Using New Technology Solutions
World-famous construction toy manufacturer LEGO is experiencing double-digit annual
sales growth. The company is extending its product portfolio by launching new toy
ranges and branded theme parks, with operations in both Europe and the US.
LEGO realized that the key to success was the creation of a business model that was as
modular and standardized as the LEGO blocks themselves – making it possible to expand
quickly into new markets.
Esben Viskum, Senior Director, LEGO Service Center, comments, “The toy world moves
onwards constantly, and LEGO needs to re-invent itself continuously. Significant
corporate re-shaping introduced new energy to the company, which led to successful
brand extensions, retail outlets and manufacturing plants. “Rapid change means being
able to respond to the market quickly, using short product development processes without
losing control of cost and quality, and being able to manage both people and operations
effectively and efficiently.
As part of a fundamental strategic shift in thinking, LEGO is looking for a number of
software products and an information technology solution that will help the firm provide
standardized yet fully flexible business systems capable of serving the corporate
ambitions.
Supporting business innovation
In the face of increased competition from online and similar digital toys and games,
LEGO undertook considerable corporate restructuring. LEGO launched new products,
introduced LEGO Games Systems, and signed agreements with Lucasfilm® for LEGO
Star Wars® characters, among many other innovations. The result has been significant
success: yearly revenues of DKK 11.7 billion (€1.57 billion), up by 22 percent annually,
generated in more than 130 countries by around 8,000 employees.
The LEGO Service Center is responsible for operations, ongoing support and
infrastructure technology projects. LEGO Corporate IT department is responsible for
application development. Viskum further explains: “Because the business strategy is to
scale things up with new sales offices, new manufacturing plants, and new branded retail
shops, this needs to be created in a ‘cookbook’ fashion, with suitable business
infrastructure on a similar rollout model. Existing legacy applications and hardware
cannot scale to meet our needs; they are also troublesome and costly to maintain, and the
IT Service Center would not be comfortable providing services to the business on this
foundation.”
Long-lasting designs
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Certain elements are critical to LEGO: excellent product lifecycle management, in order
to introduce outstanding new products rapidly and efficiently, and always-on logistics, to
manage international manufacturing and distribution. LEGO also needs efficient human
processes to support its diverse and international workforce, alongside the usual business
need for financial management and analysis. LEGO would also like to meet market
opportunities more rapidly with integ
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In short, there is no opportunity for downtime, which was a key consideration in
analyzing different solutions LEGO can use,” according to Viskum.
Planning future models
LEGO is looking for a software product that will help the firm connect with valued
suppliers. LEGO would also want to consolidate its purchases from different company
branches on particular raw materials with certain suppliers. The company has to deal
with hundreds of suppliers in Asia and North America of toy parts and raw materials. It
has not always been possible to have just the right amount of each part or components
available when it was needed because the company lacked accurate, up-to-date
information about parts in inventory and what manufacturing processes needed those
parts.
Now that LEGO has become successful, it has a complex supply chain and
manufacturing processes to coordinate in many different locations. Its recent innovations
in response to the introduction of its LEGO Games Systems, signed agreements with
Lucasfilm for LEGO Star Wars characters have prompted LEGO to streamline its
relationships with its toy raw material suppliers. LEGO is constantly searching for ways
to reduce supply chain costs and improve efficiency throughout its entire manufacturing
and distribution network.
The information will potentially allow LEGO to reduce the costs of raw materials. For
example, it could allow the firm to examine the benefits of consolidating multiple
suppliers to a smaller number with higher volumes at lower prices, or perhaps speaking
with a supplier and saying “Look, three different units are all buying from you, and
LEGO would like a centralized, discounted purchase price.” LEGO would also want the
software product to allow the firm to compare supplier prices in each LEGO operation
and give each procurement division a benchmark target to beat.
Completing the LEGO model
Mark Werner, LEGO Chief Information Officer or CIO explains: “We want to work
within a flexible IT infrastructure that would enable us to grow and add new services
without needing to consider the underlying hardware or any other constraints. We want
the IT staff to focus on desired business outcomes rather than on low-level infrastructure
concerns. The ability to turn on and off additional server resources is a great benefit, and
we can add resources on a day-by-day basis as we need them, and pay for the additional
capacity on a monthly basis.”
Also, the CEO Jorgen Vig Knudstorp recently met with the IT staff and clearly expressed
a mandate for us to streamline the IT budget even as LEGO is experiencing current levels
of success in the marketplace.
[Source: This case study was obtained from IBM’s website. Parts of the original case
study were altered to meet the needs of this class assignment.]
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QUESTIONS: Please answer all three (3) questions below.
Pretend that you are the head of a team of consultants, Mr. Damian Spacey, approached
by LEGO to help the firm resolve its IT issues given the current business success and
accompanying challenges the firm is facing.
1) What will recommendation be in terms of suggesting an IT infrastructure solution
to LEGO considering where the firm is now with its current level of success and
with the desired IT infrastructure expressed in the case study? Be sure to address
concerns about the need to cut costs and have services ensuring backup/mirroring
and business recovery.
2) How can LEGO ensure that its different key business units involved with
manufacturing, warehousing, sales, human resources, logistics, etc., are talking to
each other and also how can this solution follow the desired “cookbook” approach
of implementation?
3) How can LEGO improve its relationships with its suppliers using an IT solution?
How can the concerns expressed about LEGO’s suppliers be addressed by this
solution.
Instructions for Submission:
1) Type out your work, double-spaced (NOT triple-spaced), with one-inch margins
all around.
2) Use 12 point Times New Roman font.
3) Staple your work. Identify yourself.
4) Submit a minimum of three (3) pages. The three pages does NOT include a
cover page.
Please observe this requirement. If you submit less than 3 pages, you will have
deductions.
Reminders:
1) All individual work should be done alone. We will be observing UNB’s policies
covering “plagiarism” for all written work in this course.
Sample Solution