Designing supply chain strategy by using shared information

This case study describes a supply chain redesign project in LEGO Company, a toy manufacturer from Denmark. The toy manufacturer faced extreme seasonality and unpredictable demands. It used to supply toys with a physically responsive supply chain, which produced according to monthly forecasts of retailer demands, and allocated inventories along the supply chain to ensure high fill-rates to its customers (the toy retailers). However, this supply chain strategy was ineffective. It generated high mismatch of supply and demand, and consequently high costs on obsolete inventory, markdown and lost sales. The supply chain redesign project collected handful of information to determine the appropriate levels of supply responsiveness for different products and retailers. However, the project team was indecisive on two choices: 1) to produce according to the real consumer demands using the shared consumer demand information or 2) to produce according to different retailer demands. The project realized that it was not so difficult to collect data, but the main difficulty was to compare these two choices and to decide how the future supply chain should be. This case demands managers or students to apply their knowledge of Supply Chain Management to help the project in making the right choice. For each choice, there is a need to specify the right supply chain strategy, which includes the forecast process, order penetration points, lead-time, production frequency and batch-size, production principle, inventory policy, and information sharing.