or perhaps pressure by low-cost suppliers in Chinese suppliers. Although there was some truth in these ideas,

many other elements impeded the achievements of the iconic global brand, which include its development capabilities and its supply chain. The company leadership knew completely to address individuals dilemmas, and that the source chain asked the most immediate opportunity for improvement. The Lego Group's supply cycle was at least 10 years old. Poor customer service and spotty availability of goods were eroding the company's operation in important markets. Rapid attention to the supply chain, the leaders reasoned, would not only buy them a chance to deal with the other challenges, but may help set in motion a virtuous ring of advancements that would support subsequent changes in the rest of the organization. And it would address head-on one of the provider's most important challenges. Having established on its own in an period when source chain administration was a couple of moving packing containers from...


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