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LEGO finds greater fulfillment in outsourcing

LEGO's direct-to-consumer division, LEGO Brand Retail, has just taken a big load off its shoulders by inking a five-year deal with Plano, Texas-based fulfillment company PFSWeb.
February 1, 2007

LEGO’s direct-to-consumer division, LEGO Brand Retail, has just taken a big load off its shoulders by inking a five-year deal with Plano, Texas-based fulfillment company PFSWeb.

Starting at the end of March, all direct-to-consumer online orders for LEGO product will be picked up at the shopping cart stage by PFSWeb, which will then locate inventory, email status information to customers, and follow through with North American shipping from its 2.5-million-square-foot warehouse. The deal also covers orders from LEGO’s catalogue, which goes out to between 750,000 and a million homes eight times a year.

Based on LEGO’s experience handling fulfillment in-house, PSFWeb chairman and CEO Mark Layton expects to handle thousands of orders each day, with business naturally peaking in the holiday lead-up, which he says accounts for about 50% of the toyco’s direct sales. This past Q4, traffic to LEGO’s online store increased by 120%, according to Nielsen/NetRatings for LEGO.com.

Layton says that LEGO wants to reduce the cost of shipping small, low-weight orders, as well as shortening its product turnaround time during peak seasons.

Being able to cater to unpredictable consumer demand was a key goal for LEGO, says Skip Kodak, the company’s VP of direct-to-consumer. ‘Once the transition is made, we’ll have better flexibility to chase demand and ultimately provide as much LEGO as the market requests,’ says Kodak.

Though LEGO’s difficulties in keeping up with retail demand made headlines in December, the company claims the decision to outsource its supply chain functions was in the works well before the holiday season.

In a related move, LEGO has hired separate companies to handle packing/warehousing and the distribution of finished goods to retail.

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