Answer

The Benetton supply chain

1. Draw out the Benetton supply chain

Supply side Demand side

Benetton

Sub- Contractors Agents Retail

Contractors stores

2. What are the major operations objectives of each part of the chain?

Operations Objectives for…..

Manufacturing and Physical distribution Retail operations
supply operations operations
 Quality of  Speed of  Sales/m2
products response - space
productivity
 Speed of  Dependability of - staff productivity
response delivery - stock
productivity
 Flexibility  Cost of
(through the ‘dyeing transportation  Image of store
in grey’ process process
 Brand
 Cost
 Quality of service

3. How well do these three interconnecting sets of operations fit

together?

Very well indeed. Think about it this way.

 The use of contractors and sub-contractors saves Benetton cost

because they have lower wage rates than in their own factories. This cost
 saving can be invested in the ‘dyeing in grey’ process (which is more
expensive than knitting the garments from colour yarn).
 The flexibility which the dyeing in grey process gives allows operations
to respond quickly when it gets orders to replenish stocks in its
warehouse.
 The ability to replenish warehouse stocks quickly allows the physical
distribution operation to respond quickly to the orders placed by the retail
operation.
 Fast response allows the retailers to operate without storerooms,
keeping all their (limited) stock on the shelves.
 This has a number of effects. Most particularly it saves the storeroom
space so that all the shop space can be used for selling. This gives good
space productivity. It also means the staff do not have to frequently return
to the storeroom to check on stock, this gives good staff productivity. Also
because there is relatively little stock kept in the shop, the shop owner
does not have to fund the working capital to keep the stock therefore gets
good stock productivity.
 Also the image of the store itself is enhanced by having all products on
display (the United Colours of Benetton).
 This enhances the brand image.

Of course there are other issues as well. The quality of the products and the
quality of service is important and the cost of transportation likewise.
However, the thread which runs through the three stages of the supply chain
is to do with the movement of materials. Although Benetton have good
factories, efficient physical distribution and good retail operations, their real
strength lies in the way these three stages fit together seamlessly.