Case Study - Lego

Chapter 6 Foundations of Business Intelligence: Databases and Information Management 273
Lego: Embracing Change by Combining BI with a Flexible

Information System
CASE STUDY
T
he Lego Group, which is headquartered in planning. As part of the solution, Lego chose to move
Billund, Denmark, is one of the largest toy to SAP business suite software. SAP AG, a German
manufacturers in the world. Lego’s main company that specializes in enterprise software solu-
products have been the bricks and figures tions, is one of the leading software companies in the
that children have played with for generations. The world. SAP’s software products include a variety of
Danish company has experienced sustained growth applications designed to efficiently support all of a
since its founding in 1932, and for most of its history company’s essential functions and operations. Lego
its major manufacturing facilities were located in chose to implement SAP’s Supply Chain Management
Denmark. (SCM), Product Lifecycle Management (PLM), and
In 2003, Lego was facing tough competition from Enterprise Resources Planning (ERP) modules.
imitators and manufacturers of electronic toys. In an The SCM module includes essential features such
effort to reduce costs, the group decided to initiate a as supply chain monitoring and analysis as well as
gradual restructuring process that continues today. forecasting, planning, and inventory optimization.
In 2006, the company announced that a large part The PLM module enables managers to optimize devel-
of its production would be outsourced to the elec- opment processes and systems. The ERP module
tronics manufacturing service company Flextronics, includes, among other applications, the Human
which has plants in Mexico, Hungary, and the Czech Capital Management (HCM) application for person-
Republic. The decision to outsource production came nel administration and development.
as a direct consequence of an analysis of Lego’s total SAP’s business suite is based on a flexible three-tier
supply chain. To reduce labor costs, manually inten- client-server architecture that can easily be adapted
sive processes were outsourced, keeping only the to the new Service-Oriented Architecture (SOA) avail-
highly skilled workers in Billund. Lego’s workforce able in the latest versions of the software. In the first
was gradually reduced from 8,300 employees in 2003 tier, a client interface—a browser-type graphical user
to approximately 4,200 in 2010. Additionally, produc- interface (GUI) running on either a laptop, desktop,
tion had to be relocated to places closer to its natu- or mobile device—submits users’ requests to the
ral markets. As a consequence of all these changes, application servers. The applications servers—the
Lego transformed itself from a manufacturing firm to second tier in the system—receive and process cli-
a market-oriented company that is capable of reacting ents’ requests. In turn, these application servers send
fast to changing global demand. the processed requests to the database system—the
Lego’s restructuring process, coupled with double- third tier—which consists of one or more relational
digit sales growth in the past few years, has led to the databases. SAP’s business suite supports databases
company’s expansion abroad and made its workforce from different vendors, including those offered by
more international. These changes presented supply Oracle, Microsoft, MySQL, and others. The relational
chain and human resources challenges to the com- databases contain the tables that store data on Lego’s
pany. The supply chain had to be reengineered to sim- products, daily operations, the supply chain, and
plify production without reducing quality. Improved thousands of employees. Managers can easily use
logistics planning allowed Lego to work more closely the SAP query tool to obtain reports from the data-
with retailers, suppliers, and the new outsourcing bases, because it does not require any technical skill.
companies. At the same time, the human resources Additionally, the distributed architecture enables
(HR) department needed to play a more strategic authorized personnel to have direct access to the data-
role inside the company. HR was now responsible for base system from the company’s various locations,
implementing effective policies aimed at retaining including those in Europe, North America, and Asia.
and recruiting the most qualified employees from a SAP’s ERP-HCM module includes advanced fea-
diversity of cultural backgrounds. tures such as “Talent Manager” as well those for han-
Adapting company operations to these changes dling employee administration, reporting, and travel
required a flexible and robust IT infrastructure and time management. These features allow Lego’s
with business intelligence capabilities that could HR personnel to select the best candidates, schedule
help management perform better forecasting and their training, and create a stimulus plan to retain
274 Part Two Information Technology Infrastructure
them. It is also possible to include performance mea- September 25, 2007 (www.scdigest.com/assets/on_target/07-09-25-
surements and get real-time insight into HR trends. 7.php?cid=1237, accessed November 16, 2010); G. W. Anderson, T.
Rhodes, J. Davis, and J. Dobbins, SAMS Teach Yourself SAP in 24
Using these advanced features, together with tools hours (Indianapolis, IN: SAMS, 2008).
from other software vendors, Lego’s managers are
able to track employees’ leadership potential, develop CASE STUDY QUESTIONS
their careers, and forecast the recruiting of new 1. Explain the role of the database in SAP’s three-tier
employees with certain skills. n. system.
Sources: ”Business 2010: Embracing the Challenge of Change,” 2. Explain why distributed architectures are flexible.
The Economist Intelligence Unit, February 2005 (http://graph-
ics.eiu.com/files/ad_pdfs/Business%202010_Global_ FINAL.
3. Identify some of the business intelligence features
pdf, accessed November 16, 2010); “Lego Creates Model Business included in SAP’s business software suite.
Success with SAP and IBM,” IBM Global Financing, May 19, 4. What are the main advantages and disadvantages
2010 (www-01.ibm.com/software/success/cssdb.nsf/CS/STRD- of having multiple databases in a distributed archi-
85KGS6?OpenDocument, October 20, 2010); “Human Resources
tecture? Explain.
as an Exponent of Good Governance” (in Danish) (www.sat.com,
October 20, 2010); “Lego, The Toy of the Century Had to Reinvent Case contributed by Daniel Ortiz Arroyo, Aalborg
the Supply-Chain to Save the Company,” Supply Chain Digest, University

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Chapter 6 Foundations of Business Intelligence: Databases and Information Management 273

Lego: Embracing Change by Combining BI with a Flexible

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