Over the past few years we've been chronicling a very expensive journey by Danish toymaker Lego. A hat tip to regular reader Peter for helping us stay up on this story.
First, back in June of 2006, Lego decided to drink the McKinsey Kool-Aid and outsource manufacturing to Flextronics. Actually it asked Flextronics to come in and manage its own factories.
Actually it was even more bizarre than that.
Sure, why not? Have an electronics manufacturer make the plastics, and a plastics manufacturer keep on making the electronics. That's bound to succeed, right? Uh, no. Just a few months later, in August of 2007, we began to hear of problems.
Then in February of this year Lego finally gave up on Flextronics at the Czech factory.
Lego drops partnership with Flextronics – Quality and effectiveness have simply not been good enough for the production that was outsourced to a Czech factory.
“We have talked about how we can be more effective and decided to run the factory ourselves. We would rather do that which is the most effective that stick to a decision that is two years old, even though it of-course sends a signal about a shift in strategy” says CEO Jørgen Vig Knudstorp.
Now the final shoe has dropped. Lego has taken back production control at the remaining Flextronics-controlled factories in Hungary and Mexico.
A long and expensive journey. Besides the direct quality and production costs, imagine the number of meetings, the hours of engineering and executive time, and the loss of employee morale that was sunk into this fiasco.
But I'm sure executives on all sides got bonuses, right?