Facing High Demand, LEGO Struggles With Supply Chain Bottlenecks
by Maureen Perroni, on September 19, 2016
Demand for LEGOs is rising, but the company was forced to cut back on marketing until it could work out supply chain bottlenecks.
LEGOs are more popular than ever. These plastic building blocks not only let children create any design they can imagine, but also come in a variety of themed sets based on popular film characters and franchises. For instance, kids can enjoy building and playing with sets based on the movie "Captain America: Civil War."
"The company is struggling to meet demand with its current production capacity."
Globally, Supply Chain 247 reports that LEGO sales have risen by an average of 15 percent annually during the past 12 years - an impressive achievement for a company that got it's start making wooden blocks for Danish children in the 1930s. And yet, the company still reported a decline in revenue growth and profits in the first half of 2016, as well as a slowdown in North America.
Why the disconnect? The problem isn't that the appetite for LEGOs is falling. Rather, the company is struggling to meet demand with its current production capacity.
Faced with supply chain bottlenecks, LEGO curtailed its North American marketing efforts this year, according to Euro News, causing a subsequent sales slowdown. This isn't a permanent solution by any means - the news source added that the company plans to invest in its workforce and add a new factory in China, where demand for its product is growing rapidly. But it shows the sacrifices companies have to make when their logistical abilities can't keep up with the market.
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