Benetton’s

‘Dual Supply Chain’ System

OPR-541 Supply Chain Management

Prepaired by: Alper TEKIN
Istanbul, 23th May 2013 1
 Learning Objectives
 Informations about Benetton

 Benetton, how to operate its operations

 The Problems

 Benetton’s Dual Supply Chain System

 How was helped the dual supply chain to

Benetton

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 Backround Notes Of Benetton
• Italy based clothing company Benetton was
founded by Luciano Benetton and his brothers
and sister in March 1965.
• In 1965, they opened their first store called
‘My Market’

• The first Benetton store was opened in 1968,

the first store out of Italy was opened in
Paris in 1969.

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 Backround Notes Of Benetton
• In 1974, Benetton bought the exclusive rights of
Sisley a popular French clothing brand which had
been launched in Paris in 1968.
• In 1984, United Colors Of Benetton (UCB) slogan
emerged. In December 1985, this slogan became
the logo of Benetton.
• In 1996 Benetton’s largest store was
opened in London.
• In 2002, Benetton posted its first ever full
year loss and in 2003

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 Backround Notes Of Benetton
• As of 2006, Benetton operated in more than 120
countries and 5000 stores.
• End of the 2011, Benetton posted EUR 2.032
Billion total revenues .
Benetton's Renevues By Market (2011)
MARKET %
ITALY 915.420.000 € 57
EUROPE (Other Than Italy) 690.580.000 € 22
ASIA 333.000.000 € 16
AMERICAS 80.000.000 € 4
REST OF WORLD 13.000.000 € 1
TOTAL REVENUES 2.032.000.000 € 100
Source: www.benettongroup.com

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 Benetton’s Operations
• Benetton operated a three-tier model.

• First Tier consist of

• Raw Materials, Unfinished Products, Production Plants

• Second Tier
• had contractors and sub-contractors

• Third Tier
• had retail outlets spread across several countries

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 Benetton’s Operations - Design
• Benetton has design center and designers

• Design center worked in three groups

• First Group taking care of commercial aspect of the products

• Second Group carrying out research on the fabrics
• Third Group  responsible for graphics.

• Brands
• UCB
• Sisley
• Killerloop
• Playlife

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 Benetton’s Operations - Manufacturing
• Benetton has been using a vertically integrated model
• technically sophisticated parts were retained In-house
• labor intensive parts were Outsourced
• Benetton had more than 200 contractors and several sub-
contractors who worked to produce the gartments
• To built close relationships
• To encourage employees to become contractors
• To give production planning and technical assistance to maintain
quality
• These arrangement was provided benetton the flexibility to
operate in a highly competitive enviroment and labor cost
• The Contractors were an integral part of Benetton’s supply chain and
played an active role in the work being carried out.

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 Benetton’s Operations - Purchasing

• Purchasing was centralized.

• One of the largest buyers of wool in the world

• Benetton had 180 suppliers who supplied the raw

material

• Benetton had gone in for vertical integration its suppliers

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 The Problems
• To be failed to keep pace because of
• Changing fashion industry
• Changing buyer behavior
• Changing customers- espicially younger customes
• Bright colored clothes which was famed by Benetton was
not unique
• Competitors (like Zara and H&M) was offering the
customers than just colorful clothes.
• They offered about 12 collections a year at affordable price
but Benetton presented only 2 collections every year at
comperatively high price

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 The Problems
• The company’s lead time to manufacture garments was much
longer than its competitors.

• Benetton was far behind the providing new design

• Benetton obtained point of sale data only from few stores

and it couldn’t obtain real time data from all its stores.

• The problem is that %93 of benetton’s sales come from

franchise operations but in contrast Zara and H&M own their
shops

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 The Problems
• Revenue growth and profitability declined year by year
Benetton Financial Performance
( € Millons) 2004 2003 2002 2001 2000
Revenues 1.686 1.859 1.992 2.098 2.018
Cost Of Sales 929 1.049 1.124 1.189 1.138
Gross Operataing Income 757 810 868 909 880
Contribution Margin 653 696 744 776 740
EBITDA 317 335 376 398 400
Income From Operations 217 232 243 286 309
Net Income / (Loss) 123 108 -10 148 243
Source : Benetton Annual Report, 2000-04

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 Benetton’s Dual Supply Chain Systems

• A dual supply chain has a better ability to

respond to changes in demand and to balance
activities like production, sales, and product
design

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Benetton’s Dual Supply Chain Systems

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 Benetton’s Dual Supply Chain Systems
• Benetteon used were of two kinds;
• Sequential dual supply chain  acted on push focused
demand. This was generally used for supplying
garments which were ordered by the franchisees before
beginning of season.
• Integrated dual supply chain  was used for clothes that
were delivered during season. these items needed to be
in the market within a very short timeframe and in this
system, the clothes were made taking into account the
demand from customers and the inputs from sales team.
This was used maninly to top up the existing seasonal
collections during the same season and to keep with the
latest fashion trends.

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 Benetton’s Dual Supply Chain Systems
• Using this system

• Production was carried out in different locations

depending on the time required to market the
market

• Brought out more collections per year

• Maintained the novelty of products by introducing

new designs in accordance with the changes in
demand.

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 The Result
• The dual supply chain helped Benetton offer new
products to its customers on time.

• Benetton could maintain the sales momentum even

afte the season by minimizing the time to market.

• The dual supply chain offered product based on

demand pull.

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 The Result
• Benetton could devide inventory shipments into
smaller lots and built the capacity to ship clothes
every two week.

• It could also deliver garments in a week if demand

arose.

• Moreover, Benetton was able to balance time to

market and cost which hadn’t been possible
before.

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 The Result
Benetton Selected Financial Data • Benetton benefited
Metrics 2006 2005 greatly from new system
Revenues 1911 1765 and this led to better sales
and profitability.
Cost Of Sales 1105 995
Gross Operating Income 806 770
Contribution Margin 669 643 • Dual Supply Chain System
EBITDA 276 285 ipmlemented in 2004 and
Operating Profit 180 157 next two years benetton
Income Before Taxes 159 134 posted best financial
performans after many
Net Income 125 112
years.

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 Thanks
for listening

Alper TEKİN
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