Logistics & Fulfilment Award Winner 2008: The Lego Group

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Logistics and fulfilment is a core element of supply chain management, so of all the categories this is the one where virtually all our entrants could have made a worthy contribution – and indeed, nine of them did. Contenders for the prize were: Argos in partnership with Kuehne + Nagel, BT Supply Chain, Donaldson Europe BVBA, Ekol Logistics, Electrabel, Ikea Distribution Service, NikeStore in partnership with Menlo Worldwide Logistics, SEW Eurodrive GmbH & Co KG, and The Lego Group.

Across this long list there were many examples of good practice and a high degree of competence, but the judges were looking for excellence and this narrowed the focus to three entries: Electrabel, NikeStore in partnership with Menlo Worldwide Logistics and The Lego Group. All three were very high scoring with barely a point or two between them, which made it difficult for the judges. However, a winner had to be found. As described in more detail in the Public Sector, Services & Utilities category, Electrabel has transformed its supply chain over a two-year period from a cost-plus operating model to one based on availability. The Belgium-based power generation company has centralised fast moving parts in a new national warehouse serving 15 power plants, a project that has resulted in a ten million euro reduction in inventory and a payback on the project within 18 months. This was a strong entry, but the huge demands brought about by NikeStore’s ambitious growth plans, and the radical transformation and global scope of The Lego Group’s entry narrowed the focus still further.

It is predicted that three per cent of all retail sporting goods purchases in Europe will be transacted online in 2008 and this figure is expected to grow exponentially as broadband penetration increases. Nike’s online presence at NikeStore.com has been established to respond to this growing demand and with its logistics service partners, Menlo Worldwide Logistics, an agile supply chain has been created, centred on its Laakdal distribution centre in Belgium. This 18-month programme to manage growth involved the implementation of lean operations, strategic supplier relations and deep collaboration between the two organisations to ensure that practices and operations were standardised across the two companies. In addition, customer segmentation was undertaken to create gold, silver, and bronze service levels which are being satisfied at a high rate. Kaizen improvement on the shop floor has also achieved sound results.

Again, this was all good stuff, but the judges decided that the sheer scale and scope of the Lego entry, backed up with a comprehensive set of impressive metrics, determined the final result.

The Lego Group has been on a four-year journey to transform the business, and this turnaround has centred on the supply chain. Ten operations have been consolidated into one global logistics service centre located in the Czech Republic, serving 130 countries around the world on a five-day delivery basis. The number of logistics service providers has been cut from over 100 in 2004 to just 15 today, and a new agile, customer facing supply chain has been created with delivery performance rising dramatically.

The judges say, “Lego has really transformed its entire logistics and distribution model. The company has improved capacity while flattening off peaks in demand and it has achieved this through the way it plans and distributes its product. Customer satisfaction has improved dramatically, responsiveness has increased, very significant savings have been made and the strategy is fit for the future.” This is an example of where a logistics transformation has secured the future growth potential of the organisation. The scale and global scope of this transformation, its methodical implementation, and the success in achieving set objectives secured the Logistics & Fulfilment Award for The Lego Group.

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