Group Case Assignment

Supply Chain
Management

Benetton Case
Trim 4
Submitted to: Dr. Akshay
Joshi

Submitted by –
Abhishek Naugriaya (80011920143)
Pooja Jain (80011920104)
Prakhar Gupta (80011920085)
Summary
Benetton is a clothing company owned by the Benetton Group, which was formed in 1955 and is
headquartered in Milan. Founded in the 1960s by Benetton family, the company is now one of the
world's most well-known clothing retailers, having stores in nearly every country. To a large
extent, its success is due to the way it organizes both the supply and demand sides of its supply
chain The company's supply chain relies significantly on "contractors" despite the fact that
Benetton manufactures a large majority of its products in-house. Customers of Benetton's factories
can hire contractors to knit and assemble clothing (many of which are entirely or partially owned
by Benetton employees). These contractors use subcontractors to help them with certain
manufacturing activities. This has two advantages for Benetton's production operations: first, due
to lower costs at small supplier firms, its woolen production costs are significantly lower
than those of its competitors. Second, by changing supply arrangements, the system allows
Benetton to absorb demand variations and avoid suffering the full effect of such swings.

The Leagile strategy positions the decoupling point in such a way that it best suits the need for
responding to a volatile demand of the marketplace.

Benetton uses numerous agents on the demand side of the chain, each of whom is in charge of a
distinct geographic region. These reps are in responsible of expanding their particular stores.
Many of the agents also run their own businesses in their areas. Products are sent straight from
Italy to selected shops, where they are shown often. Benetton stores have typically had minimal
storage capacity to allow products (often brightly coloured) to be exhibited in the store, giving
colour and mood to the overall appeal. Store owners demand rapid and consistent clothing
delivery because there is such a limited amount of space in stores for inventory. This is because in
part to Benetton's well-known practise of making clothing in grey wherever feasible and then
colouring them only when there is a strong demand for certain colours. Although this process is
somewhat more expensive than knitting straight from coloured yarn, their supply- side economics
allow them to absorb the expense of the increased flexibility, allowing them to deliver items to
shops more rapidly.
Logistics and Distribution in Benetton
Benetton is a vertically de-integrated corporation, which means that its main functional operations
are still centralised. When it is unable to process items in-house, it outsources them in some
circumstances. The logistics department of Benetton was critical to the company's strategy. It
consists of retail outlets that sell Benetton items and are designed to act as backup supply. Each
agent is in charge of a certain geographic region. To stay on top of supply fulfilment, they
maintain a tight check on franchise and local retailers.
Problem Identification:
Expanding business to Japan and US:

 Cross-cultural differences shows different preferences in taste (soft vs. wool), logistics,
distribution channels, grey wool, fabric sourcing prices, and plant setup costs.
 Should Benetton recruit new agents or use current ones? Is it possible to contemplate an
entirely new sort of retail outlet?
As part of their operations design, Benetton has a design centre and designers. The design center
was divided into three groups, the first was responsible for the commercial elements of the items,
the second for fabric research and, the third for graphics.
Some of the Challenges that Benetton can face:
 Shifts in the fashion business

 In fact, Benetton's brightly coloured apparel wasn't the only one of its kind.

 In comparison, Benetton created only two collections every year for the same price.

 As a result of the competition (such as Zara and H&M), shoppers received more than simply
vividly coloured clothes.

 The company's lead time for garment production was substantially greater than its
competitors'.

 It took a long time for Benetton to present fresh designs to the market.

 93 percent of Benetton's sales come through franchise operations, whereas Zara and H&M
own their stores.

Recommendations:
The Italian apparel brand Benetton adopted a unique strategy in addressing the lean vs. agile
confusion. It decided that it would not use colored fabric to make garments – rather it would make
all the garments in one natural color and then dye all of them in the color that was selling.

The innovation of the Benetton Supply chain was called “tinto in capo” i.e. dye upon the garment.
With this, it became possible for Benetton to produce large volumes of garments to exploit
economies of scale at the manufacturing level.
And yet respond quickly to the color that the customer wanted to wear by quickly dyeing the
garments in the preferred color (and thus in line with the agile concept). Benetton adopted the
combination of Lean and Agile supply chain- Leagile Supply chain.

In today’s glossary of the supply chain, it is called moving the “decoupling point” toward the point
of sale. Decoupling point is where product differentiation happens, or in other words where
products take their final shape. Beyond this decoupling point, no changes can be made to the
product.

The garments were then dyed in various colors upon receiving information from the actual point of
sale as to what was selling. Because of this, forecasting error was reduced to a minimum.

 Benetton must undertake extensive study on labour laws and country requirements, such as
certification, licences, and any specific approvals, before establishing a clothes unit.
 To recruit labour, workers, agents, and contractors, use techniques that your competitors
don't.
 They have years of expertise in the industry and a strong brand image in Europe, which
may help them develop their business. They have years of experience in the industry and a
strong brand image in Europe, which could help them grow their business. In other
nations, they already have a significant network. They may learn from their mistakes in the
past and avoid making the same ones in the US market.
 A dual supply chain can respond more quickly to demand fluctuations and balance
operations such as production, sales, and product design.

 Another cost-cutting technique is to make each country's manufacturing unit more

focused and leaner. The endeavour attempts to urge each country to focus on a single
economic category rather than encouraging each country to focus on many economic
categories. For example, the Benetton Group's accessory manufacture, such as watches,
will be exclusively based in Japan.

 To summarize, Japan will supply all accessories to Asian, American, and European
businesses. As a result, in order to service them, other nations will need to develop their
core goods. Shortening learning curves, increasing economies of scale, and maximizing
capital expenditures are all goals of this method.