Calum Lewis: “We design our different toy sets for flexibility”

Nine questions about the topics on the supply chain agenda of a supply chain professional.

By Helen Armstrong  (Supply Chain Movement)

Significant  financial problems after the turn of the Millennium forced toy manufacturer LEGO to refocus. In 2004 it introduced a five-year strategy plan, Shared Vision, and in the last few years it has enjoyed double digit sales growth. The LEGO Group, headquartered in Billund, Denmark, is still privately held and owned by the Kirk Kristiansen family who founded it in 1932. It is now the world’s third largest toy manufacturer in terms of sales behind Mattel and Hasbro, and its mission is to inspire children and pioneer new ways of playing: Eight LEGO play sets are sold every second. Its on-line communities include the LEGO Club (about 4.2 million members) and programmes for Adult Fans of LEGO (AFOLs) which foster closer inaction with consumers. As operations director of LEGO Company Ltd, for UK and Ireland, Calum Lewis has to deal with all the figures and ensure operations run smoothly.

1. What is the strategy of the Company (or Division/Supply Chain): Operational Excellence, Product Leadership or Customer Intimacy?

Our objective has always been product leadership but in recent years operational excellence has become more important. Ten years ago Lego was in financial difficulties after having diversified into a number of different things, including theme parks.  In 2004-5 a turnaround plan was put in place, to get in control and focus on our core product range. By 2006-7 Lego had successfully recreated a stable platform and since 2008 we have been moving on and further developing our operating model. Over the last 3-4 years we have made strategic decisions, such as to keep manufacturing in-house within Europe, in Denmark, Hungary and the Czech Republic, so it is close to our European markets. By reducing lead-time we can respond to consumer trends and work better with retailers in this respect. Also we design our different toy sets for flexibility so we have as many common components as possible. The Lego operations model is fundamental to the business. We see our supply chain as a way of delivering competitive advantage.

2. What is your responsibility regarding the supply chain?

I am at the customer end of the supply chain in the UK and Ireland, the UK being the third largest toy market in the World (US is No1) so it is very strong. My primary focus is on planning and managing demand and working to ensure supply to that demand. The Business Intelligence team that work on consumer and market trends report to me as do a  forecasting and planning team who mostly work in a collaborative way with the major toy retailers. I am also responsible for a team  that processes orders and organises logistics to get the product to the customers and, by no means least, the accounts receivable team.

3. What are the main business challenges that drive supply chain projects at the moment?

This is mainly the development of collaborative planning with the major retailers. We have seen a  consolidation in retail toy sales so now  eight to 10 customers represent the majority of sales volume. In line with this development, we have also become a dominant player in the non-food offer made by the big grocery retailers. This trend is also having a large impact on the traditional toy specialists. With just a small number of players, we find we are moving away from the transactional type of business, where they place an order and we supply the goods. Instead it’s about forming a relationship. LEGO is increasingly being asked to take part in collaborative planning, such as joint business plans and forecasting (operations) and how can we take cost out of the supply chain.

We are being asked to give insight into our sales expectations, share our views on trends, and highlight the concepts that we expect to sell well and where we can add value for the consumer. The relationship is maturing: We are key player and the retailers want to work with a strong brand.

4. Which supply chain challenges keep you awake at night?

Data! Sometimes we feel awash with data. The question is, “How do we bring it together and turn it into something actionable? How can we use it to make useful decisions both in the short term and in the long term?” We are looking at our systems and we are employing more resources into assessing data, deciding what information we can gather from it and how we can take action either via a week-to-week replenishment activity or in a S&OP process.

5. What do you do about these challenges?

Our focus is on gathering skills and knowledge to deal with the data. We can easily aggregate up information but the challenge is to add intelligence.  We have analytical resources that review trends and we have planning resources that convert this, for example, into a sales and supply plan. We have recently expanded the team but we are also developing people internally to take on challenging customer-facing roles. Demand planning seems to be a hot area in terms of recruitment so competition is quite strong but we have a good brand and this is a good place to work which attracts people.

6. Who do you like to meet for exchange of knowledge?

I enjoy meeting retailers and at the moment there is a lot of discussion about omni-channel  retail and what this seamless multi-channeling approach will mean for us.

I also like networking with consumer goods colleagues to exchange ideas with people experiencing similar challenges. I attend seminars but I am also a member of Leaders in Supply Chain UK, which is networking group that meets four times per year to debate current issues.

7. Which book has inspired you the most and why?

Logistics and Supply Chain Management, by Martin Christopher. It talks about strategic lead time management, swapping inventory for information etc. I first read it about 20 years ago but many of the concepts are still relevant today.

8. Where do you expect to be professionally in 5 years?

I believe the supply chain is core to many businesses. I see myself in a role that drives the supply chain but also which drives the performance of the business.

9. What do use for an agenda?

I use Microsoft Outlook to manage my schedule and tend to write short action lists to prioritise.