Back to the Future: Benetton Transforms Its Global Network

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STRATEGY

During the 1980s, everybody marveled at Benetton, the Italian casual-wear company with a penchant for provocative advertising. The archetypal network organization, it used subcontractors and independent agents for production processes, distribution and retail. But recognizing that times change, Benetton decided on a new approach — in advance of external pressures. Without giving up the strongest aspects of its networked model, it is integrating and centralizing, instituting direct control over key processes throughout the supply chain. The company also is diversifying into sportswear, sports equipment and communications.

Vertical integration has meant establishing state-of-the-art production poles in Benetton's foreign locations. The Castrette pole, near its headquarters, decides what each of the foreign poles should produce (on the basis of the skills and experience of the local population), and the foreign poles contract out production tasks. Benetton also has increased its upstream vertical integration to exercise greater control over its supply of textiles and thread. At the retail end, the company is supplementing its network of small, independently owned shops with large, directly controlled megastores. To stay ahead of fashion's ever-changing whims, Benetton is streamlining its brands and collections, supplementing two basic collections with smaller, flash collections.

In its recently acquired sports businesses, Benetton has invested in high-tech systems for designing sports equipment and has brought together designers from around the world for creative cross-fertilization. It has also reorganized its production processes and improved its retail network by establishing Benetton "corners" in the large sports shops of major distribution chains.

In the field of communications, Benetton's Fabrica workshop has produced award-winning films, and its new company, United Web, hopes to take advantage of the possibilities of e-commerce.

Benetton knows that innovative businesses must pay attention to how knowledge is divided among producers, suppliers and retailers. Its new directions represent a major discontinuity from its past and divergence from industry practices.

Arnaldo Camuffo is professor of management at Ca'Foscari University of Venice. Pietro Romano is a lecturer on supply-chain management and Andrea Vinelli is professor of operations management at the University of Padova. Contact the authors at camuffo@unive.it, pietro@gest.unipd.it and vino@gest.unipd.it.

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