MBA20291 Deepak Raj

Answer 2
The existing complex Distribution Centre (DC) can be simplified by implementing few cases.

Assumption: In case it is given that after constructing the EDC nearly 62,000 m 2 space the space was
very large but still it was insufficient for LEGO because of their business model.

Solution: The whole LEGO operations can be optimized by Integrating the whole Sales & Operation,
Demand Planning, and Inventory Planning department. The following are few steps which need to
be done inside LEGO business model

1. Removing Just in Time Delivery system

As mentioned in the case after a getting information from customer via a survey it was found
that they are not really bothered that the order is delivered within a single day or two. But
to carry out Just in Time delivery the company carried high level of inventories in numerous
warehouses and DC in Europe which impacted their capacity of the warehouses increase the
number of pallets and lastly resulted in huge logistic and financial stress.
2. CDC Operations
Optimizing the inventories can results increase in accessibility of products and easily
shipment and the order can be tracked so that the logistics team can deliver the product as
soon as possible. It will help the LEGO to maintain a fast delivery system for their network.
3. By turning Warehouse into Distribution Center
Storage of Inventory was a major issue for LEGO the new distribution center constructed to
hold all the inventory for the company. Since the inventory was so high that there were high
number of pallets created which impacted space but also the transport. It also increased the
storage cost for DHL. It is mentioned in the case that the EDC was built to store 76,000
pallets and once the inventory dropped, they would need a double size of current EDC.

 The First Step: To convert the existing warehouses as distribution center since LEGO
has the four regional Warehouses of 30,000m 2. It can be fully operated as a
distribution center so that LEGO did not need to invest more money in construction
a new distribution center for managing its inventory.
 The Second Step: Introducing the new IT solutions for business and operation,
companies like SAP and Kinaxis are having products which can be used to modify the
in going systems of the company and they can optimize the inventories, stock,
transportation lane, ordering of raw materials, predicting demands, etc. These are
most advance solutions currently present in the market to manage the operations
for any company.
 The Third Step: Stock location using the software, the software can be used to find a
specific product or a lot in such huge warehouse or DC it will reduce the errors and
the specific location of the stocks can be used by the distribution manager ship the
stock according to the demand and it will also reduce the holding cost for the DC or
warehouse.
 The Fourth Step: Schedule Replenishments with the help of computer software-
based replenishment system. There are certain scenarios when the managers face
that the demand which need to be delivered cannot be fulfilled because there is not
enough stock in the slot or bin. With the help of software, the manager can create a
cycle, and, on every cycle, he can run and create a list of stocks which are less than
 MBA20291 Deepak Raj
estimated and place the order which in turn will be matched with the demand in the
actual market and accordingly it will be delivered.
 The Fifth Step: Inventory Reviews, in order to achieve the optimum pick location a
product versus movement report can be used, the report can be based on moving
average monthly records. Once the report is prepared managers can pick out the
non-performing stocks.
 The Final Step: The logistics and the management should be done by a potential 3PL
company, in the case we found that DHL has never handled such complexity while
managing a DC or warehouse and it clearly shows that DHL was in capable in terms
of managing the DC and logistics. So, well-coordinated and highly effective 3PL
company should be the helping hand of LEGO.

PITFALL while restructuring transportation partners

 The contract that was signed with DHL they were not very clear about the level of
integration and engagement they would need to work with LEGO. Finding a new
transportation partner is easy but now LEGO must give a detailed description of their work
and how do they perform their operation and what exactly they expect from their new
partners.
 Secondly there was a lot of mismatches in the culture of both the companies LEGO and DHL
which impacted the teamwork and started to create a blame game chain between both the
companies when something went wrong DHL blames LEGO and LEGO blames DHL. So, it
should be very clearly mentioned in the contract that how much risk and in what process the
risk should be taken by new partner and LEGO to maintain the integrity inside the business.
 Lastly the decisions regarding the increasing the inventories and introducing new
technologies then the new partner workforce should be trained under LEGO training
program which will help them to understand the system and software and perform their
jobs properly.