Mani MasoodIn today’s business environment, companies are constantly seeking ways to cut costs while improving their operational efficiency. Lego, the world-renowned toy manufacturer, has implemented a fascinating business strategy that is worth exploring. By changing its distribution plans, Lego has been able to save money on its operational processes while simultaneously making its products more accessible to consumers.
Sticking with the Czech Republic
One of Lego’s primary strategies for reducing distribution costs was consolidating a large portion of its European warehouses and manufacturing spaces into one large warehouse and distribution center in the Czech Republic. This proved to be a massive success, allowing Lego to target not only Europe but also Asia and the Middle East. By simplifying its distribution processes to one location, Lego was able to go from having 55 transportation providers to just ten that could fit in both Europe and Asia. This helped to trim costs by reducing the need for hiring more people to ship items in and around several spaces.
Focusing on Third-Party Distribution
Lego also saw that by shifting its distribution processes to a third party, it would be easier for Lego to save money. This strategy would allow Lego to have more time for other functions, especially important as a massive amount of distribution functions take place in the months of September to December due to the rather seasonal nature of Lego sales. By getting rid of its own original distribution site and replacing it with controls from DHL Exel Supply Chain, Lego trimmed costs.
Simplify Transportation as Business Strategy
Transportation costs were also adjusted to ensure that the cost of operating the business would be a little easier to manage. By reducing the number of transportation providers and routes, Lego was able to enhance the overall process associated with keeping costs down. This helped to cut down on transportation costs that come with getting different products ready for sale, which have proven to be more expensive over time thanks to added fuel costs.
Official Lego Stores Are Very Popular
Lego has made the distribution process easier through the use of Lego-branded stores. Lego-branded stores can be found throughout the world in a variety of shopping malls, with a majority being found in the United States, United Kingdom, Germany, and Canada. These branded stores have become popular for offering practically every Lego product around while also making it easier for people to learn about Lego’s newest products. By reducing the total number of vendors, Lego is not only saving money on transportation and shipping costs but is also getting its products into places where people will be more committed to selling these products.
Advantages and Disadvantages of LEGO Business Strategy
Lego’s business strategy has numerous advantages. By simplifying its distribution processes and reducing the number of vendors, Lego has been able to save money on its operational processes. Additionally, the company’s decision to focus on Lego-branded stores has facilitated the process of selling more products with care while keeping shipping costs down.
However, there are also some potential disadvantages to Lego’s strategy. By relying on a third-party for distribution, the company is giving up some control over the process. If the third-party is not effective in its distribution process, it could impact Lego’s business. Additionally, consolidating warehouses and manufacturing spaces into one location could lead to supply chain disruptions if there is a natural disaster or other unforeseen events that affect that location.
In conclusion, Lego’s business strategy of changing its distribution plans has proven to be a successful way to save money on its operational processes while making its products more accessible to consumers. By focusing on third-party distribution, simplifying transportation, and using Lego-branded stores, the company has been able to enhance its overall distribution process. However, it is important to note that there are potential disadvantages to this strategy that must be carefully considered.
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