Wednesday, November 19, 2008

Lego Bricks and Outsourcing

I've done the one about Lego Bricks and Reuse. But did you hear the one about the Lego Company and Outsourcing?

Seems the Danes were losing money, so back in 2006 they decided to outsource production to Flextronics, an electronics company in the Czech Republic [Lego Press Release, June 2006].

Now here's the clever bit. Flextronics would do the plastic moulding, but Lego would retain the manufacture of the electronics.

Kevin Meyer is sarcastic. "Sure, why not? Have an electronics manufacturer make the plastics, and a plastics manufacturer keep on making the electronics. That's bound to succeed, right?"

The Fast Company wrote a case study about Mass Customization called Brick by Brick - Lego's New Building Blocks. And Booz Allen Hamilton wrote a case study called "Rebuilding Lego Brick By Brick", (strategy+business August 2007 via Slow Movement).

The Booz Allen report had sub-headings like "Approaching the Value Chain Holistically" At that time it looked like the strategy was working.

But now Lego and Flextronics have parted company. “It has become increasingly obvious to the two parties that it would be more optimal for the LEGO Group to manage its global manufacturing set up."

Kevin Meyer provides an excellent history, and asks Did Lego Learn a Lesson? Did You?

I read the case as a story of complexity. The product had got more and more complex, and so had the production process. It isn't obvious how an apparently simple outsourcing deal does anything to address this complexity.

By the way, if you search for Lego and complexity, you will also find some wireless network algorithm called Locally Enabled Global Optimization, and a discrete event simulation technique called Listener Event Graph Objects. Presumably these have nothing to do with the Danish toy company. But sometimes people want to reuse a familiar set of initials.

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