Ecommerce

How to Set Up a Control Tower for Your E-Commerce Company

November 28, 2023

Illustration introducing a ecommerce control tower

TL;DR

A  command center oversees every aspect of the business, It helps in enhanced visibility, real-time decision-making, real-time alerts, increased operational efficiency, risk mitigation, cost savings and customer satisfaction. To achieve all a control tower should centrally manage departments such as inventory, logistics, payments/checkouts, customer success and marketing.

A control tower needs to track metrics such as Reorder Point, Stockout Events, Inventory Turnover Ratio, Checkout Abandonment Rates, Payment Failure Rate, First Strike Rate, Non-Delivery Report, Return to Origin, Turn Around Time, Gross Merchandise Value, Return and Refund Rate, Customer Lifetime Value, Order Cancellation Rate.

In setting up a control tower the most important aspect is of having the right people, technology, and processes in place. It also necessarily require collaboration among different departments and the utilization of appropriate technology to ensure visibility, monitoring, and resolution of issues.

Building a control tower is essential for e-commerce success. Start with automation, Locale.ai can help you automate automates your business processes and SOPs via AI. Think of it as an AI agent that maps your processes into workflows executed by AI.

In the fiercely competitive realm of e-commerce, implementing a control tower isn't just an option—it's a vital strategy needed for survival. The demand for instant gratification has made a centralised command centre mandatory that can oversee and optimise every facet of the business. This guide is your roadmap to crafting an agile and responsive control tower tailored for the fast-paced demands of the e-commerce landscape.

What is an E-Commerce Control Tower?

In the fierce battleground of modern retail, the absence of a supply chain control tower for omnichannel retailers competing against Amazon is an oversight you cannot afford. Amazon has set the bar astronomically high, transforming customer expectations to demand instant gratification—customers now crave products immediately, not tomorrow or next week.

In this era where eCommerce eclipses traditional retail, companies face a critical challenge: the inability to track sales performance seamlessly across diverse retail platforms. A supply chain control tower emerges as the pivotal solution, enabling real-time monitoring, quick issue resolution, and proactive decision-making.

The control tower isn't just a watchtower; it's an all-encompassing view of the supply chain. It provides an eagle-eyed view of demand, distribution, manufacturing, and supplier inventory. By consolidating planning and execution tools into a unified platform, it becomes the nerve centre for lightning-fast responses, ensuring businesses keep pace with customer demands and outmanoeuvre competitors. Without this strategic asset, staying relevant in the cutthroat retail landscape is an uphill battle, potentially leading to irrelevance and, ultimately, obsolescence.

What Superpowers will an E-Commerce Control Tower give?

  1. Enhanced Visibility: A control tower provides end-to-end visibility across the entire supply chain. It consolidates data from various sources, enabling real-time monitoring and tracking of inventory, shipments, and production. This visibility helps in identifying bottlenecks, inefficiencies, and potential disruptions, allowing for proactive decision-making.
  2. Improved and Realtime Decision-Making: With access to comprehensive and real-time data, supply chain managers can make more informed and strategic decisions. This includes optimising inventory levels, rerouting shipments to avoid delays, managing demand fluctuations, and responding promptly to unexpected events or changes in market conditions.
  3. Realtime Alerts: Control towers ensure proactive issue resolution by employing an alerting system. Stakeholders receive immediate notifications when steps are missed or if KPIs, SLAs, or TATs exceed acceptable levels, allowing prompt intervention to resolve issues.
  4. Increased Operational Efficiency: A control tower streamlines operations by facilitating better coordination and collaboration among different stakeholders in the supply chain. It enables smoother communication, alignment of processes, and synchronisation of activities across departments, suppliers, and partners, leading to improved efficiency and reduced lead times.
  5. Risk Mitigation and Resilience: By proactively identifying potential risks or disruptions in the supply chain, such as supplier issues, transportation delays, or natural disasters, the control tower allows for the implementation of contingency plans. This enhances the resilience of the supply chain, minimising the impact of disruptions and ensuring continuity of operations.
  6. Cost Savings: Through optimised inventory management, reduced lead times, and better utilisation of resources, a supply chain control tower can lead to cost savings. Efficient decision-making based on accurate data helps in minimising excess inventory, reducing transportation costs, and optimising overall operational expenses.
  7. Customer Satisfaction: The improved efficiency, faster response times, and reliability achieved through a supply chain control tower contribute to a better customer experience. Meeting delivery deadlines, maintaining product availability, and swiftly addressing any issues result in increased customer satisfaction and loyalty.
Illustration talking about the superpowers that a control tower for ecommerce enables

What Components will a Control Tower Manage?

A control tower typically manages various components to ensure visibility, coordination, and optimisation. Some of the key departments that a control tower may manage include:

  1. Inventory and Logistics
  2. Payments/Checkouts
  3. Customer Success
  4. Marketing

We’ll explore these points in further detail below.

Inventory and Logistics:

Managing inventory and logistics involves overseeing stock levels, warehouse operations, and distribution channels to ensure seamless order fulfilment and timely delivery to customers. Further things to monitor can be:

Sl. no Problem What does it mean? Alerts & triggers to manage this problem Potential impact
1. Inventory Holding Costs Inventory holding cost, also known as carrying cost, encompasses all expenses associated with storing and safeguarding unsold products within a specific period. Notify the inventory management team or procurement team when the inventory holding costs exceed a predefined threshold or percentage of the total revenue. The team reevaluates inventory management strategies and cost reduction measures such as optimising storage, streamlining the workforce, or revising forecasting methods.
2. Inventory Turnover Inventory turnover measures how frequently a company sells and replaces its inventory within a specific period, typically a year. Notify the inventory management team when the inventory turnover rate falls <2 or exceeds >4. <2 indicates excess deadstock, prompting the need to reevaluate inventory levels. >4 suggests a risk of stockouts, requiring immediate attention to avoid inventory shortages.
3. Backorder The backorder rate quantifies the number of orders a company cannot fulfil when customers attempt to make a purchase. It assesses a company's stocking efficiency, particularly for high-demand items. Send alerts to the procurement team to reorder goods that are selling fast or fall below the reorder point. Improve customer loyalty and maintain supply chain.
4. SKU Not Moving/Products Closer to Expiry Products are not moving as expected or are nearing the expiry date. Prompt business analysts to team up with operations. Focus on shipping soon-to-expire items and bundle or discount slow-moving products for effective inventory management and sales optimisation. Improve inventory management and reduce the standard loss from inventory as products will move faster. Overall holding costs will also be reduced.
5. Stockout Stockout is a situation where a business runs out of inventory, failing to meet customer demand for a particular product. The operations team, along with the procurement team should be informed as soon as the stock hits the reorder point. Managing this should help reduce customer dissatisfaction, customer churn, revenue loss and better inventory management.
6. Warehouse Stock Level All retailers take an omnichannel approach, any business manages multiple SKUs in different warehouses. Keeping track of their levels given sales and returns becomes complicated. Notify the procurement team to order the item and take the lead time into consideration while ordering the SKU. This will directly impact the experience the customers have while purchasing the product as will help maintain the estimated delivery date.
7. Estimated Delivery Date (EDD) EDD is the projected date a customer will receive their ordered products. It measures the efficiency of order processing, logistics, and shipping. The warehouse team and procurement teams get notified about orders and stock based on existing levels. They coordinate to make sure they have enough inventory to keep the estimated delivery date in check. Keeps the estimated delivery date to a minimum which will have a direct impact on the revenue and bottom line.
8. Back-in-Stock Missed sales due to low stock or out-of-stock cases or high demand. The marketing team gets notified of the items which were out of stock earlier. They inform the customers who tried purchasing the products but couldn’t due to an outage. Helps move the inventory faster and recapture the customers who might have churned or purchased a competitor's product.
9. Lost/Delayed Shipments Lost or delayed orders due to order tracking complexities. Notify the operations team if the order status isn't updated in the set SLA to retrace the journey of the shipment to track where the order is and then update the status. Proactive issue resolution, enhanced customer satisfaction, and reduced customer queries.
10. Courier Partner Performance Varying courier partner performance affects the customer experience. Notify business analysis teams on the performance of delivery partners, and instances of delayed pickup/delivery. Streamlined processes, improved service reliability, and enhanced customer satisfaction.

A graphic showing reatlime alerts on issues like stock outs and delivery delays

Payments/Checkouts:

This facet involves monitoring payment gateways, transaction processes, and checkout systems to guarantee smooth, secure, and efficient payment experiences for customers. Further things to monitor can be:

Sl. no Problem What does it mean? Alerts & triggers to manage this problem Potential impact
1. Payment Failure Payment failure on the website for multiple reasons like payment gateway failure or invalid details or security issues. Notify the business team/engineering team to analyse why the payments are failing. Improved payment reliability, improved customer experience and helped maintain business-as-usual activities without interruption.
2. Refund Streamlining refund processes to reduce customer inquiries. Notify customer support and finance teams when a refund is initiated for either an order cancellation or a return. Efficient refund handling, improved customer satisfaction, and reduced inter-team confusion.

Customer Success:

The focus here is on maintaining high levels of customer satisfaction and retention by addressing customer concerns, providing support, and optimising overall customer experience. Further things to monitor can be:

Sl. no Problem What does it mean? Alerts & triggers to manage this problem Potential impact
1. Average Complaint Resolution Time The average complaint resolution time measures the average duration taken by a business to resolve customer complaints or support issues and is typically quantified in days, hours, or minutes. The customer support team lead gets notified of unanswered queries over the set time limit. Improved customer satisfaction scores and improved engagement with the brand.
2. Customer Abandons Cart Customers abandon their cart midway and do not complete the transaction. Generate alerts to the product team/customer experience team to monitor the volume of these instances. Boost sales or streamline the process for fewer friction points.
3. Customer Retention Rate (CRR) CRR measures the percentage of customers retained over a specified period. It calculates the rate of customer loyalty post the initial purchase. Notify the customer success team when the CRR declines by a significant margin or falls below a predefined threshold, such as a 10% decrease from the previous period. A direct impact can be observed on the bottom line as it is cheaper to sell to an existing customer than to a new customer.
4. Customer Satisfaction (CSAT) Score CSAT measures the level of satisfaction customers experience with a company's products, services, or overall brand relationship. Trigger alerts to the customer success team when the CSAT score falls below an acceptable threshold. A direct impact can be observed on the bottom line as it is cheaper to sell to an existing customer than to a new customer.
5. Refund Rate RR measures the ratio of refunded or returned products to total products sold within a defined period, reflecting customer-initiated returns due to dissatisfaction or product issues. Trigger alerts to the customer success team when the RR falls below an acceptable threshold. Monitoring and optimising for the refund rate should help in reducing costs that are incurred in return and improve CSAT.
6. Net Promoter Score NPS is the north star metric used to measure a company’s customer loyalty and satisfaction. Alerts are triggered when the NPS score crosses a specific threshold or when customers leave specific comments or feedback along with their NPS responses. Improved customer satisfaction scores and improved engagement with the brand.
7. Customer Lifetime Value (CLTV) CLTV represents the total revenue a business can reasonably expect from a single customer account over their entire relationship with the company. Alert the customer success team when CLTV deviate from the expected threshold or if there are unexpected changes. This helps in signalling potential issues in customer retention or changes in purchasing behaviour.
8. Repeat Purchase Rate (RPR) RPR refers to the percentage of customers who return to make another purchase from your business after their initial transaction. Set alerts for significant changes in the RPR, especially if it falls below a predetermined threshold or shows unexpected fluctuations. This helps improve the ability to retain customers for subsequent purchases.

A graphic showing real-time alerts on issues in refund statuses and nps scores

Marketing:

This area involves strategising and executing marketing campaigns, tracking performance metrics, and analysing customer behaviours to enhance brand visibility and attract potential customers. Further things to monitor can be:

Sl. no Problem What does it mean? Alerts & triggers to manage this problem Potential impact
1. Website Traffic Website traffic refers to the volume of visitors or users who access a website within a specific period. Alert the marketing team when website traffic significantly deviates from the normal range or when there's a sudden drop in traffic volume. Find the source and the quality of the traffic and then double down on those channels.
2. Bounce Rate Bounce rate measures the percentage of visitors who land on a website and leave without interacting further or navigating to other pages within the site during their session. Alert the marketing team when the bounce rate exceeds a predetermined threshold or experiences a sudden significant increase. This will prompt a review of the website's performance, and investigate potential issues that can be optimised.
3. Average Sessions Duration Average session duration quantifies the average amount of time users spend on a website during a single browsing session. Alert if the average session duration deviates significantly from the usual range or falls below a specific threshold. Knowing where your customers drop off or spend the most time will help you decide which features to prioritise over the rest.
4. Cost per Conversion (CPC)/Customer Acquisition Cost CPC calculates the total expenditure on marketing campaigns divided by the number of conversions (purchases or desired actions). An alert is sent to the marketing team when the CPC exceeds the predefined acceptable threshold or significantly deviates from the average. This will help maintain the bottom line and recover the cost spent on acquiring new customers at the earliest.
5. Traffic-to-Lead Ratio The traffic-to-lead ratio is an indicator that measures the effectiveness of converting website traffic into leads. It shows the proportion of website visitors who take action to become potential leads. Set alerts for the marketing team when the traffic-to-lead ratio falls below a predefined threshold or when there's a significant decrease in this ratio. This will help the team to optimise pages or campaigns to improve lead conversion rates.
6. Churn Rate The churn rate KPI measures the percentage of customers or subscribers who discontinue their relationship with your product or service within a given period. Trigger alerts to the customer success manager when the churn rate exceeds a predefined threshold. This will signal the need for immediate attention to customer satisfaction, product improvement, or targeted retention strategies to mitigate further churn.
7. Average Order Value (AOV) AOV is the average monetary value of orders placed by customers over a specific period. It measures the average revenue generated from each transaction. Set alerts to monitor significant fluctuations or deviations in AOV, such as a 10% increase or decrease, indicating potential shifts in customer purchasing behaviour or issues affecting order values Monitoring this will help you manage and optimise your revenue and marketing strategy.
8. Profit Margin The profit margin KPI calculates the percentage of revenue that exceeds the costs of goods sold (COGS) and other indirect costs. Implement alerts for substantial decreases in profit margins beyond a certain threshold (e.g., 10% reduction) compared to the standard margins. This signals issues such as increased production costs, pricing inconsistencies, or inefficiencies in the sales process, prompting immediate investigation and corrective actions.
9. Conversion Rate The conversion rate KPI measures the percentage of website visitors who complete a desired action, typically making a purchase, filling out a form, or subscribing to a service. Set up alerts for the marketing team when the conversion rate falls below a predefined threshold (e.g., 2% lower than the average rate) or experiences a sudden significant drop. This will help you with developing marketing Insights on which campaign is working.
10. Cart Conversion Rates A lot of businesses overlook this, this denotes how many online shoppers add items to their shopping carts and either convert or abandon them. Set up alerts to the marketing and product team when the shopping cart abandonment rate/completion rate surpasses a predefined threshold or deviates from the norm. This will help you with developing marketing Insights on what is working.
11. Sell-Through Rate The sell-through rate (STR) is a metric used to assess the efficiency of inventory management. Alerts can be triggered when the STR falls below an acceptable threshold or deviates significantly from the usual range. This will help you optimise inventory and sales analysis. A high STR signals effective sales and good turnover, while a low STR might suggest overstocking or slow-moving inventory.

A graphic showing real-time alerts on issues in website traffic and cart conversions

Metrics to track to make life easier while setting up a control tower

Metric Description
Reorder Point The reorder point is the level of inventory which triggers an action to replenish the SKUs.
Stockout (or) 00S event A stockout (or) Out Of Stock event is an event caused when inventory is exhausted.
Inventory Turnover Ratio The measure of the number of times inventory is sold or used in a time period.
Checkout Abandonment Rates Percentage of customers that are leaving checkout after initiating the checkout process.
Payment Failure Rate The percentage of payment transactions failed out of the total transactions initiated.
First Strike Rate (FSR) Rate of orders where the first attempt to deliver or pick up is successful.
Non-Delivery Report (NDR) A failed Delivery event was attempted by the courier/Logistics partner.
Return to Origin (RTO) A return event is where a package is sent back to its origin due to the inability of agents to deliver it.
Turn Around Time (TAT) Time taken from end to end to fulfil an order.
Gross Merchandise Value (GMV) GMV is a metric that measures your total value of sales over a certain period of time.
Return and Refund rate Percentage of products returned out of total products purchased and delivered.
Customer Lifetime Value Average customer's revenue generated over their entire relationship with a company.
Order Cancellation Rate (OCR) OCR is the rate of orders cancelled by the buyer (or) seller before shipping them.

How to set up a good control tower?

A control tower is made up of 4 elements

  • Data
  • Right people
  • Right technology
  • Right processes

When these things run hand-in-hand, they collectively become your supply chain control tower. Here’s how you can start:

  1. Right people - Include the key people from different teams from the entire org (logistics and distribution, production, procurement, sales and marketing). Typically, all these departments have their own information silos and stakeholders. To set up the control tower, you need to get all stakeholders on the same floor. Important: don’t forget your on-ground staff. No control tower was built solely by executives sitting around a boardroom. You need to get your on-ground staff a seat in the control tower, to be successful at this.
  2. Right technology - There is a lot of tech out there which enables things like supply chain visibility, monitoring of key signals, metrics and activities, alerting, collaboration and resolution of issues, etc. To build a control tower, you need the right technology. In addition, you need systems which collect data from multiple sources and systems. This is the base of the entire system.
  3. Right processes - We’ve already talked extensively about this. To reiterate: you need proper systems around each of these aspects
    1. Finding issues in time
    2. Sending issues to the right person
    3. Helping them resolve the issue
    4. Making sure that issues are actually being resolved in time in a collaborative manner
    5. Analyzing the root causes behind common issues and setting up corrective measures.

Docking Thoughts

To summarise, setting up a control tower is the central command of building a resilient company. It can seem extremely complex, but it’s really not. Start with some small automation which can reduce the manual work. Next, automate some of the problem-solving and decision-making steps. If you can just start off these two, you have a good base. And then it’s off to the races!

Locale is your one-stop solution for setting up triggers and automation!

Locale is a business process operations automation and issue-tracking solution, mainly focusing on two important steps in the operations process:

  • Automating business processes thereby eliminating redundant manual work in the process.
  • Create new incidents every time a new problem occurs and alert the right stakeholders on the operations team. The team just has to approve or reject the changes the AI Agent recommends.

Using Locale, teams need to set up an alert once to ensure that their averages are constantly monitored and any deviation can be quickly notified to the right stakeholders, to take corrective measures and resolve problems within the desired and agreed-upon timelines.

Ready to transform your processes and save the teams time? Talk to us today to get early access and experience the easiest way to stay ahead in the game!

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