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Jomo Kenyatta University of Agriculture and Technology *
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504
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Management
Date
Nov 24, 2024
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Question 1
The success of Benetton as a major global retailer of clothing is significantly
influenced by its supply chain management practices. They have created a unique and
successful supply chain strategy that encompasses both the supply and demand sides
of their organization. The operations of Benetton's supply chain are broken down in
the following manner:
Provider Side
Heavy Dependence on Contractors: To make its clothing, Benetton heavily relies on a
network of contractors. These contractors are independent businesses, some of which
are wholly or partially owned by Benetton staff. In the process of making clothes,
these contractors offer a variety of services, such as knitting and assembling.
Subcontractors: For particular production activities, the contractors frequently employ
subcontractors themselves. This concept of multi-tiered subcontracting enables
specialization and labor division within the production process.
Cost Effectiveness: This supply-side configuration has a number of benefits, one of
which is cost-effectiveness. Benetton is able to keep production costs low thanks to
the fact that smaller manufacturers and contractors typically have lower operating
costs than larger ones.
Flexibility: The supply chain at Benetton is quite adaptable. Due to the decentralized
nature of the network of contractors and subcontractors, the business is able to quickly
modify output in reaction to shifts in demand or vogue. This flexibility is essential in
the quickly evolving fashion business.
Risk Reduction: Benetton can reduce the risks brought on by supply chain disruptions
or variations in demand by dispersing its manufacturing over numerous contractors
and subcontractors. If a contractor runs into difficulties, other contractors can fill up
the burden.
Supply Side:
Benetton operates on the demand side through a network of agents, each of whom is
in charge of a certain region or locale. The management and expansion of Benetton
stores in their various regions is the responsibility of these agencies.
Ownership of Stores: Many of these agents also hold ownership of a number of
Benetton stores in their local areas, which aligns their interests with those of the brand
and the stores.
Limited Storage: Benetton stores are made with a small amount of storage. This
deliberate design decision supports a quick and effective supply chain. Due to limited
storage space, store owners rely on prompt deliveries to make sure that clients can
easily get clothing.
Just-In-Time Production: The renowned "grey-to-colour" manufacturing strategy of
Benetton entails creating clothing in a neutral or "grey" state and dying it only when
there is a certain demand for particular hues. Benetton can react swiftly to shifting
customer preferences thanks to this technique.
In conclusion, Benetton's supply chain processes stand out for being decentralized and
adaptable. On the supply side, using contractors and subcontractors offers flexibility
and cost savings, and on the demand side, using an agent network assures effective
distribution and store management. Benetton's competitive advantage in the fashion
sector is a result of its ability to manage costs while remaining flexible and providing
goods to retailers quickly. However, this supply chain strategy's long-term viability
rests on its capacity to adjust to shifting market conditions and uphold solid bonds
with its network of contractors and agents.
Question 2
The distinctive qualities of Benetton's contractors and the crucial part they play in the
company's supply chain strategy define them as specialists. The advantages and
specialized services that these contractors offer help Benetton maintain its competitive
edge. The specialties of the contractors for Benetton are listed below:
Cost Effectiveness: Benetton works with smaller, independent businesses that
prioritize cutting costs. When compared to larger firms, they frequently have reduced
operational expenses. This cost advantage is the result of things like lower overhead,
more efficient operations, and frequent, close access to local raw material suppliers.
Flexibility and responsiveness: The contractors for Benetton are very adaptable and
responsive. In the fashion sector, where trends can shift quickly, and consumer
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demand can be erratic, this is essential. Due to the contractors' swift capacity
adjustments in response to demand changes, Benetton is able to remain flexible and
respond to changes in the market.
Numerous of these contractors have specialized knowledge in particular areas of
garment production, including knitting or assembly. Utilizing this knowledge,
Benetton can make sure that its clothing is well-made and of high quality.
Additionally, these contractors frequently have a thorough awareness of Benetton's
particular needs and are able to customize their services accordingly.
The contractors employed by Benetton, who are dispersed across numerous locations
and frequently operate independently, help spread the risks related to production and
supply chain interruptions. Others in the network can continue production if one
contractor encounters difficulties, such as equipment failures or workforce shortages,
lessening the effect of these problems on Benetton's overall operations.
Close Collaboration: Benetton and the contractors have a close working connection.
Many are owned entirely or in part by Benetton employees, which promotes a sense
of teamwork and common objectives. Planning the supply chain, maintaining quality,
and adhering to manufacturing schedules are all included in this partnership.
Local Insights: Contractors, particularly those based in diverse areas, can offer
insightful local information about consumer trends and preferences. For Benetton to
successfully tailor its product offers to particular geographic regions, this information
is essential.
Scalability: In response to changes in demand, Benetton's contractors are able to scale
their manufacturing capacity up or down quickly. Benetton may effectively satisfy
client needs thanks to this scalability without overcommitting to manufacturing.
In conclusion, Benetton's contractors are experts in producing clothing that is
affordable, adaptable, and responsive. They interact closely with Benetton and offer
specialized skills, diversity to lower risk, local market insights, and scalability. By
providing clients with high-quality goods while effectively managing prices and
supply chain complexity, these specializations help Benetton maintain a competitive
advantage in the fashion business.
Question 3
Benetton does have a competitive advantage over its rivals thanks to its supply chain
strategy, which mainly relies on a network of contractors and subcontractors.
However, a number of variables affect how long this approach will last. Let's look
more closely at both of them:
Competitive Benefit:
Cost-effectiveness: Benetton is able to sustain lower production costs than certain
rivals because of its strategy. Smaller contractors and subcontractors frequently have
cheaper overhead and labor expenses, which helps keep Benetton's clothing prices
affordable. The company is able to provide clients with affordable products thanks to
this cost advantage.
Flexible and responsive: Benetton's decentralized supply chain allows for quick
adaptation to shifting consumer needs and fashion trends. Benetton may introduce
new styles or modify old ones by swiftly modifying production in conjunction with its
contractors, lowering the risk of excess inventory or lost chances.
Risk distribution is made possible through the network of contractors and
subcontractors. Other suppliers can step in if one contractor encounters problems like
equipment failures or labor disagreements, lessening the impact on Benetton's overall
operations. The diversification of risks improves business continuity.
Customer Experience: Benetton's focus on prompt and consistent shop deliveries
guarantees that clients may easily find merchandise. This strategy contributes to brand
loyalty and repeat business by meeting the expectations of customers for a seamless
shopping experience.
Sustainability Over Time:
Relationship Management: Benetton's continued success depends on fostering close
connections with its suppliers. These connections may experience difficulties over
time due to things like shifting corporate priorities, leadership changes, or
disagreements. Partnerships that are cooperative and mutually beneficial must be
maintained.
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Market Dynamics: Consumer preferences, trends, and competition are constantly
changing in the fashion sector. Benetton must continuously modify its product lineup
and supply chain strategy in order to keep current with market demands and maintain
a competitive edge.
Resilience of the supply chain: Although the subcontracting strategy offers flexibility,
it can also cause complications and weaknesses. Benetton needs strong risk
management and backup procedures to deal with any disruptions and maintain
business operations.
Environmental and ethical issues in the fashion business must also be addressed if
long-term sustainability is to be achieved. Like all other fashion companies, Benetton
has to deal with questions of sustainability, ethical sourcing, and labor standards. It's
crucial to adjust to changing consumer expectations and legal requirements.
Competition in the market: Businesses in the fashion sector are consistently
innovating and refining their supply chain methods. Benetton must keep an eye on
developments in the competitive environment and act accordingly to maintain a
competitive edge.
In conclusion, the cost-effectiveness, adaptability, risk reduction, and improved
customer experience of Benetton's supply chain system provide it a competitive edge.
However, the long-term viability of this approach depends on good relationship
management, adaptation to market changes, supply chain resilience, resolving ethical
and environmental concerns, and staying ahead of the competition. The way Benetton
handles these difficulties will determine how successful the company remains in the
fashion sector.
References
Holmström, J., Holweg, M., Lawson, B., Pil, F. K., & Wagner, S. M. (2019). The digitalization of
operations and supply chain management: Theoretical and methodological
implications.
Journal of Operations Management
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(8), 728-734.
Saragih, J., Tarigan, A., Silalahi, E. F., Wardati, J., & Pratama, I. (2020). Supply chain operational
capability and supply chain operational performance: Do the supply chain management and
supply chain integration matter?
Int. J Sup. Chain. Mgt Vol
,
9
(4), 1222-1229.
Attaran, M. (2020, July). Digital technology enablers and their implications for supply chain
management. In
Supply Chain Forum: An International Journal
(Vol. 21, No. 3, pp. 158-172).
Taylor & Francis.
Chowdhury, S., Rodriguez-Espindola, O., Dey, P., & Budhwar, P. (2023). Blockchain technology
adoption for managing risks in operations and supply chain management: evidence from the
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Attaran, M. (2020, July). Digital technology enablers and their implications for supply chain
management. In
Supply Chain Forum: An International Journal
(Vol. 21, No. 3, pp. 158-172).
Taylor & Francis.
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