Key Challenges in Maintaining a Relationship Between Lego and Flextronics

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Key Challenges in Maintaining a Relationship between LEGO and Flextronics

LEGO Group is the fifth-largest toy-maker in the world with a complicated global supply chain, while Flextronics is a large Singaporean electronics manufacturing services provider. So the first challenge between these two large companies when they corporate is to achieve an agreement and maximize the common benefits of both parties. However, Lego Group needs a flexible and market-responsive business because of the unpredictable demand of its product, while the business model of Flextronics is more stable and predictable. It means that Lego may keep releasing new products because of changing market conditions, and these new products have to arrive with a very short time line, but Flextronics cannot keep up with these changes. In addition, Lego bids for a lower price at the beginning and lock it over a long period, which is hard for Lego to convince Flextronics that its profits has been considered as well. Without a profitable business model for both parties, a win-win solution is hard to achieve.

The second challenge is especially for Lego, since it has little prior experience in outsourcing a large amount of production, but decide to outsource 80 percent of its production to Flextronics. There will be many unexpected situations. Lego doesn’t have an accurate picture of what should happen when. In particular, Lego is a European company while Flextronics is from Singapore. They may have different culture, thinking and working styles. Setting up processes for sharing information at all levels is especially important for cooperation than in-house production for both companies. Moreover, Lego has several categories of products, and it keeps broadening its portfolio into new areas. Therefore, transition internal operations to an outsourcing partner, typically involves so many staff, can…...

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