Benetton's 'Dual Supply Chain' System

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Case Details:

Case Code : OPER065
Case Length : 19 Pages
Period : 1998-2006
Organization : Benetton SpA
Pub Date : 2008
Teaching Note :Not Available
Countries : Italy
Industry : Apparel Retailing

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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"The Group's new industrial set-up is based on a double supply chain: a better gauged and more efficient one, based on a logical sequence of activities for minimizing costs; and a more rapid one with better response capabilities. A balance between these twin tracks makes the system flexible and provides the required support for the large expected growth in production..."

- Benetton Annual Report, in 2006.

Benetton Moves to Fast Fashion

In 2004, Italy based clothing company Benetton SpA (Benetton) formally adopted the 'Dual Supply Chain' system.

The new system was a top down, pull driven supply chain, which enabled the company to bring in more products on to the store shelves more often, in accordance with the growing demands of the customers and changing fashion trends.

Through this system, Benetton was able to delocalize some of the production to countries, where the production costs were low compared to the European countries, where Benetton had earlier produced all its products.

Operations Management Case Studies | Case Study in Management, Operations, Strategies, Marketing Management, Case Studies

Benetton was the world leader in the casual apparel market during the 1980s and the early 1990s.

The company's success was attributed to techniques like postponement, where the dyeing of the final product was postponed as long as possible to dye it in the colors that were in vogue during the season. By the early 2000s, Benetton had to face tough times; its new collections were limited to just two a year - not enough to sustain the interest of the consumers, who were getting used to fast fashion - fashion that changed every week - provided by the likes of Zara1, H&M2 and Gap3. Benetton recorded losses in 2002, mainly due to limited collections, and growing competition. Under the 'Dual Supply Chain' system, the main tasks like design, planning and coordination were carried out in Italy, while production was carried out in locations in Europe and Asia.

Benetton's 'Dual Supply Chain' System - Next Page>>

1] Zara is the largest division of Spain based Inditex Group, one of the largest fashion retailers in the world. Compared to the average period of nine months taken by most of the designer stores to bring in new collections, Zara brought in new collections every two weeks. In 2006, Inditex recorded revenue of € 8.196 billion and net income of € 1.010 billion.

2] Sweden based Hennes & Mauritz AB (H&M) is a clothing company famous for fashionable clothing at reasonable prices. H&M operated in 29 countries, through 1,300 stores.

3] Gap Inc. is San Francisco, US based clothing and accessories retailer. Gap operated through more than 3,000 stores in 11 countries across the world.

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