Supply chain management of united colors of Benetton

1. UNITED COLORS OF
BENETTON
SUPPLY CHAIN MANAGEMENT

3. BENETTON’S HISTORY
Came in 1955
•Benetton family, led by Luciano Benetton started a small fashion company
in Italy.
•First store was opened in Belluno in 1969 called My Market’.
•In the same year, the company began its overseas business by establishing
a store in Paris, France.
•During the 1970’s the Benetton empire spread across the globe and
established a strong brand equity.
•In 1974, Benetton bought the exclusive rights of Sisley a popular French
clothing brand which had been launched in Paris in 1968.
•The company was made public limited company in 1978.

4. BENETTON’S HISTORY
•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.
•By 2001, it had a presence in 120 countries.
•Benetton’s other brand comprised Sisley, Playlife, Nordica, Prince,
Rollerblade and Killer Loop.
•Benetton was also the world’s largest consumer of the wool in the garment
industry.

5. BENETTON BACKGROUND
The Supply chain caters to following main seasons :
oSpring/Summer: February to July
oFall/Winter: September to December

6. MANUFACTURING (OUTSOURCED MODEL)
Only Dyeing is done In-House as it is “Scale Sensitive”
Other Processes work on outsourced model
Knitting : 80 subcontractors
Stitching : 100 subcontractors EXCLUSIVE TO
Finishing : 20 subcontractors
•High No. of contractors
•High Capacities

7. CONT.:
•Location of subcontractors : Close to Benetton factory
•Machines: Provided by Benetton
•Financial support is also provided

8. SUPPLY CHAIN OF BENETTON
•Company outsourced labor intensive production such as
tailoring, finishing, ironing, Investment strategy.
•Operations such as weaving, cutting, dying & quality control
kept internal.
•Benetton maintained “ central pole "located near head quarter
to manage production logistics and distribution.
•Consolidated central shipping center saved 20% of the
transportation cost.

9. BENETTON’S OPERATIONS
Benetton operated a three-tier model.
First Tier
Raw Materials, Unfinished Products, Production Plants.
Second Tier
had contractors and sub-contractors.
Third Tier
had retail outlets spread across several countries.

10. 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.

11. 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
subcontractors who worked to produce the garments
• To built close relationships.
• To encourage employees to become contractors.
• To give production planning and technical assistance to maintain
quality.

12. •These arrangement was provided Benetton the flexibility to
operate in a highly competitive environment 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.

13. 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.

15. 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.

16. HISTORICAL
SUPPLY CHAIN

17. CURRENT
SUPPLY CHAIN

18. BENETTON’S DUAL SUPPLY CHAIN SYSTEMS
Benetton 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
It was used for clothes that were delivered during season. These items
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 mainly to top up the existing seasonal
collections during the same season and to keep with the latest fashion trends.

19. 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.

20. THE RESULT
•The dual supply chain helped Benetton offer new products to
its customers on time.
•Benetton could maintain the sales momentum even after the
season by minimizing the time to market.
•The dual supply chain offered product based on demand pull.

21. •Benetton could divide 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.
•Benetton benefited greatly from new system and this led to better sales and
profitability.
•Dual Supply Chain System implemented in 2004 and next two years
Benetton posted best financial performance after many years.

22. SUPPLY CHAIN : ORDERING & DELIVERING
SYSTEM
Finalized before Spring/Summer & Fall/Winter
Orders-
Ph I : 7 Month in Advance - 80% of Vol
Ph II :Flash Collector -Quantity Flexible Orders -10% V
70% Specific (size, color…)
30% unspecified–to be decided according to demand
witnessed.
Ph–III :Re Assortment -10% Vol.-Rapid delivery
•Shops Supplied Twice a week

23. ORDER PROCESSING SYSTEM
•Push Based Stock System
•Push/Pull Based System
•Point of Sales (POS) data collected directly from retailers to discern
the products in demand
•Make Ready the Right Product
•Dyeing & Distribution based on Point of Sales (POS)
•Information System

24. KEY CHARACTERISTICS OF SUPPLY CHAIN
•Demand uncertainty and variability, in particular, the bullwhip
effect.
•Economies of scale in production and transportation.
•Lead time, in particular due to globalization.

25. DESIGN FOR LOGISTICS (DFL)
•Product and process design that help to control logistics costs
and increase service levels .
•Economic packaging and transportation .
•Concurrent and parallel processing.
•Standardization.

26. ECONOMIC TRANSPORTATION & STORAGE
•Design products so that they can be efficiently packed &
stored.
•Design packaging so that products can be consolidated at
cross docking points.
•Design products to efficiently utilize retail space .
•Cheaper to transport: redesign for less storage space, stack
easily, ship in bulk.

27. CONCURRENT/PARALLEL PROCESSING
•Achieved by redesigning products so that several manufacturing
steps can take place in parallel.
• Objective is to minimize lead times.
• Modularity/Decoupling is key to implementation.
• Enables different inventory levels for different parts.

28. DELAYED DIFFERENTIATION /
POSTPONEMENT
•Aggregate demand information is more accurate than
disaggregate data:
Re-sequencing: modify the order of product
manufacturing steps
oCommonality
oModularity
oStandardization

29. MODULARITY IN PRODUCT & PROCESS
Modular Product:
•Can be made by appropriately combining the different modules .
•It entails providing customers a number of options for each module .
Modular Process:
•Each product undergo a discrete set of operations making it possible to
store inventory in semi-finished form .
•Products differ from each other in terms of the subset of operations that
are performed on them.

30. STANDARDIZATION
•Aggregate demand information is more reliable .
•Designing the product and manufacturing processes are
delayed until after manufacturing is under way so that
decisions about which specific product is being manufactured
(differentiation).