Case Study

LEGO: Consolidating distribution (A)

14 pages
December 2008
Reference: IMD-6-0315

Two years after joining the LEGO Group as their Logistics Manager for Europe and Asia, Egil Møller Nielsen finds himself fighting several battles at different fronts; the most difficult one on his home turf against his own management team. He is half-way implementing a bold plan: close down all existing local and regional logistics operations and consolidate all logistics and distribution activities from a central location in the Czech Republic, managed by an external partner – DHL. Outsourcing logistics services on a scale like this – in East-Europe – had never been done before by any other European company. The stakes are high as LEGO, struggling for survival, is also trying to re-invent itself. Should Nielsen push through his plan – in which he firmly believes – or give in to the mounting pressure from home and relax his efforts?

Learning Objective

We observe two new partners, both active on new, unexplored territory in the early stages of their partnership. The relationship is strained; both companies are under tremendous pressure from their corporate headquarters to show results while there is a general distrust in each others capacity and motivation. In this first case we learn that building a relationship that is based only on a contractual agreement can be a painful experience. Cost accounting in general and cost drivers in specific are mentioned to illustrate their importance in key decision making.

Outsourcing, Change Management, Partnership, Production Management, Operations Management
Lego Group (The), Consumer Goods, Toys and Games
Field Research
© 2008
Available Languages
Related material
Teaching note, Video
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