NSU MGT 314, operation management report (daraz store)

Course Code: MGT 314; Operation management
Section: 16; Semester: Spring 2020
Submitted to:
Raihan Sharif
Lecturer, Department of Management
School of Business & Economics
Submitted by:
Name ID
AhmedNasimRaihan 1120243030
MehediHasanPolash 1620850030
FatemaTujJohora 1621826030
An in-depth review of Operations Management
The Ladies Gallery (Daraz Bangladesh)

i
Letter of Transmittal
30 April 2020
Raihan Sharif
Lecturer, Department of Management
School of Business and Economics
North South University
Subject: Submission of report on "Operation Management of The Ladies Gallery (Daraz)"
Dear Sir,
We have completed this report as part of our Operation Management course. The report
has been compiled as per your requirements and those set by the host organization. It gives us
immense pleasure to tell you that working on this report has given us a wide range of exposure. The
report is based on the information that we have able to get during the interview with the store
manager.
We are thus submitting this report with the hope that it lives up to your satisfaction.
However, we would be glad if you enlighten us with your thoughts and views regarding the report.
Besides, if you wish to enquire about any of the aspects of the report, we would be glad to answer
your queries.
Sincerely yours,
Ahmed Nasim Raihan
Mehedi Hasan Polash
Fatema Tuj Johora

ii
Acknowledgement
First, we would like to thank the Almighty Allah for blessing us with the strength, aptitude, and
patience for completing the interview and this report even the time of a pandemic. We would like
to thank our Faculty, Raihan Sharif, for his guidance. Without his supervision and guidance, we
could not be able to complete our report. He has supported us throughout the project and helped
us whenever we needed his assistance. We have tried our best to implement his constructive
suggestions while doing our report.
The project would have been incomplete without the tremendous support from The Ladies Gallery
team. Our sincere gratitude goes to Mehedi Hasan (shop manager) for giving us time from his busy
schedule, providing us with information that was required to complete the report.
However, because of the pandemic, he was not able to show the store operation process physically.
Even it was a small retail business, the store operation is complicated and extensive to learn a lot.
But it was also difficult and challenging that we might be unable to apply many of the course terms
because it is a whole new type of business for our country. So, we put only precise terms from our
class lectures and slides and added some facts which seems relevant.
Finally, our sincere thanks go to everyone who has helped and supported us significantly in
different stages during the period of completing the report. Describing a 20th
-century e-commerce
model and strategy was not easy, but we tried our best to do.

iii
ExecutiveSummary
This report reflects the concepts of operation management of The Ladies Gallery retail store. For
this project, we have done extensive research on the Daraz retail store operational activities
management.
The report deeply discussed an analysis of the existing operation strategies and operation
management concepts. How The Ladies Gallery retail store is running their operation, managing
orders and inventory has presented on the process maps.
Analysis of quality control using six sigma method and issues, analysis of demand forecasting
using a scatter diagram has projected in this report. Strategies used and the reasons implementing
the strategies have discussed clearly to understand what and why. Using the primary data, we’ve
plotted a SWOT analysis of the business to recognize internal and external advantages and
disadvantages.
Using the fishbone diagram, we have identified their root problem and the reasons behind the
problem. We tried to come up with a solution for the strategies which are favorable for the business
operation. How to get rid of those problems have been addressed in the last section of this report.
The retail store operation is efficient and effective as for the size of the company. Although it is
not perfect. It has some issues, and those can be solved if they follow the proper strategies.
This report should reflect its overall operating method and everything they have done to grow the
business of The Ladies Gallery retail shop.

iv
Contents
Introduction..................................................................................................................................... 1
1. Analysis of Operation Strategies ............................................................................................. 2
1.1 Competitive Advantages ....................................................................................................... 4
1.2 Inventory and order processing capacity Strategy ........................................................... 5
2. SWOT analysis of the business ............................................................................................... 5
3. Quality control......................................................................................................................... 6
4. Process map ............................................................................................................................. 7
4.1 Order Process Map (Retailer)................................................................................................ 7
4.2 Return process map ............................................................................................................... 8
4.3 Inventory restocking process map......................................................................................... 9
5. Analysis of quality control issues.......................................................................................... 10
6. Analysis of demand Forecasting............................................................................................ 10
7. Operational problems ............................................................................................................ 12
Recommendation .......................................................................................................................... 14

P a g e | 1
Introduction
The business we have selected for the project is a retail shop operating under Daraz Bangladesh.
Daraz is also known as the most extensive retail e-commerce in Bangladesh. But surprisingly,
Daraz works as an intermediary only between business owners and customers. The Ladies Gallery
is a retail store partnered with Daraz Bangladesh. The sole proprietorship business started its
journey in January 2019, with a small warehouse located inside Dhaka city.
Mission: We want to help those who want to change himself for betterment.
Vision: To make The Ladies Gallery largest online bookstore of Bangladesh.
It is a small business with a target segment of a niche market. But initially, The Ladies Gallery
was a jewelry shop. As a small startup, it failed to gain customers on that selected segment. Tested
various products for selling and ended up being one of the most positive rated seller of Daraz
Bangladesh platform. The platform does not offer any changes in the shop name. Once you register
your shop with a name, you cannot change it anyway. So, the shop name remained the same; even
the product category has changed.
Now, the shop offers self-help books of forty different international writers at
your doorstep, anywhere in Bangladesh. According to Daraz Bangladesh data, The Ladies Gallery
has a 97% positive seller rating with an experience of serving around fifty thousand self-help books
in various regions of Bangladesh.
The shop also earned a reputation for quick customer response through instant chat and less than
a 2% cancellation rate throughout the year 2019. As a result, among twenty thousand sellers of
Daraz Bangladesh, The Ladies Gallery listed on the top two thousand sellers list in the year 2019.
It might not sound massive, but it was the only shop in the category.

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1.Analysis of Operation Strategies
Figure 1. Operation Layout Map (Daraz)
If we want to understand the whole process and operation strategies of the selected business, we
need to start with how Daraz operates. The retail store relies on Daraz for its external operation.
But if we deeply analyze the process, all Daraz's policy also affects the retailer's internal operation
as well. A significant part of the marketing, communication and whole transaction process handles
by Daraz. So, Daraz has direct control over the marketing and communication strategy in the view
of the formulation. On the other hand, the retailer has full control over pricing, product selection
and maintaining the product quality. Most of the controlling mechanism is a kind of hybrid except
third party logistic and transaction; those two functions directly and only managed by Daraz. The
Ladies Gallery get payment twice in a month from Daraz.
Figure 1. Operation Layout Map gives a bird's eye view of how Daraz serves its customers. The
Ladies Gallery retail store does not sale any product outside of Daraz. The whole operation is a

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combining process of Daraz and The Ladies Gallery retail store. So, it is essential to understand
the layout of how Daraz works before moving forward to strategies.
The Ladies Gallery retail store adopted several strategies to maximize its supply chain to run the
operation smoothly and extending the business. Using Daraz as a partner is the most subtle
strategy to meet the retail store mission and vision. Because partnering gives the benefits of:
• No logistic headache:
For a small retailer who wants to serve online with a motto to serve the whole nation,
logistic is the obstacle. The Ladies Gallery solved the problem by partnering with Daraz
and make their product accessible to millions of people.
• Minimal marketing effort:
Initially introducing business and grab attention from the customer is a hard job for every
small startup. Daraz's existing brand value and crucial marketing helped a lot to eliminate
the primary obstacle by creating awareness. Which means greater customer penetration in
a short time with minimal effort.
• Low fixed cost and cost-effective:
Daraz takes 10% commission basis on the selling price of a product. That means no sale,
no commission. Daraz does not care where you store your product or how many employees
you have; you do not have to keep separate departments like marketing or management to
run the business. Which cuts fixed cost.
Daraz is also an enriched network system which operates on its software management and
constant surveillance of hundreds of experts. It would not be cost-effective when it comes
to managing its logistics or supply chain if it would operate without the partnership. Which
cuts a lot of fixed cost and helped to start the company at a minimal investment.

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Outsourcing goods: Manufacturing facility cost a lot of money and effort to manage, to keep the
business focus its vision it has to be flexible. Outsourcing the products keep the retailer amenable
to its operation.
Pricing: To attract the new customer, The Ladies Gallery retail store following market penetration
pricing.
1.1 Competitive Advantages
The Ladies Gallery retail store competes using various tools of operations. Especially Daraz's
already proven service design helps the retail store to grow, cut costs and helped to apply those
investment and time to effectively improving the stores' quality of operation.
For example, when the retail store starts its operation, it chose to push selling offering books at a
price which is identical to its competitors but at a higher quality (e.g. better bindings, vivid
printing). It was possible for the seller because of economies of scale. Suppliers offer a discount
rate in quantity base, the higher the quantity lower the cost.
But because of a good and long relationship with suppliers, the retail manager was able to manage
the proposal of increasing the quality of the products but keep the price same. That's why the
retailer was able to improve the quality at the same rate as competitors. And sales become higher
than competitors in the platform. Which falls under the order winning qualifying factor (Slack,
Brandon-Jones & Johnston, 2013).
All support of the Daraz platform helped the retail store cut the cost to gain the quality based
operation it was aiming for and gave the retail store a competitive edge as quality in its core
compared to its rivals.

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1.2 Inventory and order processing capacity Strategy
In the circumstance of expansion of the inventory and order processing capacity, the retail store
follows Wait-and-see strategy. The retailer does not increase its inventory holding size or order
processing capacity by following early-expansion capacity strategy.
2.SWOT analysis of the business

6
3.Quality control
There is a benchmark standard in Daraz platform to describe a seller total quality control. The
benchmarking standards are average shipped on-time rate must be above 80%, return due to seller
negligence must be less than 2% and positive seller rating more than 60%. The standard value
changes over time by following the Plan-Do-Study-Act (PDSA) Cycle (Summers, 2000). As far
as we have checked and compared with the standard benchmark, we have found that the shop has
a very high score in every element of Daraz quality control.
Quality and best price is the key to dominate in the market. The organization follows a zero-defect
strategy when selling a product to comply with Daraz policy of 2% return due to seller negligence.
Which falls under six sigma's statistical method of quality assurance (Harry & Schroeder, 2000).
According to the store manager, the organization follows a two-step quality check. If we look at
figure 2 (order process map) and figure 4 (Inventory restock map), there is a clear indication that
their both process map has optimally designed to meet with zero defect strategy. Which fulfil the
requirement of six sigma's conceptually method (Harry & Schroeder, 2000).
One of the regular issues with e-commerce sites order management; the customers complained
that most of the time, their order gets cancelled after placing an order. But this retail store has a
fail-safe (Burdick & Wheeler, 1962) feature which solved the issue. The seller dashboard of Daraz is
automatic. Shop manager inputs the quantity on the seller dashboard while restocking the
inventory, once restocked amount of goods ordered by customers; no one will be able to place an
order. And also, the Daraz seller app will show which product of your shop went stock out. The
small tool not only helping the seller to restock the goods timely but also boosting customer
convenience.

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The seller bound to comply with Daraz's seven days easy return policy. Also, the seller provides
a 100% refund in few circumstances even if that doesn't meet the criteria of Daraz return policy,
which is a remarkable after-sales service.
4.Process map
4.1 Order Process Map (Retailer)
Figure 2: Order Process Map (Retailer)

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4.2 Return process map
Figure 3: Return Process Map

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4.3 Inventory restocking process map
Figure 4: Inventory restocking process map

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5.Analysis of quality control issues
If we analyze the figure 2 (process map of ordering) and Figure 4 (restocking), we can see that the
product quality checked twice before handing it over to the logistic partner hub. But One hundred
per cent checking may not guarantee that all defects will be identified. Sometimes it is intrinsically
difficult (Slack, Brandon-Jones & Johnston, 2013).
The store manager complained that; during the campaign time, overwhelming orders put pressure
on logistic partners. But the logistic has a limited capacity which does not meet most of the
campaign's demand. As a result, logistics partners need a large warehouse where they can keep all
the packages safely. But due to unavailability of space logistics partners fails to keep the packages
safe and sometimes deliver damaged packages. So, even if the retailer tries to keep zero defect in
quality, the whole process isn't capable of it. And it’s only a very short-term issue.
We also tried to match with the theory of Type1 and Type 2, but we failed to do so. The reason is
it’s not a manufacturing company, and we do not have sufficient data to conclude.
6.Analysis of demand Forecasting
The company rely on historical data and multiple variables for the demand forecasting. Which
means the company follows the quantitative and associative forecasting method (Stevenson,
2002).
In Daraz platform, electronic data interchange occurs in every order. The Ladies Gallery team use
those data to forecast sales for campaigns purpose only. Because Daraz holds three prime
campaigns in every year: Eid ul Fitr, 11.11 (Singles Day) and Fatafati Friday.

11
The company experienced more than 100% increase in sales during the month of Eid-ul-Fitr and
more than 200% increase during November due to 11.11 campaign. As a newly grown-up
company, they do not use historical data to forecast demand during regular time. Instead, they rely
on their intuition; always, they try to keep every variance of the products.
We have tracked previous year sales data (see appendix, figure 6) using a scatter diagram for
forecasting to understand the behaviour of demands over time. It seems both of their campaign
sales might falls under seasonality of demand because it occurs due to calendar time (Stevenson,
2002).
Figure 4: Monthly changes in sales over the year 2019 (Average sales is 1)
We cannot exactly conclude that the retail store face seasonality of demand in time series
behaviour. Because the retail store is a new startup, we do not have sufficient data to conclude
accurately.
0
0.5
1
1.5
2
2.5
0 2 4 6 8 10 12 14
TIME
Changes in sales
Average changes in sales

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7.Operational problems
We have found that late delivery and delivery failure is the root problem of their operation and
growth. To understand it better, we have reflected all the related causes that are fueling the root
problem in a fishbone diagram.
Figure 5: Fishbone Diagram
Management:
As a Daraz shop, the retailer has no control over policies. Daraz can impose anything at any time
in their policy according to the agreement to protect their customers. So, sudden change is policies
affect the delivery and product pickup process. (e.g. sudden change in shipping level in agreement)

13
It is not the retailer who controls and decide which delivery partner will deliver their product. The
Daraz automatic system determines which delivery partner will be selected for the order. Daraz
Express or DEX is the fastest delivery partner and runs by Daraz. On the other hand, the third-
party delivery partners are quite the opposite of DEX in terms of delivery time. So, not having
control over the delivery is the most concerning thing causing higher lead time from customer
perspective.
People:
It is a family business that runs by only two people. During the prime campaign time, the store
faces a sudden increase in sales by up to 200%. For the store, it took 3-4 days to hand over the
orders to the Daraz hub due to lack of human resources.
Process:
If we see the fig1- process map, the complicated sorting method is increasing the lead time.
Barcode scan error is not a recurrent issue but due to that technical error order goes cancelled.
Environment:
Sudden changes in weather, heavy traffic, and roadblocks due to construction increasing the
delivery time.
Resource:
As a newly started small business, the retailer cannot yet hire trained personnel as an employee.
Two members from a family managing the whole business with their own knowledge.

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Recommendation
As our point of view and academic experience, we can conclude that the business contains some
operational problem. To fix this, we recommend some ways to keep the operation efficient. But
no one can guarantee that a strategy will work or not in a business until it is applied. It is our
opinion, based on the facts and analysis we find out the few root problem.
We have already made a clear identification of a problem and its causes by using a fishbone
diagram. If tomorrow another e-commerce site solves the problem of delivery, for the retail store,
it will be hard to reach their vision. Even it could be a threat to stay in the market. Because the
retailer does not manufacture the product, any retail store can hire the same supplier and make the
same product or other suppliers can directly introduce their product to another e-commerce site.
And if someone else can offer more convenience, The Ladies Gallery won't be able to reach their
vision.
We cannot solve the macro factors (e.g. climate, traffic or Daraz). But the micro factors can be
changed. The Ladies Gallery needs to make a partnership with growing e-commerce sites as well.
It is hard to grab a market, and it is harder to sustain. And every customer wants a faster horse in
terms of e-commerce delivery. So, to create sustainability and minimizing the risk, The Ladies
Gallery should partner with other growing e-commerce sites.
As the business is growing, The Ladies Gallery retail store needs to focus on other aspects besides
the product quality. Quality is beneficial to gain a lifetime customer. But offering a better-quality
product at a low price creates confusion in the customers' mind. The fact is that the price-quality
inference theory implies that this contextual appeal may not be well-accepted by consumers
because it contains two contradictory cues: high quality and low price (Shirai, 2015). So, we suggest
changing the pricing strategy.

15
References
• Burdick,E.,&Wheeler,H.(1962).Fail-safe(1sted.).NewYork:McGraw-HillBookCompany,Inc.
• Harry, M.,& Schroeder,R. (2000).SixSigma:TheBreakthrough Management Strategy Revolutionizing
theWorld'sTopCorporation.NewYork:CurrencyDoubleday.
• Slack, N., Brandon-Jones, A., & Johnston, R. (2013). Operations management (7th ed., p.
77). Harlow: Pearson.
• Summers, D. (2000). Quality (2nd ed., p. 67). Upper Saddle River, N.J.: Prentice Hall.
• Stevenson,W.(2002).Operationsmanagement(7thed.,p.73).Boston:McGraw-HillIrwin.
• Stevenson, W. (2002). Operations management (7th ed., pp. 75-76). Boston: McGraw-Hill
Irwin.
• Slack, N., Brandon-Jones, A., & Johnston, R. (2013). Operations management (7th ed., p.
545).
• Shirai, M. (2015). Impact of "High Quality, Low Price" Appeal on Consumer
Evaluations. Journal of Promotion Management, 21(6), 776-797. doi:
10.1080/10496491.2015.1088922

16
Appendix
Business Name: The Ladies Gallery
Business Type: Retail
Ownership Status: Sole proprietorship
Number of employees: 02
Store Manager: Mehedi Hasan
Phone: 01781282813
Online shop: https://www.daraz.com.bd/shop/the-ladies-gallery/
Warehouse Address: 1/3 South Mugdapara, Shabujbagh, P.O. Basaboo, Dhaka-1214

17
Figure 6: Monthly sales throughout the year 2019
• Daraz and the retailer operation, order process, return, restocking map and swot analysis
has been created by using www.lucidchart.com/
• The business we have selected for the project is far ahead of our text-based education; we
have not experienced that much complication in any business operation while completing
the course. That means we completed a report with a company which follows a strategic
model that we never learnt in the class (e.g. Inbound). Also, in our whole University
program experience, we learnt one thing that no one can guarantee that a strategy will work
or not in a business until it is applied. So, it is hard to make a recommendation.
0
20000
40000
60000
80000
100000
120000
Total Sales

NSU MGT 314, operation management report (daraz store)

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