News
Lego hits back in indie stock spat
Ronnie Dungan Jul 31 2007, 10:30am
Comments (3)
Indie grumblings force manufacturer to defend allocation policy as demand outstrips supply
Lego has responded to criticism from the independent sector about its stock allocation policy and has vowed to fulfil all but a “minute proportion” of its forward orders.
After rumblings of discontent last year, regarding its stock allocation ToyNews heard from a number of disgruntled independents who forwarded a communication they had received from the firm.
It said: “The Lego Company has a fixed capacity of product. Unfortunately, we have exceeded our allocated capacity for this year. Therefore we are not in a position to take any further orders as we do not have the capacity to fulfil them. We are reviewing this across Europe on a regular basis and will inform you if there is any change to the current situation. Official communication will follow shortly.”
One disgruntled indie said: “I would like to think that if stock is really that bad then support will be given to those who stock the whole Lego range all year round. That means no stock to supermarkets, Argos and other catalogues and some of the national department stores. But this is Lego we are talking about.”
Marko Ilincic, MD of Lego UK responded by saying: “Now that we have had our production capacity for 2007 finalised, we can see that demand is outstripping supply for our products, particularly for Star Wars and City.
Despite having already shipped a double digit growth during 2007 versus 2006 we will only miss five per cent of total current forward order book for these two lines.
“In many ways this is a testament to the success of our forward ordering system - we can inform our retailers now in July of the stock situation they can expect in the run up to Christmas. Given the perspective of the immense success of our Star Wars and City ranges and the finite stock situation in any production capacity, the stock limitation only affects a tiny proportion of total orders on these ranges. We are, however, still taking orders on a restricted range of other Lego products for immediate delivery.”
He continued: “We would like to thank our retailers for their continued commitment, support and understanding over recent times – any transition period brings with it its own difficulties, but happily these areas of our business are slowly but surely being rectified. Together with our customers we are looking forward to our best ever Christmas for ’07 and even stronger trading platform going into 2008.”
Comments
“shocking customer service”
Posted by: H.Lal - Sep 27, 12:51pm
I think this is absolute nonsense
Marko you are an absolute jerk
“Re: shocking customer service”
Posted by: Matt - Oct 8, 12:39pm
My wife runs an independent Toy shop, and I am Supply Chain Director of an international Telecomunications equipment manufacturer. I cannot understand how a company like Lego can have such a poor supply chain. It takes 6 months to change supplier of complex Printed Circuit Board Assemblies, and we have 100% flexibility outside 4 months. Why do Lego have to secure production capacity 12 months in advance for a very simple product, where all of the components have a lead-time less than 4 weeks.
Operationally Lego is a very disappointing company, although the product is great
Also, what is not reported is how much market Lego cannot supply - Marko reports that they only have issues with 5% of orders - what about all of those new customers and orders that they won't even load onto their system - the problem is far greater than they are letting on
“100% Customer Satisfaction”
Posted by: PRBen - Jan 26, 7:00am
I think it’s impossible for any organisation especially one the size of Lego to achieve a 100% customer satisfaction rate.
There are thousands of suppliers for circuit boards making it far simpler to change supplier but as far as I am aware there are not many manufacturers of Lego components, hence the lead-time on production.
Two practical conclusions are drawn from studies to indicate that lead time is statistically related to the manufacturing goals of quality, productivity (cost), delivery, and flexibility.
Therefore it may seem such a simple component but in Lego’s case the cost of production is kept down and a high quality consistency is maintained and lets face it Lego is producing millions of components.
I’m sure Lego could reduce its manufacturing lead-time to improve delivery performance but then this would not help customer satisfaction.
Why?
Because this would mean an increase in the overall production costs, this cost would then be passed on to the distributor who then passes it on to the consumer.
The big players such as ‘Toys R Us’ would probably absorb the cost increase but the smaller distributors would see their profit margin reduce along with the lead-time.
Ben.London School of Economics.