Blog Post - Frank Kochenash , Apr 3 2020

The importance of maintaining situational awareness in eCommerce

The importance of maintaining situational awareness in eCommerce

The massive amounts of news and news about news over the last two weeks reminds me of the importance of maintaining situational awareness (SA). I learned the importance of SA while in the US Navy. In almost every after-action report from a collision at sea or grounding, lack of situational awareness is cited as a leading cause of the mishap. In many ways, big companies are similar to big ships. They don't necessarily move very quickly, but their reactions to stimuli are rather predictable. in retrospect, most collisions at sea are predictable tens of minutes, if not hours, in advance. But various factors like darkness, fatigue, poorly trained operators, broken equipment, and overwhelming or misinterpreted data can cause two ships to relentlessly plod toward each other. Without stretching the metaphor too dar, I want to apply the key elements of situational awareness to the current Amazon/eCommerce environment.

Trust your indicators. But always corroborate them

Is that ship on radar on a collision course with you? If the radar says so, treat it so. But check for visual contact. Hail them on the radio. Check sonar. In the world of eCommerce, this has parallels. The press reports that Amazon is pausing POs for some categories. Ok, there's some truth in the press, but does that mean that Amazon is also pausing outbound customer shipments? Check your Vendor Central account. Call your buddy who works for a different company. Call your agency and ask them what they're observing across vendors. Same with delivery promises. See what the delivery timelines actually look like. It's foggy out there right now. Trust your signals, but corroborate them to confirm what you need to know. Which leads to the next principle...

Prioritise what you need to know

In a crisis at sea, or in the reactor control room, the information can be literally overwhelming. The Three Mile Island reactor incident investigation found that the sheer number of visual and audible alarms during the crisis so overwhelmed operators that they could not understand nor take effective action. The outcome was to construct more thoughtful alarming systems. As an operator, this means prioritising what you really need to know - ask for and get what you need; disregard the riff-raff. Course, speed, depth (I was a submariner), range to nearest contact, which side of you is the contact on, and contact's bearing drift are paramount (Trust me - it can be very difficult in a crisis to understand these seemingly basic and essential data points). In eCommerce, focus on customer-ordered units, open POs, new POs, sellable inventory weeks of cover, and your direct performance metrics. Other signals may be helpful, but they key things to understand are what is being sold, and at what rate, and what can you supply and at what rate.

Verify expected response

At sea, if you manoeuvre to the right, you would expect your projected closest point of approach to open (reducing chance of collision). But check. Did the other guy move left? Did your ship actually turn? Did the helmsman manoeuvre you to the course you actually ordered? Make sure. In eCommerce, if you confirm a PO and ship products, are you seeing receipts? If you believe more consumers are flocking to Amazon, are your PDP metrics and AMS metrics confirming that and are you capturing them? If not, why not? Questions underlying assumptions if anticipated response is not found.

Plan ahead

What if the other guy did turn the wrong way (i.e. left)? What id your steering system is broken? Or if the helmsman misheard your oder? You can't speculate endlessly, of course, but you can anticipate some likely scenarios. In the COVIS-19 response guidance that we released last week (here) we identified some scenarios to consider. I list a few of those below. We would be happy to talk through any of these with you.

  • Amazon may pause Purchase Orders for 1P products or throttle FBA replenishment
  • Amazon may not replenish some or all of your products
  • Amazon may dampen customer demand for your products by extending delivery promises
  • Amazon may stop customer orders for your product
  • Amazon may reduce or stop traffic acquisition efforts for your products or category or cancel merchandising events
  • Customer demand for your products may increase unexpectedly and Amazon may order more
  • Amazon may reverse any of the above with no notice
  • Amazon may delay or cancel Prime Day

We've seen some or all of these, to varying degrees, across Amazon's global markets. They are not normal scenarios, but you should consider them and inform your response by the key data points you need: actual sell-through rates, inventory on hand and on order, new PO rate, and ability of your supply chain to deliver or provide alternative fulfilment.

Lastly, I urge brands to consider the recovery scenario. Consider various scenarios of recovery, some sooner, some later within the expected range. How do you know a recovery is starting? What are your actions? I expect things will happen very quickly once recovery begins just as it did when crisis hit a few weeks ago.