2. What are the major objectives of

• The Benetton’s retail operations?

• The Benetton’s physical distribution operation?

• The Benetton’s factory and its suppliers? 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 that 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 subcontractors to perform some of the manufacturing tasks. Benetton’s manufacturing operations gain two advantages from this. First, its production costs for woolen items are significantly lower than 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.