Readers of the blog will recall my fascination with all things Lego (in my defence, I've got a lot of kids). I use the company as a case study in applying the Long Tail to consumer packaged goods, in everything from mass customization to peer-production.
Lego Factory is the company's service that allows you to design your own models and have the parts sent to you in a cool Lego kit-style box (and share your designs with others in a Lego marketplace). It's a great idea, but it's been hampered in the past by gnarly fulfillment issues that inflated the cost of the kits by including too many pieces you don't need. (I described the problem here).
Basically, the combinatorial possibilities of 7,000 possible parts in 75 possible colors (that's more than a half-million variations) created an overwhelming picking-and-packing challenge. So Lego limited choice in two ways. First, each model could only be built from a single set brick palette, such as car parts. Second, those parts come in pre-packaged bags of a fixed number of bricks, so you'd likely get more than you needed. If you weren't careful, a simple vehicle that might cost less than $10 in retail could turn out to cost nearly $100 in Lego Factory simply because it uses those bags of parts inefficiently.
Now Lego's just announced a very welcome new version of the software (1.6) that fixes this problem, only charging you for the pieces you use. You're still limited to certain set palettes of parts (although they now include train pieces and minifigs), but somehow they've found a way not to ship more than you need. Lego claims average savings of 60%. I've got a call in to Lego HQ to find out how they did it, but for now we can just enjoy the good news...and start designing!