The Benetton Supply Chain

THE BENETTON SUPPLY cooking stove CASE STUDY Retail trading operations of import headings Benetton? s core melodic line is in the manufacturing, end product and sale of daily and sportswear, which accounts for 95% of get revenues (Camuffo et al, 2001 47). The connection has a securities constancy presence in oer 120 countries and has consistently generated revenues exceeding $2 billion by dint ofout this decade (Industry profile, 2007 15). It has 5,000 retail outlets around the world, the vast quite a little of which ar run by independent managers as part of a franchise organization whereby the licensee? of those outlets sell products which carry the Benetton brand hit (Skjott-Larsen et al 2007 94). A key objective of Benetton HQ ( base in Treviso, Italy) has always been to have overall manoeuvre on twain aspect of product gross revenue, thereby ensuring that the Benetton total look is adhered to. The caller-up is renowned for having a differentive school of t hought which is espoused done debat adequate to(p) advertising techniques (Dapiran 19928).Its world-wide mesh topology of sales agents each holds responsibility for their own geographical atomic number 18a. They work finishingly with franchise operators in the sale and distri justion of its goods, as healthy as overseeing all aspects of merc progress toising (Camuffo et al 2001 47). A global knowl progress constitution unites every link in the tote up range of a function. Stiff competition has forced Benetton to radically change its retail scheme (Economist 9 November 2004). To that end it has introduced over 100 mega-stores? nd, whilst the majority re principal(prenominal) down the stairs the franchise formation, the company has decided to take direct self-command and ascendancy of a few as it seeks to form a closer blood with its clientele the logic being that this campaign facilitate a deeper misgiving of guest preferences (Camuffo et al 200150). One expert has decl ared that Benetton a antecedent trade loss leader is lagging behind its competitors, non through any defects in its depict chain, but to a greater extent because it is less good at seeing the opportunity, inferring that the franchise organisation is to blame because it creates a barrier amid company and customer.Zara, on the other hand, is proving to be far more succeederful because of it has take agile? supply chain practices (Cane 20071). Diversifying into refreshed product ranges such as the sportswear mart, as healthful as an added stress on its lifestyle branding is a key pillar of the new approach. Its Fabrica, cause of death Loop and Playlife brands are all geared towards capturing a large slice of the younker merchandise (FT 9 May 2003). As the Managing Director explains, we want the trade to receive that Benetton is about more than just sporty sweaters.It? s a lifestyle sentiment (HargraveSilk 20031). The Asian markets are vital to Benetton? s future retail operations objectives, save a 35% pro harmonize devise in Russia and 50% rise in India in 2007 (Women? s Wear fooling 14 November 2007). Although Europe remains Benetton? s largest market it has recently refocused its attention towards building brand awareness in the rising markets of Asia, the Middle tocopherol and the Far East (Evans 20041).One insider sums up the Benetton retail philosophy, when (s)he states that we do non want to start with superior outlays to cast people later on with high discounts, but we want our customers to appreciate every time of the year that there is the objurgate ratio between quality and price (Evans 20041). Physical distribution operation main objectives The company severalizes itself as vertically de-integrated? , nub that its core functional activities such as program and global strategy are still centralized.Nonetheless it is willing to outsource those activities where it is futile to reach in-house economies of sca le. Its logistics operation has always been immediately controlled, in large part owe to the integral part it plays to the companies overall success. let on to effectiveness is the rapid liquify of market intelligence between customer and grind. This is achieved through maximising the benefits of EDI technology which facilitates direct flow of communication between the agent engagements representing the 5000 retail outlets.EDI information allows Benetton manufacturers to delay the dyeing shape up until a clear understanding is reached on market requirements. This eliminates the build up of wasteful inventories, thereby reducing costs, cut cycle times and maximising efficiencies. in one case this information is relayed to the centre, Benetton is able to arrange bulk delivery of products from its regional distribution centres which are highly automated and thus able to cope with charter.The company describes their hearty raceway record in distribution as being down to its 36 0 degree survey in other words a recognition from the out habilitate as to the strategic importance of logistics through integrating suppliers, manufacturers and retailers in a value chain that thrived on speed, efficiency and flexibility (Dapiran 19929-11). Factory & suppliers main objectives Benetton? s manufacturing processes are characterised by strong upstream vertical integration which entails meaning(a) output at its own occupation entres (22 in Italy and 10 abroad), as substantially as outsourcing the more labourintensive tasks such as tailoring and ironing (Camuffo et al 200149). The Treviso HQ has overall control over design activities. hound technology is fully employ to maximise opportunities for the speedy bringing to market of messiness produced garments. This is achieved through the effective practice of 500 subcontractors who work in the vicinity of the companies HQ and production base.The sub-contractor group, often themselves former Benetton managers, org anise the cooperate tier of smallish factories who undertake the labour-intensive processes (Skjott- Larsen et al 2007 95-96). A pyramid analogy has been used to describe the hierarchical nature of this relationship, with Benetton at the apex, the sub-contractors forming the second tier and the army of small workshops forming the stub layer (Harrison 1993 160) Benetton directly controls the supply of edged materials thereby achieving cost savings in supplier overheads.It has a very close relationship with the subcontractor base, thus ensuring that the factories under their control are able to satisfy market trends at short notice. This is a distinct advantage to their competitors who do not relish such flexibility and are hampered with fixedcost overheads (Skjott-Larsen et al 200797). Consider the following statistic in 1990 90% of Benetton garments were produced in Italy. Now it is further 30% and within a few days it is expected to fall to only 10% (Economist 8 February 20 07).Such is the dramatic impact of globalisation. Benetton has responded by remaining true to its philosophy of loaded central control by replicating its Treviso production model on a global basis. For instance Benetton Hungary has production oversight of 7 countries within the region (Camuffo et al 2001 49). This is in keeping with the underlying company philosophy of creating global brands which transcend national boundaries. How well do these three interconnecting sets of operations fit together?For decades Benetton has consistently demonstrated that acquiring the right mix of the 3 supply chain functions is critical if market success is to be achieved. Its franchise net income has prove to be adept at communicating critical market trend information via its EDI schema to HQ who alerts the manufacturing side to the real-time needs of the market. Use of sophisticated CAD/ CAM technology has enabled Benetton to gain the upper hand on its competitors by being alert and flexible at this point in the production process (Dapiran 19929-10.Benetton has successfully victimized I. T. advantages from an early stage. Its Geis global integrated network has enabled agents to forward customer order expand to the 500 sub-contractors based in the Veneto heartland where the company manufacturing capability has historically been located. Within days they are able to receive eightfold orders from various country agents and rapidly set in motion the manufacturing work by fully exploiting the vast network of sub-contracted labour.The system is also connected to Benetton manufacturing plants worldwide (Johnston 1994 2-3). Benetton is storied for using custody? tactics at the actual sequencing point of the production process, whereby decease of the garments is not completed until the agent network have provided market intelligence on what particular products are in demand in which locations. Tang points out the advantages of postponement when declaring that it has proven to be a costeffective mass customisation tool to handle regular fluctuations under normal circumstances (Tang 1996 38).Camuffo has demonstrated that in recent years Benetton has successfully uprise to a more challenging market environment by chooseing for a strategy that involved increasing its overall self-possession and control of supply chain assets and only outsourcing those areas where the company was not in a position to achieve economies of scale. He points to the enigma of tighter centralized control over the all supply chain, yet at the kindred time being able to achieve sufficient flexibility to rise to market challenges (Camuffo et al 2001 52).There can be no doubt that Benetton prefers quite rigid control over processes, despite the tendency to opt for sub-contracting relationships with suppliers. It remains to be seen whether or not Benetton can sustain its competitive edge, curiously in the emerging markets of Asia, where much of its weightlift is now focused . The early signs are good, until now it has been shown that competitors who are able to display more agile? working practices can edge out established brands in a very short space of time. Zara is a case in point. SUPPLY kitchen range DIAGRAMHQ, Treviso Agent network EDI system business hubs (32 worldwide 22 in Italy) Outsourced factory production Global distribution system Franchise operators Mega stores 5000+ Retail outlets References Camuffo, A. , Romano, P and Vinelli, A (2001) Back to the future Benetton transforms its global network? , Sloan Management Review Volume 43(1) Cane, A. , mental dexterity flexibility takes over from planning? financial Times 20 November 2007. forthcoming from http//ft. com Accessed 15 February 2008 Dapiran, P. , (1992) Benetton- Global logistics in action? international Journal of Physical Distribution & Logistics Vol. 22, geld 6 on hand(predicate) from http//www. boku. ac. at Accessed 16 February 2008 Evans, D. , Benetton in Greater China push to build brand awareness? , Media Asias Media & trade Newspaper, 16 January 2004, lendable from trading reference work phase modulation Accessed 15 February 2008 Growth in India, Russia spurs Benetton profits? , Womens Wear Daily, 14 November 2007, Vol 194, young 104. Available from Business cum Premier Accessed 15 February 2008 Hargrave-Silk, A. Benetton overhauls HK stores strategy? , Media Asias Media & merchandising Newspaper,9th May 2003, Available from Business solution Premier Accessed 14 February 2008 Harrison, B. , (1993) The emergence of hierarchy within a district based production network The United colourise of Benetton? in The Italian industrial districts and the crisis of the conjunctive reform Part II European Planning Studies, Vol. 2, Issue 2 Infantswear industry profile Italy, December 2007. Available from Business Source Premier Accessed 16 February 2008 Johnston, M. electronic commerce speeds Benetton business dealings Benetton assembly SpAs use o f General Electric cultivation Services valueadded network services? Software Magazine, January 1994, Available from http//www. //findarticles. com/ Accessed 15 February 2008 Skjott-Larsen T. , Schary P. B, Mikkola J. H & Kotzab H. , (2007) Managing the Global show Chain Copenhagen Business School Press. Available online http//www. google. com/books Accessed 15 February 2008 Tang, C. S. (1996), Robust strategies for mitigating supply chain disruptions?International Journal of Logistics Research & Applications, Vol 9, make out 1 The other colours? , Economist, 9th November 2004, Vol. 372, Issue 8392 Bibliography Benetton company website (Press release section) Available from http//www. production. investis. com/ben_en/releases/2006-07-20/ Accessed 15 February 2008 Kaiser, A. , Benetton? s abrupt exists CEO, CFO both depart, shares fall 8. 5 percent? , Womens Wear Daily, 14 November 2006, Vol 192, Issue 102. Available from Business Source Premier Accessed 15 February 2008 Kouvelis, P. 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