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Ch13 Case1 Q

Benetton achieved competitive advantage through its supply chain organization. It relied on contractors and sub-contractors to manufacture garments at lower costs. This allowed Benetton to absorb demand fluctuations without feeling their full effect. Benetton also operated through agents responsible for geographical areas. Products were shipped to stores with limited storage, so garments were often put directly on shelves. Fast deliveries were possible as Benetton manufactured garments in grey first and then dyed based on demand, absorbing extra costs through supply-side efficiencies.

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84 views

Ch13 Case1 Q

Benetton achieved competitive advantage through its supply chain organization. It relied on contractors and sub-contractors to manufacture garments at lower costs. This allowed Benetton to absorb demand fluctuations without feeling their full effect. Benetton also operated through agents responsible for geographical areas. Products were shipped to stores with limited storage, so garments were often put directly on shelves. Fast deliveries were possible as Benetton manufactured garments in grey first and then dyed based on demand, absorbing extra costs through supply-side efficiencies.

Uploaded by

alimdtahir
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Short Case

The Benetton supply chain


One of the best known examples of how an organization can use its supply
chain to achieve a competitive advantage is the Benetton Group. Founded by
the Benetton family in the 1!"s# the company is now one of the largest
garment retailers# with stores which bear its name located in almost all parts
of the world. $art of the reason for its success has been the way it has
organized both the supply side and the demand side of its supply chain.
%lthough Benetton does manufacture much of its production itself# on its
supply side the company relies heavily on &contractors'. (ontractors are
companies )many of which are owned# or part*owned# by Benetton
employees+ that provide services to the Benetton factories by knitting and
assembling Benetton's garments. ,hese contractors# in turn# use the services
of sub*contractors to perform some of the manufacturing tasks. Benetton's
manufacturing operations gain two advantages from this. First# its production
costs for woollen items are significantly below some of its competitors
because the small supply companies have lower costs themselves. -econd#
the arrangement allows Benetton to absorb fluctuation in demand by ad.usting
its supply arrangements# without itself feeling the full effect of demand
fluctuations.
On the demand side of the chain# Benetton operates through a number of
agents# each of whom is responsible for their own geographical area. ,hese
agents are responsible for developing the stores in their area. /ndeed# many
of the agents actually own some stores in their area. $roducts are shipped
from /taly to the individual stores where they are often put directly onto the
shelves. Benetton stores have always been designed with relatively limited
storage space so that the garments )which# typically# are brightly coloured+
can be stored in the shop itself# adding colour and ambience to the
appearance of the store. Because there is such limited space for inventory in
the stores# store owners re0uire that deliveries of garments are fast and
dependable. Benetton factories achieve this partly through their famous policy
of manufacturing garments# where possible# in greggio# or in grey# and then
dyeing them only when demand for particular colours is evident. ,his is a
slightly more expensive process than knitting directly from coloured yarn# but
their supply*side economies allow them to absorb the cost of this extra
flexibility# which in turn allows them to achieve relatively fast deliveries to the
stores.
Questions
1 1raw out the Benetton supply chain.
2 2hat are the ma.or operations ob.ectives of3
)a+ Benetton's retail operations4
)b+ the Benetton physical distribution operation4
)c+ the Benetton factory and its suppliers5
3 6ow well do these three interconnecting sets of operations fit together5

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