LEGO Group to Phase Out Outsourcing Agreement with Flextronics During 2009
3 July 2008
The LEGO Group announces a change in its production set up. While holding on to the strategy of establishing production hubs near the largest markets in central Europe and the USA, the LEGO Group has decided to a larger extent to focus on an internal production solution and will phase out the existing outsourcing agreement with Flextronics during 2009.
The LEGO Group and Flextronics have worked together for almost three years, and through the cooperation both parties have learnt a great deal about handing over resources, skills and outsourcing with fast ramp-up at new sites. But during the past year it has become increasingly obvious to the two parties that it would be more optimal for the LEGO Group to manage its global manufacturing set up.
The LEGO Group and Flextronics have now come to the joint decision that the LEGO Group will take over LEGO production from Juárez, Mexico and Nyíregyháza, Hungary. At the Nyíregyháza facility, the LEGO Group is in negotiations with Flextronics to take over the plant and people. These discussions will hopefully be concluded by the end of July. The Juárez production will, during first quarter of 2009, move to a new site in Monterrey, Mexico, and the site is expected to be up and running in the second quarter of 2009.
Executive Vice President in charge of the Global Supply Chain, Iqbal Padda said: “We have had an intensive and very valuable cooperation with Flextronics on the relocation of major parts of our production. As expected this transition has been complicated but, throughout the process we have maintained our high quality level. Jointly we have now come to the conclusion that it is more optimal for the LEGO Group to manage the global manufacturing set up ourselves. With this decision the LEGO supply chain will be developed faster through going for the best, leanest and highest quality solution at all times.”
The LEGO Group further has own production sites in Billund, Denmark, and Kladno, Czech Republic, and cooperates with other manufacturing suppliers in Poland, Hungary and China. After the change in the production set-up the LEGO Group said it will have a total of about 6,500 employees.
