Children love to play with LEGO building blocks, a fact that has made the family-owned Danish toy company a household word in homes around the world, particularly near holiday time.
"About 60 percent of our retail sales are concentrated in November/December," said Jorgen Eeg Sorensen, general manager of transportation and warehousing for LEGO in Billund, Denmark.
To make sure its product gets to markets in 150 countries, both during the holidays and throughout the year, LEGO places a lot of emphasis on logistics. The logistics department is, in fact, the company's largest, employing between 3,000 and 4,000 people out of a total work force of 9,000, said Sorensen. Many of these employees are involved in forecasting and planning but half are on hourly wages and about 10 percent to 15 percent are temporary, peak-season employees.
Currently, LEGO divides the logistics function into two parts: manufacturing and sales. That division has served the company's organizational structure well, but Sorensen said things are changing. "The key issue for LEGO's future will be to integrate manufacturing logistics and sales logistics into a single comprehensive system," he said.
Under the current setup, the group involved with manufacturing schedules delivery of raw materials and components to plants, and the delivery of finished goods to LEGO's 24 wholly-owned sales companies, each of which covers one national market. These companies, which effectively are the plants' customers, are coordinated through a central sales and marketing department that sets merchandising, promotion, pricing and inventory policy. New sales subsidiaries are established as soon as a market has sufficiently large revenue. In the interim, sales agents are used. LEGO currently has agents in about 100 countries administered through LEGO Overseas.
|"Within Europe, LEGO uses a single transport company to take care of all inter-factory movements and movements to the sales companies."|
- LEGO's Jorgen Eeg Sorensen
The cardboard boxes now have been largely replaced by a system of modular plastic returnable cartons. An analysis based on German and Swiss experience suggests this system will impact the environment significantly less than the use of cardboard, Sorensen said.
Billions of Blocks
Since its founding in 1932, the LEGO Group has manufactured more than 170 billion LEGO elements and 11 billion DUPLO bricks for more than 300 million consumers worldwide.
The company today is the largest toy manufacturer in Europe and among the top five in the world.
All tooling and molds for LEGO toys are made and tested in Billund. LEGO's operations there also manufacture 50 percent of the company's total output. Switzerland, the company's second-largest manufacturing site, creates a quarter of all LEGOs. Enfield, Conn., produces 20 percent and serves the entire North American market; sites in Brazil and Korea manufacture the remaining 5 percent. Ninety-eight percent of LEGO's total production is sold outside Denmark, according to corporate statistics.
LEGO may be worldwide, but Europe continues to be its biggest market with 17 sales companies handling many versions of the product as opposed to three sales companies in North America and one in Japan.
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