Citations › Citation ID: 101

C101. BOOK: David C. Robertson, Brick by Brick: How LEGO Rewrote the Rules of Innovation and Conquered the Global Toy Industry (Crown, 2013), p. 114-115.

Beginning in the late 1980s, every LEGO development team, when it began work on a new project, was assigned a full manufacturing cost (FMC) for producing the set. The FMC totaled the entire spectrum of the set’s costs—acquiring the raw materials, molding the bricks and other pieces, producing building instructions, packing and packaging the assortment of pieces, even the injection molding machine’s depreciation. No development team was permitted to exceed its FMC; if it had, it would have eaten into the company’s margins.

In the go-go years of the late 1990s, however, the LEGO Group’s management allowed developers to untether themselves from the FMC’s limits. The consequences were disastrous. Freed from the FMC’s constraints, designers concocted more and more of those specialized pieces. Designers didn’t simply decide to go wild. They were spurred by management’s insistence that they devise increasingly esoteric models, such as Galidor, Jack Stone, and LEGO Explore, which required radically different components.

Full Manufacturing Cost (FMC) is a framework to ensure all sets have a chance at profitability.