Aalborg Universitet

Lego: Embracing Change by Combining Business Intelligence with a FlexibleInformation SystemOrtiz-Arroyo, Daniel

Published in:Information Management Systems: Managing the digital firm. Global Edition

Publication date:2011

Document VersionEarly version, also known as pre-print

Link to publication from Aalborg University

Citation for published version (APA):Ortiz-Arroyo, D. (2011). Lego: Embracing Change by Combining Business Intelligence with a FlexibleInformation System. In K. Laudon, & J. Laudon (Eds.), Information Management Systems: Managing the digitalfirm. Global Edition: Managing the Digital Firm (12 ed., pp. 271-272). Pearson Longman.

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Lego: Embracing Change by Combining BI with aInformation System

CASE STUDY

The LEGOGroup, which is headquartered inBillund, Denmark, is one of the largest toymanufacturers in the world. LEGO's mainproducts have bee~ the bricks and figures

that children have played with for generations. TheDanish company has experienced sustained growthsince its founding in 1932, and for most of its historyits major manufacturing facilities were located inDenmark.In 2003, LEGOwas facing tough competition from

imitators and manufacturers of electronic toys. In aneffort to reduce costs, the group decided to initiate agradual restructuring process that continues today.In 2006, the company announced that a large part ofits production would be outsourced to the electronicsmanufacturing service company Flextronics, whichhas plants in Mexico, Hungary, and the CzechRepublic. The decision to outsource production cameas a direct consequence of an analysis of LEGO'stotal supply chain. 1b reduce labor costs, manuallyintensive processes were outsourced, keeping onlythe highly skilled workers in Billund. LEGO'swork-force was gradually reduced from 8,300 employees in2003 to approximately 4,200 in 2010.Additionally,production had to be relocated to places closer to itsnatural markets. As a consequence of all thesechanges, LEGOtransformed itself from a manufac-turing firm to a market-oriented company that iscapable of reacting fast to changing global demand.LEGO's restructuring process, coupled with dou-

ble-digit sales growth in the past few years, has led tothe company's expansion abroad and made its work-force more international. These changes presentedsupply chain and human resources challenges to thecompany. The supply chain had to be reengineeredto simplify production without reducing quality.Improved logistics planning allowed LEGOto workmore closely with retailers, suppliers, and·the newoutsourcing companies. At the same time, thehuman resources (HR) department needed to playamore strategic role inside the company. HRwas nowresponsible for implementing effective policiesaimed at retaining and recruiting the most qualifiedemployees from a diversity of cultural backgrounds.Adapting company operations to these changes

required a flexible and robust IT infrastructure withbusiness intelligence capabilities that could helpmanagement perform better forecasting and plan-

ning. As part of the solution, - 7

SAPbusiness suite software. _-~pany that specializes in eme::;=-tions, is one of the leading so~_world. SAP's software producs:applications designed to effic:-company's essential functioLS -chose to implement SAP'sSt::;=;_Management (SCM),Produc: =-=-(PLM), and Enterprise Reso'~_modules.The SCMmodule include:: -

as supply chain monitoring ~forecasting, planning, and :"..-=

The PLMmodule enablesdevelopment processes and ::0.

ule includes, among other a=-:;-Capital Management (HCr., _.:nel admini~tration and de\~_.:SAP'sbusiness suite is b~=~

tier client-server architecru:-=-adapted to the new Service _(SOA)available in the late. -In the first tier, a client in e::=-graphical user interface (G--'=-laptop, desJ<.top,or mobile -~requests to the applicatior:. ::=-

servers-the second tier in ==process clients' requests. ==servers send the processed == _system-the third tier-\\'t.:~more relational database . =--::.....

ports databases from diffe~=-those off~red by Oracle, _~ers. The relational database:: -store data on LEGO's proa::supply chain, and thous~can easily use the SAPque==-from the databases, beca --=technical skill. Additional.:=--ture enables authorized pc=-access to the database sy --various locations, inclu~~· .....America, and Asia.

SAP'sERr-HCM modu>tures such as "ThlentMa"';;..:-dling employee admini.st:s=.and time managemem. -=-.=.::::