Benetton has shifted from a conventional to a new global network. For casual wear, it now designs one product range globally versus customizing for each country. Production is consolidated in Italy and abroad at lower costs. Retail outlets are larger. For sports, it expands soft clothing and makes equipment through innovation. It moves from make-to-stock to make-to-order production and develops new retail formats. Benetton's strategy involves centralized product design, outsourcing labor-intensive production globally for cost savings while maintaining quality control, and direct retail networks with both traditional and large new outlets.

1. Operations Management
Ehsan Zeraatparvar
November 2014
United
Colors of
Benetton

3. Introduction and Background
 Benetton Group’s activities:
 Casual wear business (74 per cent of total turnover in 2000)
 Sports business (20 per cent of total turnover in 2000)
 Complementary activities (6 per cent of total turnover in 2000)

4. Benetton: the archetype of the network organisation
 Factors of Success (now outdated):
 Unique and original marketing and communication
strategy
 Network organisation for distribution
 Franchising
 Network organisation for manufacturing
 use of a network of ‘contractors’ and ‘subcontractors’
 Innovative operations management techniques
 resequencing for postponement (tinto-in-capo strategy)

5. The emerging challenges
 Globalization
 cross-country homogenization of consumers’ lifestyles
 Manufacturing
 I&CT
 real time response to market
 product development and manufacturing

6. Challenges in the casual wear business
 international production network
 labour cost global Scanning
 minimisation of foreign trade constraints effects
 The role of retail outlets (Megastores)
 draw the customer into the firm’s world
 communicating its image and philosophy
 twofold, turnover increases per square metre

8. Challenges in the sports business
 the worldwide distribution chains
 Inclusive relationship of actors of business with Benetton
 The worldwide chains dictate the rules of the game
 Highly competitive industry
 the world market is already virtually saturated
 a market that is not going to expand much further
 many of the firms have already consolidated their positions

9. Benetton’s new global network

10. Product design in the casual wear business
 Until recently:
 Customization of more than 20 per cent of the models for each country
 Selection of the models by area’s retail agents
 different image of Benetton in different geographical areas
 Now:
 develop just one, more limited range of products to be offered in every
country
 only 5–10 per cent of the models have been differentiated
 communicate just one image all over the world

11. Product design in the casual wear business
 Now:
 Flash collections (35-40 per cent of its total products)
 Streamlining of its brands
 In the field of design: searching for easy-care textiles
Reinforcing the image of Benetton products:
I. Global
II. Young
III. Easy
IV. High Quality

12. Operations management in the casual wear business
 Benetton conventional network system:
 heavily outsourcing the labour-intensive phases of production (tailoring,
finishing and ironing)
 SMEs, mainly located in the north-east of Italy
 In-house operation of strategic activities which require heavy fixed
investment:
 weaving, cutting, dyeing
quality controls at entry and on finished goods
quality control of intermediate phases
 packing

13. Operations management in the casual wear business
 Now:
 high-tech production pole at Castrette (mid-1990s):
I. 100,000 square metres
II. Five technical divisions: Wool, Cotton, Tailoring, Shirts and Jackets,
Accessories and Shoes
III. Responsible for all garments and accessories production
IV. overall production capacity of about 120 million items per year

14. Operations management in the casual wear business
 Now:
 Relocating of some of its outside contractors abroad
 labor cost differentials
 Relocation of production poles
 Spain, Portugal, Tunisia, Croatia and Hungary, etc.
the original Castrette model
coordinating the production activities of a group of the SMEs
Benetton Hungary coordinates the production activities of outside
contractors in Hungary, but also in the Ukraine, the Czech Republic,
Poland, Moldavia,Bulgaria and Romania

16. Operations management in the casual wear business
 Foreign production poles
 make-to-order (order by Castrette pole)
Independent in allocating production tasks among SMEs
Articles produced abroad return to Italy
focus on one particular type of product and use skills already
existing in the area
70 per cent of Benetton’s output is still produced in Italy

17. Operations management in the casual wear business
 Now:
 Change in the system of production of Castrette pole
 more outsourcing
In-house operations: elaboration of the marker sheets for the
computerized fabric cutting system (using CAD and CAM systems)
 Improved communication between Castrette and foreign production
poles
 improved timing of the various phases

18. Operations management in the casual wear business
 Now:
 Upstream vertical integrtion
 mostly, to reduce lead-times
main supplier of raw materials is 85 per cent controlled by
Benetton itself
transfer upstream quality controls on textiles/threads
reducing transport costs and cutting production lead-times

19. Operations management in the casual wear business
 Now:
 Logistics
 direct control
Heavy investment in automating logistics processes
total integration within the production cycle
the average consignment time: seven days
10 million garments/month to all over the world

20. Reshaping the retail network
 traditional approach:
 direct retailing entrusted to third parties
 New Challenge:
 Aggressive market penetration strategies of its international competitors,
whose retail outlet’s average size is larger

21. Reshaping the retail network
 Now:
 Reorganization of commercial policies and change the size of retail
outlets by:
I. enlarging its retail outlets, wherever possible
II. focusing, where such expansion is not possible
III. opening new large retail outlets (500–2000 square metres) in the main
shopping streets and areas of big cities

22. Reshaping the retail network
 traditional approach:
 traditional licensing formula
 Now:
 Downstream integration
 The Retail Project (since November 1999)
 Direct sales network: directly owned and managed by the Treviso-based
company itself
 Get closer to the final consumer

23. Reorganisation of the sports business
 Currently:
 The world market for sports equipment and clothing: 20% sports
equipment and 80% soft clothing
 Benetton Group: 88% sports equipment and 12% soft clothing
 New approach:
 Expand its sportswear (clothing)
 offer very wide Playlife and Killer Loop collections, ranging from the
top level to the most economic items
 attract a broader spectrum of consumers
 In sports equipment: highly innovative and professional

24. Design of sports equipment
 Currently:
 $5 million investment in high technology systems of designing
 All R&D activities: Venegazzu, Treviso county
 an open space of about 2000 square metres, 100 people work together
 exploit possible synergies within the product innovation process to the
maximum

25. Operations management in the sports business
 Two main guidelines:
 minimise manufacturing and transportation cost of materials and part-
finished items from one site to Another
 maintaining and constantly expanding the know-how
 Strategies:
 production of ski boots, skates, skis, attachments and accessories in the
production plant at Trevignano, in Treviso county
 Delocating (part of the rollerblade production in Hungary and China)
 concentrating management and control of sportswear production at
Castrette

26. retail network
 Optimization of distribution network structure:
I. by developing, within the large sports shops of the distribution chains
II. by constructing a new specific network of Playlife retail outlets
 Blade Express Formula:
 Change from a make-to-stock production approach (usually imposed by
the large distribution chains) to a make-to-order one
 offers special commercial credit to customers that accept the Blade
Express Formula
 does not produce on the basis of forecasts any more, thus avoiding
warehousing (risky)
 70% of total orders

27. Fabrica and United Web

28. Questions
1. Identify and summarize the main differences between
the conventional and the new Benetton networks,
addressing product design, supply and production, and
retail networks, both in the casual wear and sports
businesses.
2. Identify and discuss the major characteristics of
Benetton’s innovative strategy to design and manage
its global supply network.

29. Special thanks for
your care.