By using IBX Purchase-to-Pay, the LEGO Group has managed to increase purchase compliance from 50% to 70% in just one year. Over the same period they have reduced the number of suppliers by 38%. The streamlining of procurement on a strategic level is one of the factors behind the LEGO Group’s renewed strength as a leading global toy brand.
The management of the LEGO Group recognized that they urgently needed to control the large number of suppliers being added to the rapidly growing supplier list every month. With a corporate culture focused almost entirely on innovation, production and sales, and with increasing scrutiny over purchasing flow, supplier numbers and contract compliance, this was a major management challenge.
The LEGO Group addressed this issue by focusing far more seriously than before on procurement and supplier contracts at a strategic level. Being already familiar with Capgemini IBX Business Network and its competitive range of Cloud-based procurement solutions, LEGO selected Capgemini as their development partner to map out their needs and design the company’s eProcurement system. “We chose Capgemini IBX Business Network because we knew they deliver a very thorough implementation from the initial meetings to rollout, and we weren’t disappointed” – says Bertil Brink Pedersen, LEGO’s Director in Corporate Finance – Procure to Pay, who oversaw the implementation of eProcurement on all levels.
The LEGO Group introduced IBX Purchase-to-Pay as one global procurement channel in all major departments worldwide. Mr. Brink Pedersen emphasizes that the newfound focus on procurement has brought a positive organizational change and new perspectives to the company:
“The eProcurement project has turned out to be more than merely a system to manage suppliers and purchasing procedures. It has helped us as a whole to realize the potential of thinking beyond system and into the mindset of process. It makes everybody across the LEGO Group see what positive things change can bring, and that everybody can contribute by altering old habits to new and better ones.”
Pedersen also highlights the fact that, apart from uncovering blind alleys within the organization and helping it to understand its needs and bad habits even better, the exercise of streamlining procurement within The LEGO Group has clearly brought visible bottom-line results: “A reduction of 38% in number of suppliers, a doubling of purchase compliance and huge support of the process among employees all count as tangible successes in my book.”
According to Pedersen, IBX Purchase-to-Pay has also helped break down barriers between departments: “A strong sensation of ownership with the employees is one of the key factors of our success in making purchasing more transparent for everybody. The company as a whole stands more united now than ever, and that is in part thanks to the obvious advantages of transparency and overview in purchasing. When the company begins to realize that efficiency and discipline in purchasing helps creating a surplus in the process of creativity, we all begin to break down the ‘silos’ within the company, and start thinking as one. It’s a cultural turnaround for the better.”
“Our ambitions over the long term are a further reduction in the amount of suppliers by 50%, purchase order compliance on all invoices and a further integration of the eProcurement system into accounts payable. For example, now we can implement a strict policy of payment only on delivery. Before, we weren’t sure whether the goods purchased and paid for had actually been delivered,” adds Pedersen. He expresses his optimism for the future development of LEGO’s never ending process towards excellence – both inwards and as a leading provider of quality toys worldwide.