In Jun 2010, the company experienced an overstock situation for 38% of the Lindt Chocolate SKUs running close to 3.5 weeks of stocks that are 6 weeks left to product expiry and thus no longer accepted by most retailers. The only way to dispose these SKUs is to do a price markdown by 70% via the distributor channel resulting in huge erosion of profit margins.
The plan is to set up a logistics hub in Shanghai Free Trade Zone to enable the distribution of products from the factory in China to Asia Pacific markets, including China market. To do this, a Request For Quotation (RFQ) exercise was conducted and a 3rd Party Logistics (3PL) provider was selected to partner LEGO to plan and implement the Asia Pacific Logistics Hub.
Post launch of the Asia Pacific Logistics hub presents opportunities to improve the supply chain network within Asia Pacific and China. The shorter lead times from the Asia Pacific hub to markets allows for a lower inventory holding at logistics hub and local distribution centres, and a higher service level to local markets in Asia Pacific and China.
Post launch, the immediate task is to focus on productivity gains in both fulfillment centre operations and delivery operations. A master plan of efficiency improvement actions were put in place.