Benetton

an organization based on outsourcing,

subcontracting and, more generally, on relationships developed between a large company and several small producers and distributors, or both

Second is its network organization for manufacturing. A network of subcontractors (mainly small and midsize enterprises, many of which are owned, completely or partly, by former or current Benetton employees) supply Benetton's factories. That structure has lowered Benetton's manufacturing and labor costs, has reduced its risk (which shifts to its suppliers) and has given it unbeatable flexibility.

Third is the network organization for distribution: Benetton sells and distributes its products through agents, each responsible for developing a given market area. Benetton does not own the stores; its agents set up a contract relationship (a licensing agreement similar to a franchise) with the owners, who then sell Benetton products. Benetton supports the retailers with services such as merchandising.

Today, Benetton's main supplier of raw materials--- which guarantees that it will provide 60% of the woven fabric, 90% of cotton knit fabric and 90% of carded and combed wool -- is 85% controlled by Benetton itself. Both upstream vertical integration and partnership relationships with external suppliers have made it possible for Benetton to exercise quality control over textiles and thread sooner. The materials then can be sent directly to workshops and external producers without further controls, reducing transport costs and production lead times overall

In casual wear, Benetton has a special relationship with its retailers, whereas in the sports business, Benetton must deal with a variety of different players: big distribution chains, small specialized shops and retail agents. None, apart from the agents, have an exclusive relationship with Benetton, which must compete with the other