To meet the rising demand for its goods in Asia, Lego has announced its plans for setting up of a new production facility in Vietnam.
The toymaker said it will invest more than $1 billion in the new production unit, which will be located near Ho Chi Minh City, the country’s primary commercial centre.
After opening a facility in China five years ago, this will be the Danish company’s second factory in Asia.
Since 2019, the company has experienced double-digit growth in the area.
“We are very grateful for the support of the Vietnamese government in helping us achieve our ambition to build our first carbon neutral factory,” Lego’s chief operations officer Carsten Rasmussen said in a statement.
Work on building the new factory is slated to start next year and the company plans to use solar panels on its roof and on a neighbouring farm to match its energy demand.
Production at the factory is planned to begin in 2024, with up to 4,000 jobs projected to be created over the next 15 years.
It’s the next step in Lego’s decade-long strategy of locating manufacturing units near major markets, and it comes after the coronavirus outbreak caused global supply chain challenges for firms all over the world.
“This provides the flexibility to respond quickly to shifts in local consumer demand, shortens the supply chain, and reduces the environmental impact of shipping long distances,” the company said.
Despite the fact that the firm saying that recent supply chain problems had no influence on its choice to establish the facility in Vietnam, some experts believe it can serve as a lesson to other companies trying to get their products to customers.
“What they’re doing is what we should have done a long, long time ago, which is hedge our bets. If you see demand coming from a certain direction, you’ve got to have alternatives,” according to Paula Rosenblum, managing partner of RSR Research.
However, the past two years have been challenging for some multinational companies with manufacturing facilities Vietnam.
As Covid-19 spread across facilities, production at several of Nike’s major operations in the country was interrupted.
Some logistics experts believe that Vietnam’s current struggles may assist it deal with similar obstacles in the future.
“Vietnam has learnt a lot in terms of balancing the risk of Covid outbreaks and maintaining production capacity during the last wave,” Megan Benger at consultancy TMX said.
“We believe that these learnings will likely hold the country in good stead in the event of future outbreaks,” she added.
(Adapted from BBC.com)