SUPPLY CHAIN MANAGEMENT

17-118 ZOHAA MUJAHID, 17-103 MISHA

SARFRAZ, 17-182 MARYAM MAQSOOD
Introduction
Concept of online shopping in Pakistan before the inception of Daraz was not existent. Online
shopping in Pakistan was all about buying clothes and accessories from various retailers’ pages
on Facebook, most of them owned by individuals. Corruption, misleading information and the
worst after sales service was very common from such non authorized sites and pages. Daraz
founded in 2012, was the first full thought-out online store in Pakistan which took these issues
into consideration and tried to rectify them. Daraz is an online store that provides branded
products for men and women across clothing, footwear, apparel, jewelry, and accessories.
Daraz.pk is part of the Asia Pacific Internet Group (APACIG), a joint venture of Rocket Internet
and Ooredoo, leading internet platform in Asia, supporting some of the top internet companies in
the region.
Daraz is Headquartered in Karachi. It has now over 50,000 sq. of warehousing space across
Pakistan including Lahore, Islamabad, Abbottabad, Hyderabad, Faisalabad, Multan, Peshawar,
Gujrat, Sahiwal, Sialkot, Sukkar, Okara and has delivered to over 200 cities in the country. It has
a portfolio of over 1,800 local and international brands and has established itself as a notable
success story.
The reason to launch Daraz in Pakistan was based on many facts. Firstly, Pakistan being one of
the most populated country in the world holds great attraction for retailers. Also 70% of its
population is under 30 years of age (youth majority) which makes it quite lucrative for an online
venture as their target market comprises mostly of youth who are tech savvy and willing to try
new things. According to a survey there are 31 million internet users in Pakistan with a rising
fashion-conscious middle class. Daraz started its operations by selling only clothes and shoes for
men and women. It was a huge challenge for the company to attract and convince people towards
this new shopping practice because a country where people barely knew anything about online
shopping, it was hard to convince people as to why they should alter their purchasing habits. But
Daraz has been quite successful in changing the perception of online shopping in Pakistan by
providing an excellent overall experience. It’s now the leader of online retail in Pakistan, hosting
a wide assortment of consumer electronics, fashion and beauty products, alongside a rapidly
growing miscellany of general merchandise.

Customer Profile
Daraz is the leading online marketplace in South Asia, empowering tens of thousands of sellers
to connect with millions of customers. Daraz provides immediate and easy access to more than
10 million products in various categories and delivers more than 2 million packages every
month to every corner of its countries. Daraz is not only a virtual mall but a marketplace yet
alone a community for its customers. It also gives a huge platform to the sellers to become
entrepreneurs and every month it educates more than 5,000 of them about e-commerce
operations.

In interview with Mr. Mujahid, Operations Excellence Associate at Daraz.pk, he stated that the
initially Daraz started their target audience with those who were educated, somewhere between
the young to middle age, who belong to the upper middle class knew the basics of using
technology and shopping online. Commercial and Marketing departments are responsible for
maintaining demand and relationships with their key customers.
To overcome the logistics challenge in the market, Daraz has built its own logistics company
specially designed for e-commerce operations – Daraz Express. To raise the standards for the
industry. In 2018, Daraz was acquired by Ali Baba Group and is proud to carry its part of the
mission to ‘ make it easy to do business anywhere in the era of the digital economy’. As part of
the Alibaba ecosystem, Daraz is leveraging Alibaba’s global leadership and experience in
technology, online commerce, mobile payments and logistics to drive growth in its market.
Since the acquisition of Daraz by the Chinese e-commerce giant, Alibaba, Daraz has seen an
immense hike in growth from when it first started out its venture in 2012. With the aid of
advanced technology systems and artificial intelligence, Daraz aims to change the digital
marketing industry to yield ultimate customer satisfaction.
HootSuite’s Digital Trends Report for 2020, Daraz was recognized as one of the most websites
and has been on ranked as the number 1 app on Google Play Store due to Daraz’s focus on
remaining innovative where it demands and stay customer-focused. Daraz’s top priority is to
ensure that all its logistics, sellers, facility centers are working towards providing customers with
a smooth and convenient online shopping experience. With its successful campaigns and sales.
Daraz has hit two big milestones in the past year: Being the first site to sell the new Prince Pearl
DFSK online, and the second was growing its product assortment to 10 million items in more
than 100 categories. Apart from categories like electronics, fashion, mobiles & tablets, and
FMCGs, Daraz also introduced fresh fruits and vegetables – DFresh. Currently, this service is
available in Karachi, Lahore, and Islamabad and provides Express Delivery where the products
get delivered the very next day. This not only allows unparalleled convenience for consumers,
but also offers items that are not readily available in local markets such as avocados, colored
peppers, and berries.
When it comes to these assorted product categories– some items have, such as winter coats,
heaters, and air conditioners, have seasonal impacts on demand. There is a moderate overall
trend with these goods, but the number of orders Daraz receives that year has risen by at least 2x.
Even though in 2019, when currency fluctuations had made the economic environment less
pleasing for e-commerce businesses. However, Daraz maintained its stability with such by
meeting consumer demands and, there has been an exponential increase in the probability of any
consumer coming into the app and discovering what they are looking for.
Daraz has an ever-growing customer base that stretches from the metropolitan city of Karachi’s
to Punjab’s rural areas, all the way north to Azad Kashmir and Khyber Pakhtunkhwa. With the
advanced AI-powered customization and technology, Daraz’s customers are able to traverse
through the various assortments and the vast range of products available effortlessly and find
items that match their preferences. Knowing the obstacles that prevent offline shoppers from
buying products online, Daraz has also concentrated on encouraging consumers to make buying
decisions by keeping them informed and also educating the sellers as well. Last year, two new
innovative features were introduced– Photo Reviews and Instant Messages were introduced to
help the buyers assess the quality of a product and to further examine its price, narrowing their
options down to a product that suits their expectations.
Competitive Strategy
The upgradation comes as Daraz.pk shifts its focus from being only a fashion and apparel e-tailer
to a portal that offers a different range of lifestyle products to consumers. The revamped
Daraz.pk will benefit the users as it offers display of high-resolution product images, detailed
product specifications and descriptions, easier checkout and ordering processes and an advanced
delivery tracking function.
“Customers will benefit from a virtually unlimited number of products that can now be displayed
on Daraz.pk,” the statement said adding that the website was also accessible to mobile users.
This does not only benefit their customers but also give them a competitive edge over others in
the industry.
Amazon being the biggest business model inspiration as well as a new competition in the
growing market helps Daraz excel in a lot ways. In November 2016, during the busiest sales
campaign of the year—Black Friday—the unthinkable occurred: Daraz’s backend systems
crashed. The Daraz mobile app was extremely slow, even unresponsive, and customers could not
view product images. Since launching, Daraz had maintained a hybrid IT network, running its
applications virtually through a third-party data center. The company had leveraged two third-
party providers, a Frankfurt company for customized network hosting and a Portuguese provider
for development and infrastructure support. When the Frankfurt company’s routers went down in
2016, Daraz began evaluating cloud-based alternatives. The company considered several
providers but found Amazon Web Services (AWS) the most mature in terms of breadth of
services offered, and it also liked the fact that AWS can be configured for multiple availability
zones. Two additional network glitches interrupted the Daraz website in early 2017, prompting
its management to urgently migrate its primary workloads to AWS before the next annual Black
Friday campaign.
Rai Umair, chief technology officer at Daraz, listed three goals for moving to the AWS Cloud.
First and foremost was stability. “Especially during campaign periods, our site cannot be down
for even a minute,” he says. Stability was also essential during the migration process; Daraz
could migrate its customer-facing workloads for all its five markets onto AWS in just four
months, with little or no downtime. The company measures performance based on customer
orders, with no significant decrease reported during the four-month migration period.
Simplicity was the next goal. Daraz wanted more control over its network. Umair started with a
team of four, which has since doubled in size. Most employees had little, if any, experience with
AWS, but they were able to experiment and learn on the job, taking advantage of the AWS
Business Support plan as needed. “We’ve really been able to simplify in terms of management,
so our team of eight is capable of solving any network issue that comes up, 24/7,” Umair
explains.

Flexibility was the final goal. During campaigns such as Black Friday, Daraz experiences rapid
spikes in traffic, from 200,000 requests per second, the average on any given day, to more than a
million during campaign periods. Umair expects site traffic to continue rising exponentially.
Daraz also needs to quickly scale down its infrastructure after big campaigns to save costs, which
it can now do with just one click, by turning off inactive AWS instances. Umair and his team
have simplified day-to-day operations with Amazon Relational Database Service (Amazon
RDS), using it to run the open source database MariaDB. “Prior to this, we were running our
databases directly on our own managed boxes, taking a lot of time to set up redundancy and take
backups. We definitely saved a lot of time and have reduced complexity by moving to Amazon
RDS,” says Umair. “We have many replicas, and by using Amazon RDS, it's easy to set them up.
The complexity is hidden behind the servers.”
As a customer-centric company, Daraz always seeks to improve its customer experience. Prior to
using AWS, nearly half of all customer calls received were simple inquiries about order status,
which Daraz wanted to expedite using automation. Faster calls would enable each customer
service agent to handle more calls each day, which would boost productivity. Experience had
also shown that the less time a customer has to wait to hear their order status, the happier they
are with the call. The company now uses Amazon Polly to deliver automated real-time
information when customers check on their order status. Edouard Gheerbrant, head of customer
experience, says, “We were able to shorten the duration of such calls by more than 40 percent.”
The majority of these calls are now handled in 15 seconds, Gheerbrant explains, “which has had
a positive impact on customer service without increasing the number of agents.”
Although, there are much advanced e-commerce websites for shopping all around the world with
an extraordinary online infrastructure to cater to a larger audience than Daraz’s but still Daraz
has been giving a hard time to all the others. Below is the comparison of other competitors with
Daraz.
Apart from this, some major local competitors that were seen in the industry were:
Supply Chain Management
On asking about their take on Supply chain and its importance, Mr. Mujahid stated, “Supply
Chain is a network of business units which allows the product, money and information flow
within the organization via upstream and downstream channels. An efficient and effective supply
chain can help an organization to not only streamline its operations but also allows it to gain
competitive advantages in the market.”
Effective management of the supply chain can be handled with the help of e-business strategies,
which will ensure better coordination between the wholesalers and the retailers of various
products. Better integration of the supply chain right from the source till the final delivery of the
product can be effectively implemented using e-business strategy. This also brings us to the point
of e- commerce where a parallel network of buying and selling can be observed using
dissemination of information over the Internet. Everything ranging from automobiles to
electronic gizmos can be bought over the Internet in a hassle free manner under the strategies of
sound supply chain management
Daraz operates on two models. Fulfilled by Daraz and the other one is Dropship. According to
Mr. Mujahid Fulfilled by Daraz (FBD) is all about Daraz owning the inventory and will restock
it at its reordering points. With Fulfilled by Daraz, one only have to manage your seller account,
raise an Inbound order, and send your inventory to the Daraz warehouse. They store your
inventory, pick and pack your orders, ship your item for you, conduct QCC, and also manage all
returns.
FBD benefits every seller on Daraz in a lot ways. Effortless logistics and shipping. As Daraz is
well known for their delivery services. It also benefits from increased sales because of Express
Delivery which allows customers to receive their products on the same day of placing orders.
Express Delivery is only available for FBD products.
Dropship on the other hand is when vendor utilizes Daraz’s services to sell it products. The role
of incubation team started once the seller signed the contract. The incubation team was
responsible for the sellers’ training over 4–8 weeks to operate on Daraz’s platform and to
facilitate the synchronization of the sellers’ operations with that of Daraz’s.
The vendor operations team monitored operations (service delivery) in the whole chain, from
order generation to the order processing. The team made sure that orders were picked up and
delivered to customers in a timely manner, and in the case where an order was returned, the team
monitored reverse logistics. If the delivery process was affected by an abnormality in the chain,
the vendor operations team took up the matter with the seller, logistics provider and/or the
warehouse, for a resolution. As described by Mr. Mujahid, ‘the team’s role is to police the supply
chain’. The core focus was on fulfilling the orders in a timely manner and strictly avoided order
cancellations. Sellers could be delisted based on constant delays and order cancellations.
Daraz’s logistical operations were managed by AIGx, an RI company itself. AIGx integrated a
network of logistics providers to provide e-commerce companies with solutions for order
fulfilments, with Realtime tracking. As described by Umer Gul, the head of logistics at AIGx,
‘We are the marketplace for 3PL providers’. There were multiple 3PL providers listed with
AIGx to choose from for a logistics job. The AIGx team managed seller pickup, seller returns,
customer delivery and customer pickups.
The transportation was conducted by Daraz’s own fleet of forty-five riders, deployed only in Tier
1 cities, or through 3PL providers Tranzum courier services (TCS), Leopard and Overseas
courier service (OCS), employing around 4,000, 3,000 and 700 couriers, respectively and having
more or less the same regional coverage. Daraz’s own fleet was also used as ‘test labs’ to
experiment on different strategies for fulfilling orders. The learnings from these experiments
were then passed on to the 3PL partners as well.
Daraz currently has 5 warehouses. (2-khr, 1 lhr, 1 FSB and 1 ISL). Safety stocks are usually set
keeping the lead time for the arrival of products in consideration. The ERP system used by Daraz
smartly calculates the reordering point to manage the variation in supply. Daraz has warehouses
in Tier 1 cities which are in Karachi, Lahore and Islamabad; thereby, maintaining two types of
seller owned inventories: first, the fast-moving products, which Daraz wanted to stock at the
warehouses to achieve shorter delivery lead-times and second, the inventory maintained as a
premier service for the strategic sellers who were reluctant to take up a bigger role in the delivery
process. Of the total, 80 per cent of the inventory was maintained in Karachi, 15 per cent in
Lahore, leaving Islamabad’s proportion minimal. None of the items were kept at the warehouses
for more than 45 days, that is, items not sold within 45 days were returned to the sellers. The
warehouse operations were divided into four functions: receiving (responsible for offloading),
inbound (responsible for barcoding), inventory (responsible for storage) and outbound
(responsible for order preparation and dispatching). Regardless, the team for each function was
cross-trained to perform different jobs at peak load times.
After an order was placed at Daraz.pk, the package had to be prepared at one of Daraz’s
warehouses or a seller’s facility depending on the particular logistics model that applied to the
corresponding seller. A fulfilment from a Daraz warehouse was done through the consignment
model, while it was either done through the cross-dock model or the drop-ship model from the
seller’s facility. The operational responsibilities greatly varied within the three logistics models.

Consignment model is basically the

products going directly from Daraz
warehouse to the doorsteps of customers.
Cross-dock Model is when the orders are placed to the seller centers, seller warehouse send the
products to Daraz warehouse for quality check and packaging. After packing the product,
Daraz’s rider drivers deliver the product to the customers.

Drop-ship Model is very self-

explanatory. After the orders been
placed, the item gets deliver from the
sellers warehouse by the 3PL Daraz’s
fleet.

With all three models operational, Daraz preferred the drop-ship model and was seeking to fizzle
out the consignment model. The target was to delegate the stocking and quality control
responsibilities to the sellers while focusing on the online monitoring of the fulfilment chain. As
of now, 35 per cent of the number of orders were being fulfilled through consignment, around 50
per cent through cross-docking and around 15 per cent through drop-shipping (percentages
around the same in terms of value). Overall the factors that influenced the selection of a logistics
model included fulfilment reliability, the percentage of SKU selling, quality control (QC) issues,
and, in cases of strategic sellers, willingness to pack and control the process. The commission
structure did not depend on the logistics model and there were no charges for packing and
forwarding services. However, Daraz was deliberating on charging for different activities under
the consignment and cross-dock models as value-adding services.

Sourcing
Mr. Mujahid told us that the number of suppliers varies from 1 to 1000 for each product
category. Daraz provides a platform to the suppliers to sell their goods to the customers. After
the KPIs with the suppliers have been met they are taken on board and then they are provided
with the training. Training is important because it helps the suppliers to familiarize with Daraz’s
process and system. The key component of the incubation phase was the training given for using
the seller center tool. Seller center was a web-based enterprise resource planning (ERP) system
that provided an end-to-end seller shop management system, a virtual shop for each seller. The
seller center allowed a seller to list products, view and track orders, set product prices, view sales
summaries, generate account statements and update stock levels. For some of the major brands, it
was the team who uploaded the entire assortment. The team also linked the sellers to Daraz’s
photography team, having an in-house studio, in case the sellers did not have reasonable
photographs for their products. After successfully going through the incubation period and
training, sellers received a graduation certificate from a so-called seller center university to make
it more ceremonial and authentic.
FMCGs and bulky products are sourced efficiently whereas, fashion related items and high value
products are sourced on the basis of being responsive and also on the demand of the product.
Commercial and vendor management team procure goods as per the demand of the customers.
These two departments coordinate with each other for the procurement of the products from
different suppliers at the same time. When asked about the sourcing of the MRO products, they
told us that they have connections with so many large corporations of all kinds, that they use
B2B/ wholesale networks to source MRO products. They are sourced by the HQ in Karachi and
then routed to all the relevant stations (we call them hubs) and sub-stations per requirement.

Information
Upon inquiring about information as a key driver of supply chain, Mr. Mujahid
enlightened us with his useful input stating information to be that sole driver who drives other
drives of supply chain hence highlighting its importance. He told us that sharing and gathering
information is a key part of Daraz operations which helps them provide visibility and create
accountability and also drives their performance in order to serve their consumers in a better
way. Information acts as a bridge between the staff at Daraz and their respective customers.
The software that Daraz uses to handle operations, gather and organize information is
Alilang which is a Chinese based software, integrated with the Chinese Ali Baba company as
well, they share their information and documents through that. He told us further that to gather
information and interaction from the customer perspective they have their own platforms namely
X space and RMS where consumers are allowed to login and lodge their suggestions and
complaints. Another software system that they make use of is Chan How which is used for
warehouse management which is also integrated with Alilang, for transportations they use the
software Lazada to gather and share information. All these various software’s are integrated with
Alilang making it easier to analyze data and drive relevant action plans. The information is said
to be updated on real-time basis by keeping backlogs of demand and supply; they are also trying
to digitalize and optimize their systems to be more efficient.
 Mr. Mujahid also told us that regular sanity checks are performed on information by the
operations PR they make sure that the information gathered and shared is error proof and helpful
for the operations team at Daraz. Information at Daraz is also efficiently used to detect business
losses on different products that Daraz is currently selling and they try to minimize the losses
depending upon where they occur in the supply chain so for example if there is a transportation
loss it will be handled by the transportation team and they will come up with relevant action
plans to reduce those losses. If losses are catered to and reduced simultaneously the costs are
reduced hand in hand hence, we are trying to look into major contributing factors of these
downfalls.
When asked about the ways of lowering cost or increasing revenues through supply
chain, Mr. Mujahid compared their business models with amazons. Lean manufacturing or Six
Sigma principles are part of the Operational Excellence program that began in 1999 when Jeff
Wilke joined Amazon as VP of Operations. He came from AlliedSignal and his background in
Six Sigma made him the perfect choice to drive efficiencies in operations. Further Mr. Mujahid
also told us up new innovations that the team came up with in order to accelerate the company
growth. Implementation of 5S and reduction of
MUDA Waste. 5S is a philosophy, a way of
thinking which focuses on organizing and
managing the workspace by eliminating 7
Wastes while improving quality and safety.
Muda, on the other hand, is a Japanese word
meaning "futility; uselessness; idleness;
superfluity; waste; wastage and wastefulness".
A process that consumes resources where waste
occurs is when more resources are consumed
than are necessary to produce the goods or
provide the service that the customer actually
wants. Daraz in this case have been benefited
from this in a lot ways. Reduced changeover
time, decrease in flow distance, Increased floor
space, Increase in productivity and etc.

Pricing
The payment methods accepted by Daraz were cash on delivery (CoD), swipe on delivery
(credit or debit card swipe on a handheld device), online payment via credit or debit cards,
payment through Easypaisa2, online bank transfer and payment through ATM. A payment,
through any method, was passed on to the seller after deduction of the commission by Daraz
within 30 days; Daraz took a 30-day credit from the sellers. This stringent policy, according to
Mr. Mujahid, only worked because of the trust that Daraz could generate significant sales.
Owing to only 7 per cent of the population having a debit or credit card and lower levels of
online fraud protection and transaction flexibility, around 97 per cent of the payments were
through the CoD method. CoD resulted in a higher cost, a higher supply chain complexity and a
safety risk, as the riders had the extra responsibility of collecting the cash, keeping the change
and depositing the amount (Deloitte, 2014). The revenue realization time was longer, unlike the
electronic payments, the amount of transfer was not instantaneous.
All prices are listed in Rupees and are inclusive of GST and are listed on the Site by the
seller that is selling the product or service. Items that the customers put in the Shopping Cart will
always reflect the most recent price displayed on the item's product detail page. The prices can
change or vary from time to time in the cart. Placing an item in your cart does not reserve the
price shown at that time. It is also possible that an item's price may decrease between the time
you place it in your basket and the time you purchase it. Daraz do not offer price matching for
any items sold by any seller on our Site or other websites.
Daraz is determined to provide the most accurate pricing information on the Site to their
users; however, errors may still occur, such as cases when the price of an item is not displayed
correctly on the Site. As such, they reserve the right to refuse or cancel any order. In the event
that an item is mispriced, they may, at our own discretion, either contact you for instructions or
cancel your order and notify you of such cancellation. Daraz shall have the right to refuse or
cancel any such orders whether or not the order has been confirmed and your prepayment
processed. If such a cancellation occurs on your prepaid order, our policies for refund will apply.
Daraz list availability information for products listed on the Site, including on each
product information page. Beyond what they say on that page or otherwise on the Site, they
cannot be more specific about availability. Dispatch estimates are just approximately written.
They are not guaranteed dispatch times and should not be relied upon as such. As they process
your order, you will be informed by e-mail or SMS if any products you order turn out to be
unavailable.
In order to avoid any fraud with credit or debit cards, they reserve the right to obtain
validation of your payment details before providing you with the product and to verify the
personal information you shared with us. This verification can take the shape of an identity,
place of residence, or banking information check. The absence of an answer following such an
inquiry will automatically cause the cancellation of the order within a reasonable timeline. They
reserve the right to proceed to direct cancellation of an order for which they suspect a risk of
fraudulent use of banking instruments or other reasons without prior notice or any subsequent
legal liability.

Refund Voucher
⦁ Refund voucher can be redeemed on our Website, as full or part payment of
products from our Website within the given timeline.
 ⦁ Refund voucher cannot be used from different account.
⦁ Vouchers are not replaceable if expired.
Promotional Vouchers
⦁ Each issued promotional voucher (App voucher and New customer voucher) will
be valid for use by a customer only once. Multiple usages changing the identity is illegal.
⦁ Promotional voucher is non-refundable and cannot be exchanged for cash in part
or full and is valid for a single transaction only.
⦁ Promotional voucher may not be valid during sale or in conjunction with any
special promotion.
⦁ Voucher will work only if minimum purchase amount and other conditions are
met.
Daraz reserves the right to vary or terminate the operation of any voucher at any time
without notice. Daraz shall not be liable to any customer or household for any financial loss
arising out of the refusal, cancellation or withdrawal of any voucher or any failure or inability of
a customer to use a voucher for any reason. Vouchers are not replaceable if expired.
Security and Fraud
⦁ When you use a voucher, you warrant to Daraz that you are the duly authorized
recipient of the voucher and that you are using it in good faith.
⦁ If you redeem, attempt to redeem or encourage the redemption of voucher to
obtain discounts to which you are not entitled you may be committing a civil or criminal offence
⦁ If they reasonably believe that any voucher is being used unlawfully or illegally
they may reject or cancel any voucher/order and you agree that you will have no claim against us
in respect of any rejection or cancellation. Daraz reserves the right to take any further action it
deems appropriate in such instances.

Pricing with Suppliers

Interaction with a typical seller started from the acquisition stage, Daraz conducted customer and
employee surveys to gauge brands and products for inclusion in the online listing. An acquisition
team was then responsible for getting the new sellers on board. The established brands were
approached for business by the acquisition team with information on the logistics models,
payment and return policies, commission structure and, in order to highlight business potential,
the sales data. Getting the well-known brands on board was considered more important because
‘when the tier 1 brands are on-board, the tier 2 brands automatically follow,’ explained Mr.
Mujahid Rafique, the head of sourcing and partner support at Daraz. Many sellers approached
Daraz on their own.
Seller center was a web-based enterprise resource planning (ERP) system that provided an end-
to-end seller shop management system—a virtual shop for each seller. The seller center allowed
a seller to list products, view and track orders, set product prices, view sales summaries, generate
account statements and update stock levels. For some of the major brands, it was the team who
uploaded the entire assortment. The team also linked the sellers to Daraz’s photography team,
having an in-house studio, in case the sellers did not have reasonable photographs for their
products. After successfully going through the incubation period and training, sellers received a
graduation certificate from a so-called seller center university to make it more ceremonial and
authentic.

Demand Forecast
Pakistan’s first E-commerce Index, which provides insights on consumer behavior and maps out
the growth of the e-commerce industry, was launched by Daraz at an online event hosted by the
platform and attended by Federal IT Secretary Shoaib Siddiqui on April 16th, 2018. Pakistan
remains a cash-reliant economy and consequently, collecting reliable data regarding the growth
of the e-commerce market has remained a challenge. Therefore, the purpose of the E-commerce
Index, which is powered by Daraz, is not only to establish benchmarks for online consumer
behavior but also to help stakeholders in the industry better understand the online shopper. With
Daraz representing the majority of the industry, the insights, which have been accumulated
through the company’s internal data from 2019, serve that purpose.
The Index analyzes the behavior patterns of a growing segment of Pakistanis who shop online
and paints a holistic picture of the factors that encourage and discourage shoppers from
transitioning to online channels. Furthermore, it maps the e-commerce potential of tier 2 cities
such as Sialkot, Gujranwala, Hyderabad and Multan, highlighting the extensivity of e-commerce
penetration across Pakistan and observes customers’ demands for different categories of products
and brands. One of the key findings of the Index is that there has been a shift toward digital
payment methods in 2019. On Daraz, digital payments contributed 32% of total consumer spend
and the use of e-wallets increased by 8.2x year-on-year.
The Index further highlights the changes witnessed in consumer demand during the second and
third weeks of March 2020, following the outbreak of the CoronaVirus in Pakistan. It notes that
the percentage of sales of FMCG products on Daraz doubled during that time period and are
expected to rise to 70% of the platform’s total sales in the coming weeks. Daraz is confident that
the insights on consumer behavior and demands provided in the Index will be fruitful for
industry stakeholders and will help propel the digital revolution in the country.
Conclusion
In the end, even though Covid-19 and the pandemic that it brought along has effected
major businesses in lethal ways. Although during this pandemic, Daraz has witnessed some
major increase in demand due to a shift to online shopping. But Daraz had to manage its
operations with limited resources which increased the promised delivery time. Other factors
effecting supply chain is Geo-political issues, environmental issues and brand awareness. Daraz
is working on contingency plans for the upcoming year to have a net gain for year 2021.

Interview Questions
1. Please introduce yourself in context to your responsibilities within the firm.
My name is Hassaan Mujahid and I am the Operations Excellence Associate at Daraz.pk. I am
currently located in Lahore; PK and I am responsible for compliance of SOPs and
implementation of multiple long-term projects to maintain the change management culture within
Daraz.
2. In your own words, what is the supply chain, and why is it important?
Supply Chain is a network of business units which allows the product, money and
information flow within the organization via upstream and downstream channels. An
 efficient and effective supply chain can help an organization to not only streamline its
operations but also allows it to gain competitive advantages in the market.

3. In your opinion who do you believe are your key customers and what do those customers
value? Please elaborate in terms of their demographics and their demand. If you don’t
know, how would you go about gathering this information?
Daraz usually targets educated, young to middle age and middle to high class citizens who are
accustom to smart phone technology. Commercial and Marketing departments are responsible for
maintaining demand and relationships with our key customers. Most of our clients are located in
well developed areas of Pakistan, namely Karachi, Lahore and Islamabad.
4. How can you add value to a business with your experience and competencies?
I am currently working on multiple projects which contribute to the following key
performance indicators in Daraz; Continuous Improvement, Reduction of Losses and
lowering cost per order of the product.

5. What are the strategies you make use of as a brand to gain a competitive edge over your
rivals?
Effective and efficient delivery rates.
High service level agreements with vendors and customers
Use of modern technologies and internet of things.

6. How are you staying up to date with trends and developments in supply chain
management and operations?
Daraz has been working on optimizing and automation of its processes with the
introduction of IOT and conveyor belts to move the products more efficiently. Heroes
have been trained to utilize mobile applications for deliveries. We are also pushing our
departments to go paperless to make our operations environment friendly.

7. Please describe the various steps and stages of the supply chain process conclusively.
Daraz usually operates on two models: Fulfilled by Daraz and Dropship.
Fulfilled by Daraz: Daraz owns the inventory and will replenish it at its reordering point
Dropship: Vendor utilizes Daraz’s services to sell it products

8. Economies of scale or having an enormous number of facilities, where is your companies

focus directed towards? Why so?
Hybrid Model.
9. Location of facilities is often chosen very wisely, could you please elaborate where and
why have you chosen the specific location?
Demographics and package count
10. Talking about efficiency and production, do you have a flexible capacity or are you more
directed towards stocking limited number of products?
Hybrid Model. Daraz own a limited amount of sku however Daraz service can be utilized by a
wide variety of vendors to sell its products using managed or full dropship.
11. How many warehouses do you currently have? Can you describe one approach for setting
safety stock levels?
 Daraz currently has 5 warehouses. (2-khr, 1 lhr, 1 FSB and 1 ISL). Safety stocks are
usually set keeping the lead time for the arrival of products in consideration. The ERP
system used by Daraz smartly calculates the reordering point to manage the variation in
supply.

12. What is your average inventory level? Who is accountable for maintaining these stock
levels?
I don’t know. Probably around 100,000 items. Warehouse and Vendor management teams are
responsible for maintaining these stock levels.
13. How do you eliminate excessive or obsolete inventory?
Liquidating offline, campaigns and charity.

14. Do you have any seasonal inventory? If yes how do you maintain the stock levels of those
due to unstable demand?
Use manage or full dropship for seasonal inventory.
15. What are the changes in supply chain that could lower costs and increase revenues? Please
elaborate in context to the company.
Please refer to Amazon. Lean manufacturing and six sigma’s

16. Have you contributed to innovate in either products or services supply chain to accelerate
your company sales growth?
Implementation of 5S and reduction of MUDA Wastes

17. Talking about the future, what factors will affect your supply chain? Have you forecasted
and brainstormed solutions for those?
Factors that might affect our supply chain includes, COVID-19, Geo-political issues,
environmental issues and brand awareness. Daraz is working on contingency plans for
the upcoming year to have a net gain for year 2021.

18. Finally at present due to the COVID-19 situation, how has it affected your business and
your supply chain? Elaborate.
Increase in demand however, due to restrictions, Daraz had to manage its operations with limited
resources which increased the promised delivery time.

19. How do you use information as a key driver to provide and maintain higher
responsiveness?
Sharing and gathering information is a key part of Daraz operations and it helps provide
visibility, accountability and drive us to perform better.
20. What software’s or technology do you use for gathering and sharing information and how
do you integrate them in your business?
For gathering and sharing information we use a platform which is been used in all our
Daraz operations which is Alilang. We share our information and all our documents
through Alilang. Also, from the customer perspective we have our own platform called X
Space where consumers can login their complaints, for warehouse we have Chan How
and for transportation we have Lazada, everything is integrated with Alilang.
 21. How frequently do you update information regarding the demand?
Information is updated on a real-time basis to keep in check with our demand and
supply. Information flow is digitalized and optimized.
22. How do detect an error in an information shared?
Sanity checks are done on the information to error proof it for the operations team.
23. How do you use information to reduce costs within a supply chain?
We are currently analyzing the business losses incurred on different products by Daraz
and we try to minimize the losses by linking them to their relevant team from supply
chain management.
24. How do you decide on the number of suppliers?
Suppliers can vary from 1 to 1000, it doesn't really matter to us. As a service we provide
our platform to the suppliers so they can sell the products to the customers who need
them but as for warehousing and options for fulfilling by daraz after the kpis of suppliers
are met we onboard them and they become the partners. We purchase goods from them
directly and sell it to the customers. In this regard after they have met all kpis and have
the good standing and rating we onboard them on daraz platform.
25. What type of product categories fall under responsive and efficient source?
Bulky and our FMCGs are mostly efficiently sourced however, fashion items and high
value items based on the responsiveness and demand of that product.
26. How do you procure goods from different suppliers?
We have a commercial team and a vendor management team who procure all the goods
that are required as per the demand.
27. How do you evaluate and select suppliers?
The suppliers are basically selected if they fall under and they accomplish certain KPIs.
We do not onboard who do not meet certain criteria and are a supplier base. We
evaluate KPIs and customer reviews and then we onboard the supplie
28. How do procure MRO products?
We have our own dashboard linked with our real-time servers which gives us predictions based
on order history for products as well as customer groups. This can be seasonal, monthly or
yearly comparisons based on what type of campaign it is.
References:
https://www.daraz.pk/
https://www.similarweb.com/website/daraz.pk/#similarSites
https://www.similarweb.com/website/daraz.pk/#referrals
https://www.zoominfo.com/c/daraz/399586419
https://www.zoominfo.com/c/daraz/399586419
https://www.zoominfo.com/c/daraz/399586419