Assignment Question(s):

Go through the case study and answer the questions that follow

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 1960s, the company is now one of the largest garment retailers, with stores which

bear its name located in almost all parts of the world. Part 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.

Although Benetton does manufacture much of its production itself, on its supply side the

company relies heavily on 'contractors'. Contractors 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. These 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. Second, the arrangement allows Benetton to

absorb fluctuation in demand by adjusting 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. These agents are responsible for

developing the stores in their area. Indeed, many of the agents actually own some stores

in their area. Products are shipped from Italy 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 require 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. This 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.

Brief your understanding about Benetton Supply Chain operations.

(3MM)

2.

In your understanding, what is the specialty of Benetton's contractors?

(3MM)

3.

Does this method provide Benetton competitive advantage over their competitors?

Is this method sustainable in the long term?

(4MM)

Note

:

You must include at least 5 references.