E-Commerce Management Tools
In this blog post, you won’t read about the latest software tools, inventory management systems or marketing tactics you need to scale your business. There are many nice lists and comparison blog posts about your ideal e-commerce software stack out there.
Instead, we want to shed some light on the classical management tools that will help you develop a one-person show with assistants to becoming an actual, scalable organization.
WHAT ARE MANAGEMENT TOOLS?
Generally speaking, management tools are all techniques, activities, and frameworks that you use to direct, align, and control your organization’s work. Everything you do when you interact with your team or your company can be considered a management tool in one way or another.
WHAT’S SPECIFIC ABOUT MANAGEMENT TOOLS FOR E-COMMERCE?
All companies and entrepreneurs will use management tools, and some tools are universally a good idea. But the e-commerce industry poses some challenges to the companies operating in it that make a special toolset necessary. These challenges are:
- Speed: E-commerce firms often operate at immense speed. Speed is at the core of their profitability, as the question of how quickly you can turn around your stock will determine your cash flow and refinancing cost of your growth.
- Complexity: E-commerce operations are often complex. A reason for this is the above-mentioned speed that forces you to do multiple things at once. Additionally, you deal with a variety of different versions for each of your value stream steps: There are multiple vendors with different conditions, logistics, and 3PLs vary from country to country or location to location and sales channels have different requirements regarding shipping and offer structure. Not speak about the multitude of fulfillment options. Above all, data management, especially when you are a reseller, adds complexity.
- Remote operation: Many e-commerce firms operate remotely, which makes managing teams and securing a great flow of information challenges.
- Operating at scale: Most e-commerce companies have to operate at scale, i.e. move large numbers of items to generate profit. These large quantities catalyze defective processes and bring problems in the management to light. If you want to do
- Cash-intense business models: Despite fulfillment models like dropshipping aiming to eliminate the cash-heavy stock-buying, most e-commerce companies still require a large amount of cash.
Given this specific set of challenges, there are various management tools that have proven highly valuable for managing an e-commerce operation. Let’s dive right in!
Meetings tend to get a bad reputation as a waste of time and productivity. Especially in e-commerce which is strongly driven by data, insights and KPIs, sitting down and talking to people might feel unnecessary sometimes. Because it’s all in the numbers, right?
Well, it’s not that easy. You will often find that numbers are not as unambiguous as you might think. Furthermore, the actions these numbers trigger will be interpreted differently by each team member.
Even more important, you want to develop your company further to become (or stay) something great. This requires you to have a clear strategy in place. And you have to align your team behind that strategy (read below on strategy execution).
Meetings – and thus a free and effective flow of information – are the single most important tools you have to accomplish that. A lack of communication is the biggest but – fortunately – an easy to fix problem of many e-commerce companies from our experience.
So what meetings do you need to achieve that operative and strategic alignment of your team?
THE 1-ON-1 MEETING
The 1-on-1 meeting is one of the most valuable and most neglected meeting type. The basic setup is that you spend a fixed amount of time with each of your team members or direct reports.
The interval of the 1-on-1 meeting depends on the task-related maturity of the respective team member and the dynamics of your operations.
Two examples: A very experienced buyer in a stable setup might be fine with a 1-on-1 spaced out as far as 2 months. A rather inexperienced program manager working on setting up FBM processes with a new 3PL (strong dynamics and insecurities) will rather need a weekly (or even bi-weekly) 1-on-1.
What’s critical about the 1-on-1: It’s your employees’ time. They determine the agenda, and they are responsible for running the meeting. Do bring in specific topics you want to discuss with them, but give them at least two-thirds of the time to speak about what’s on their mind.
Often, a wealth of insight, both into your operations and potential improvements on the one hand and your employee’s development goals, on the other hand, is the result.
Once you have set the 1-on-1 meetings up, resist the temptation to cancel them altogether once times get hectic. They’re usually one of the first victims in busy times, but making them an integral part of your operations is a key success factor.
THE HUDDLE/DAILY STANDUP
With the high speed at which most e-commerce companies operate, it is critical to a) keep everyone up to speed about new developments and other relevant information and b) identify and communicate backlogs that affect other players in the company regularly and quickly.
Example: If one of your two 3PL partners has a problem, customer support needs to know that. If one of your credit cards has an issue, your accounting team needs to share that with your purchasing teams. The huddle is a great platform to share those small but relevant operative bits and pieces.
How it works: Plan a meeting every morning. The goal is to keep it short. The huddle can last between 15 and 30 minutes. Exchange all relevant topics for the day and the majority of the group, like new information or new customer information.
Postpone more extended discussions to one of the other meeting types. After the huddle, your team members should be crystal clear about the priorities for the day.
Also, this recurring meeting is great to reinforce the strategic direction you’ve set for your company.
THE TEAM MEETING
Gather your team for 1 hour to 90 minutes every week or every two weeks. Assign the responsibility to design a team meeting agenda to one of your team members.
The goals of the team meeting are to discuss topics more in-depth, derive operational measures for strategic decisions, and thus align the team with the company’s strategic goals.
Also, use this meeting to review all relevant metrics for reaching your strategic goals, so your team is clear about whether they’re on track to reaching the goals.
Team meeting topics also include discussions about process improvements and discuss questions about specific tasks or cases.
MEETINGS RELATED TO STRATEGY EXECUTION
No matter if you use OKRs or another operationalization of your strategy, you want to review the metrics and topics you have identified as critical for your strategy. Define a recurring meeting for each of these topics to create transparency and accountability for the subject.
One of these topics will undoubtedly be customer or client-related, but there are limitless possibilities. Let’s say one of your strategic measures is to cut purchasing time by 20%; you want to implement a recurring meeting that tracks progress and pushes this goal.
As we always say, you need to assign a person to every important task you are doing. Otherwise, it won’t get done.
Staff these meetings with the people that have the most knowledge of the matter at hand, regardless of hierarchy or title. This knowledge will also give them the power to make good strategic decisions.
THE STRATEGY WORKSHOP
Every three months, take one to two days to review your strategy and its operationalization. Are you on track? Have parameters changed? Do you have to adapt?
Your most knowledgeable team members should be part of this. You can also use this meeting to decide on organizational questions on how to set up your team.
Every three months, gather your whole team and present the current strategy, showcase successes and share best-practice. Also, include an open mic session where people can ask questions or raise concerns.
This meeting serves to align your team with the mission and to create clarity about the strategic direction. Especially for distributed, remote teams, as they are common for many e-commerce companies, this type of meeting will help create cohesion.
Now, you might feel that these are too many meetings. If you properly manage and space out these meetings, chances are that you will actually spend less time in meetings overall. Simply because you won’t need them anymore, having enough regular touchpoints.
“What get’s measured get’s managed” – This famous quote of management thinker Peter Drucker is more relevant than ever in our data-driven world. If you want to improve certain aspects of your business, the first step should be to start measuring these aspects.
As you want to focus on how your company is doing, your measuring should usually be related to your outcomes or performance. Additionally, you need to narrow down your focus and the set of variables you measure.
You need to find the Key Performance Indicators (KPI) that drive your business.
So, how do you arrive at a meaningful set of KPIs for your e-commerce company? Here’s the general approach (see a list of suggested KPIs further down).
STEP 1: ASK YOUR TEAM HOW THEY MEASURE THEIR PERFORMANCE.
Your team will have implicit performance measures already in place, whether they track them or not: They will have a good feeling over what makes their performance good.
So the first step is asking them. E.g., the account management team will know that upselling existing clients is a good thing, even though they might not be measuring it. Collect all that implicit knowledge.
STEP 2: QUALITY-CHECK THE KPIS YOU HAVE GATHERED
A beneficial KPI system should follow some rules. Check the KPIs you have collected against these criteria.
THE THREE MS
Ask yourself these questions:
- Is this KPI meaningful? Why is it important for my business?
- Can I measure it? It doesn’t make sense to track something that you can´t measure.
- Is it manageable? Monitoring indicators you have no control over will only stress you out.
LEADING VS. LAGGING INDICATORS
You want your metrics to be as early in the process as possible and that they are causing outcomes, not depending on inputs. E.g., revenue will, in most cases, not be a good KPI; measuring new incoming orders or customer acquisition would be better as they predict the future revenue.
OUTPUT, NOT ACTIVITY
You want to measure output, not activity. After all, you want to achieve results and not just keep people busy.
STEP 3: SORT THE KPIS YOU’VE GATHERED INTO A MATRIX OF STRATEGIC GOALS AND STAKEHOLDERS.
This step ensures that you measure the things that are defining your business success and are relevant to your strategic goals.
Decide on your strategic goals for your company. What you measure highly depends on where you want to go. If you want to increase sales by increasing your retention, you will measure different things than if you wanted to enter new products. Also, it makes sense to look at strategic goals, as they probably are a bit more stable than your quarterly OKRs.
Ensuring all stakeholders are covered has proven valuable in designing a 360° KPI system that considers all parties relevant to your business.
It’s unnecessary to have a KPI for every strategy/stakeholder combination; it would be sufficient to have at least one for every strategic goal and every stakeholder. However, filling every combination will give you a super-comprehensive KPI system. Add KPIs as needed. Also, make sure all teams have KPIs they can work with. If you can’t come up with KPIs for one of your teams, ask yourself why that is.
Also, take a look at industry standards. It might make sense to include some KPIs that are common in the industry to benchmark.
STEP 4: SET UP A PROCESS TO MEASURE AND CAPTURE THE DATA FOR YOUR KPIS AND TO REPORT ON THEM
Define a person responsible for collecting KPIs, usually in the controlling department.
Define where the data is coming from, who collects it, how often, and where and how the KPIs are calculated. Create a visual representation of the numbers, as visuals are so much more powerful than numbers alone. Such a KPI dashboard can be a powerful tool.
You also have to decide if you want to calculate the KPI manually or automatically. That depends on the frequency you want to look at them. Automated data retrieval and calculation have the benefit of having data available at no time and effort, any time.
If there’s somebody who is manually compiling data or documenting the KPI, let’s say for the weekly meeting, I’ve found that this is a super valuable exercise as people need to spend time looking at their performance.
“Sometimes, creating a report is more valuable than reading it.”
Please also note: There will always be important things that are hard to measure, like employee engagement; keep these in mind besides all your measured values.
KPIS FOR YOUR E-COMMERCE COMPANY
Shopify has set up a great list of KPIs for e-commerce. Find the full list here.
Additionally, check which KPIs will be important to manage your company and all its stakeholders well. We suggest adding HR-related KPIs. Also, make sure all your strategic goals have KPIs in place to measure target achievement. Read more about how to convert strategy into something measurable and actionable next.
Strategy Execution Tools
A strategy is a plan you make for your business to achieve your vision and support your mission. The usual time span will be 3-5 years; however, e-commerce companies tend to use shorter strategic cycles.
A strategy can be defined by the market and customer segment and the unique selling proposition you provide; add everything that sets you apart from your competition. You have a simple but powerful strategy set up.
Arriving at a strategy is often not the problem, however. Things get tricky when you try to execute that strategy. Let’s assume your strategic goal is to become the market leader in exclusive hats and caps for Europe with a dropship model in the next three years. What does that mean for your purchasing team in the next three months?
This is where strategy execution comes into place. It’s the activity of translating your mid-and long-term goals into actionable and measurable steps.
Here are the tools.
ROADMAP & OKR
Once you are clear on what you want to achieve (your “end-state”), you can start creating a roadmap. The roadmap is your first step in executing your strategy. It defines where you are right now, where you want to be according to the strategy and then describes which milestones you need to reach to get to where you want to be.
You can compare it with the literal roadmap: You are in New York City and want to go to Boston; the roadmap will tell you which highway to take and which cities you need to pass on your way.
Let’s use an example to play through the idea of a roadmap.
Our example strategy could be: We sell kids’ books for the DACH-region (German-speaking) for ages 2-4. We have a low price strategy: Our books are of simple, stable quality so we can offer them at very affordable prices. We sell them online only.
STEP 1: DEFINE WHAT’S NECESSARY
To create a roadmap, make a list of things necessary in your strategic target state. To guide this, stick to the categories People, Processes, Tools and Partners.
For the above example strategy, the list could look like this:
- People: We need an e-Commerce specialist. We need a specialist for content, SEO and affiliate marketing. We need an expert in fulfillment.
- Processes: We will need a book creation process that is lean and included market demands. We will need a fulfillment process for online orders. We will need a demand-planning process to order the right books for production.
- Tools: We need to set up an online shop. We will need to set up a sales funnel, social media accounts and other lead generation tools.
- Partners: We need a partner that can output 100,000 books in solid quality at EUR 1,20 maximum landed cost per book. We need a distribution partner to send out the books to the clients.
STEP 2: WRITE DOWN WHERE YOU ARE TODAY.
In the next step, you define where you are today. Again, it makes sense to stick to the categories.
- People: Our team consists of a writer, an artist and a publisher.
- Processes: No real process landscape in place.
- Tools: We have an Instagram account.
- Partners: We work with a publishing company that puts our book onto the market in smaller quantities.
STEP 3: DEFINE AN EFFECTIVE WAY TO CLOSE THE GAP
Now create the actual roadmap – a high-level execution plan on how you will close the gap between today and your strategic goal. This road-map will be the basis for goal-setting for your organization and successful strategy execution. The roadmap will always have a time component as it lays out the milestones in a chronological way. In our example, the roadmap could look something like this.
- People: Hire an SEO marketer in the next month. Hire an eCommerce Specialist in 2 months. Hire a fulfillment expert in 4 months’ time.
- Processes: Build a book creation process until 1 month from now. Have the demand planning process in place three months from now. Have the eCommerce processes, including fulfillment, in place five months from now.
- Tools: Build an online shop four months from now. Define the fulfillment process until five months from now.
- Partner: Shortlist potential printing and distribution partners until one month from now. Decide on a printing partner and a distribution partner two months from now.
This strategy map gives you a rough path to reach your strategic targets. The next step is to operationalize further.
Don’t worry about being wrong. You most likely will be here and there. But the guidance the roadmap gives you enables you to operate effectively. And you avoid being paralyzed by too many choices.
STEP 4: OBJECTIVES AND KEY RESULTS
Use the milestones identified in the roadmap to lay out the most critical tasks for the next three months. An excellent tool for this is Objectives and Key Results (OKRs). You are breaking down the 1-to-5-year horizon into manageable steps of three months. This clarity will help your team to set the right priorities. You will have to handle your regular business in parallel while working on strategy implementation. Staying focused on three topics per quarter will make sure your resources are used most effectively.
Check out how to use OKRs here.
Among the action items and results you have defined in your strategy execution exercise, there will be more complex, interdependent endeavours that need to be run using project management tools.
WHAT IS PROJECT MANAGEMENT?
Project Management describes all activities related to finalizing clearly described set of tasks that occurs only once. Usually, different people in your company will be involved.
Before you start bigger change efforts in your organization, like, for example, implementing an ERP system, it makes sense to plan out the project. This requires setting the guidelines for three areas:
- Scope: What is it that needs to be accomplished in the project. What is part of the project and what is not? A clear scope will help you not get overwhelmed by the next and the next field you could work on but focus on your initial plan. Also, it will make this decision clear to everyone in- and outside the project team.
- Time: Next, you need to plan how much time you need to accomplish that scope—tools like work-breakdowns help you arrive at estimates for the project’s overall duration.
- Budget: Lastly, you need to decide how much money you are willing to spend on the project.
The three dimensions, scope, time and budget, form the project management triangle and are interdependent. Increasing the scope without granting more time will mean you need more budget.
The project manager’s role is similar to that of the product manager, as in having no disciplinary power over the project members. Still, the project manager’s task is to make sure the project is completed complying with agreed-upon metrics (in-time, in-scope, in-budget).
The toolsets the project manager has for this are:
- Project plans and project management software
- Reporting to the leadership (every project must have a sponsor in the organization)
- Communication, communication, communication.
Finally, the project manager’s role is that of an integrator, which brings together all people, information, and decisions that need to be combined to complete the project.
An integral part of growing your e-commerce operation will be finding the right people to execute your strategy. That’s why your hiring should be operationalized in the same way as the rest of your strategic goals – with a roadmap.
DEFINE YOUR TALENT NEEDS
Your talent demand should already be part of your strategic roadmap. If you don’t have that yet, it’s the major step to get more proactive with hiring. There are three simple steps involved:
- Write down where you want to be in the time-scope of your strategy,
- Write down where you are today,
- Write down the steps to closing that gap and when they need to happen.
If you do that for your people, this could look something like this.
- I need an effective drop-shipping team of five people and a great customer support team of 2 reps in 1 year,
- I have one person that deals with drop-shipping today and two marketing people who also take care of customer support,
- I need to hire another drop-shipping person in 3 months, one more in 6 months and two more in 9 months. I need to hire one customer support rep in 3 months and one more in 9 months.
So this will be your people roadmap; it is not yet your recruiting roadmap. The difference is the number of positions that you can fill by developing people you already have into a job.
This will not solve the majority of your people demand but change numbers here and there.
Assume you decide to develop one of your marketing people into a customer support manager – the recruiting demand for customer support reps will be -1. Still, you might need to hire another marketing person.
THE RECRUITING ROADMAP
With the information whom you need to have hired by which time, you can start drafting your recruitment process for the next year.
AVERAGE HIRING TIME PER POSITION
You are in a comfortable position now to know when you need to fill a specific position. That enables you to start early enough.
Now, the question is what early enough means. If you have hired and documented your hiring efforts in the past, you can use the time it took to fill a position to project the future. If you don’t have that information, consider the following:
- Plan enough time for all kinds of positions. Starting the hiring process three months before you want to have a position filled is a good rule of thumb.
- Particular rare types of talent might be harder to find than others. Plan more time for niche positions.
- Use the talent pool that you have created in the first step to activate passive candidates.
- If you can’t tap into your talent pool, use conventional employee recruitment strategies like job platforms, recruiting firms. If you use one of these for the first time, plan in some extra time.
CREATE JOB SCORECARDS
The job scorecard will be the basis for your hiring efforts. They’re based on your org-chart and your strategy and include:
- The position’s mission
- Deliverables and
- Competencies you’re looking for in a candidate.
The good thing about job scorecards is that you can use them to grade candidates you interview during your recruitment process. They are more hiring specific than your role descriptions but less targeted to job platforms than your job posts.
USE A STRUCTURED SCREENING AND INTERVIEW PROCESS
When going through the screening and interview process with candidates, make sure you follow the same process every single time to ensure consistent and comparable results.
Break down the interview questions and stick to the script. While you lead the interviews, use the job scorecard to grade the relevant metrics.
As you have planned your hiring process well in advance, you can already block the time for these interviews with all the people you want to be in the interview.
HAVE GREAT RECRUITMENT PROCESSES
Spreadsheet-based or manual recruitment processes are risky:
On the one hand, you are risking your employer reputation with a process that isn’t fair, transparent or human. Many of us have been in the situation to apply somewhere and then don’t hear back. In today’s review-driven world, this frustration in the form of a negative review can quickly harm your reputation and make finding the right talent even more difficult.
On the other hand, you are at risk of missing out on great candidates if you handle all applications manually.
We recommend using some form of recruitment software. Many modern HR software suites like Personio include Recruitment features. Using a full suite has the benefit of a seamless transition from recruiting into onboarding.
Continuous Improvement Process
Continuous Improvement is one of the most powerful tools or mindsets out there. Lean has popularized the concept of Kaizen, the Japanese term for continuous improvement.
The idea is to build structures that enable the organization to improve each process continuously. Those structures include Continuous Improvement Circles or places to collect improvement suggestions.
There are several advantages of continuous process improvement over improvement projects:
- More cost-effective
- produces results continuously and long-term
- keeps processes up to date
- addresses quality issues as they occur
- uses the expertise of the people who are the closest to the problem
- makes sure that process quality is continuously monitored
ESTABLISH A CONTINUOUS IMPROVEMENT MINDSET
Firstly, it’s necessary to build the right mindset in your organization. Only when people feel safe to admit to mistakes will they be brought up in meetings or reporting. You need to learn about these mistakes to improve.
KEEP EXECUTION SUPER SIMPLE
Implement a regular session to collect process improvement suggestions or integrate them into your daily huddle or weekly team meeting.
Use simple tools like spreadsheets and don’t get hung up on the format – it’s the content that counts.
Collect possible improvements, order them by priority and assign them to be fixed. A great source for potential improvements will be your customer support team. They know a lot about what your customers don’t like about your products, fulfillment or service.
Be sure to follow up so that things actually improve, and your team will soon develop a hunger for it. Continuous improvement is like a muscle you can train. Use the 5 Whys and Gemba Walks or Calls to dig deeper where necessary.
Standard Operating Procedures
Use standard operating procedures to create a basis for process improvements and a knowledge base for onboarding new team members.
Additionally, standard operating procedures will help you to
- Ensure quality: SOPs will help to maintain a constantly great execution, e.g. in customer support. You create the basis for a specific case type to be handled in the same way each time
- Understand how your business actually operates: Especially after or during extensive growth, you often lose transparency over how your teams operate. Creating standard operating procedures will bring back this knowledge
- Build a process landscape to enhance growth: Having a well-defined set of procedures will make it easier to add new procedures.
Read all about creating great standard operating procedures here.
Integrated Financial Planning
Last but not least, you can be as great as you want with the above, but if the numbers don’t work, you are screwed. The challenge with fast-moving e-commerce firms is that financial planning is complex.
Generally, there are a variety of things that will impact both cash-flow and profit:
- Your sales
- Your inventory cost
- Your fulfillment cost
- Your operational cost
- Your project-based cost (e.g. for new channels, technology, etc.)
The idea of integrated planning is to integrate your roadmap with your financial planning. This ensures sufficient cash at every point in time.
Let’s say your purchasing team is stocking up in inventory; simultaneously, your development team is making a bigger investment. At the same time, sales decline due to some political reasons (Brexit, trade tariffs, etc.).
Not a great scenario, is it.
The idea behind Integrated financial planning is to tie all your different cash inflows and outflows together with the underlying business planning (the roadmap) and your sales and inventory forecast to sync your business roadmaps with your financial means.
If you use an ERP system or other comprehensive software to manage your e-commerce business, try to realize this planning process software-based.
But regardless of the tools you use, make sure all parties in your company that influence cashflow talk regularly to your finance people.