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On March 1st, ESADE Alumni organized a talk in its refresher programme entitled ''How to build an operating model for e-commerce: new ideas which, when well-organised, can suggest how to construct back-end operations.'' The event was presented by Carles Roig, associate professor in ESADE’s Department of Operations, Innovation and Data Sciences and program director of the Executive Master in Operations and Innovation.
Citing many examples of big companies, such as Dell and Amazon, that have developed business models based on e-commerce, professor Roig examined the most recent changes in the world of commerce, and also the benefits and complexity of on-line business opportunities.
E-commerce supply is both complex and demanding and gives rise to ideas that are both generalised and mistaken. Internet can reach all types of consumers, but this does not mean that the product in question must target a large market segment, hence the professor’s insistence on the need to define a focal point, a scale and priorities.
Carles Roig defines e-commerce not only as the modus operandi of a conventional company but also as a business model in itself. He reminded the audience of the need to justify the value proposition – a key factor in consolidating a business. Operating on-line is not merely displaying goods or services in non-traditional ways, but the ability to deal with new supply requirements that companies must be aware of in order to optimise their resources.
In this type of business, Roig explained, logistics is a major distinguishing feature and it must be organised to handle demand in the best possible way because despite being unpredictable, demand can be forecast by understanding consumer behaviour and having experience in this type of market, therefore well-established players have a head’s start. Before opting for this business model, it is essential to have effective responses to deal with demands for customised products, frequent returns and incidents.
The professor underlined the importance of prioritizing the focal point, i.e. the product or service on sale, and pinpointing the industry which the entrepreneur is most familiar with or knows better than anyone else. He also pointed out the need to segment the scale because although the internet exponentially increases the ability to reach a large number of people, “not everyone wants the same sort of coffee, but offering a thousand different types of coffee would send costs through the roof.
Productive activities call for two key elements: an in-depth knowledge of customers’ needs and preferences - and effective planning. ''The ability to plan is an essential skill, and likewise the ability to interact in order to synchronize the parties involved and enable them to respond together,'' said Carles.
On the other hand, a firm that understands its customers will know what they will or won’t accept. However, because there are no sales staff in the e-commerce model, it is more difficult to know individual consumers than in a traditional model, hence the increasing importance of Big Data.
It is important to consider what this change of business model implies and its main pros and cons in the area of costs. Firstly, inventory costs are lower but transport costs are higher. Secondly, the lack of physical outlets causes costs to plummet, despite higher information costs. Finally, the cost of technological obsolescence is minimum, because not many gadgets or equipment are needed.
Professor Roig explained that a firm’s service policy should be based on four cornerstones: product availability, time and reliability, communication and expectation management, and adequate market segmentation. He emphasised that corporate reliability was more important than speed of delivery. ''Speed is important, but trust is even more so.'' In fact, only 2% of consumers say they would pay a premium for better delivery according to a survey by McKinsey & Company.
Firms must use planning and market knowledge to build an operational back-end based on the design of a network to distribute their products or services, the selection of a logistics partner and delivery models, among others. Hence the need to analyse stock management, which is usually in line with the life cycle of the company or product.
The systems used by logistics providers change constantly. Traditional companies such as MRW, DHL, UPS, Seur and Nacex have plenty of experience in this sector. However, other options still in the learning phase based on the collaborative economy are being developed, e.g. Glovo and Packagepeer, and also last-mile delivery, i.e. the creation of networks or repositories where products can be picked up, such as Yupick and Hubbl. Carles Roig also mentioned future options currently under discussion such as, for example, delivery by drones, self-drive vehicles or the construction of underground pipes to transport products.
The talk focussed on how e-commerce can be managed well on the basis of a variety of factors. Firstly, thorough knowledge of the market and the customer. Secondly, effective planning to ensure good stock management and low logistics costs. Thirdly, choosing the logistics provider best suited to the company’s goals, and finally, the ability to boost consumer trust. Programme
ESADE Alumni invites you to ''How to build an operational e-Commerce model: 9 organisation ideas to get the creation of an operational back-end system off to a good start'', a Refresher Programme talk by Carles Roig, associate professor in ESADE’s Department of Operations, Innovation and Data Sciences, and director of the Master in Operations Management programme.
e-Business opportunities are proportional to the challenges arising from a complex, demanding supply. Effective operations on the internet are a gateway to an enormous and highly atomised market. It calls for fulfilling new supply requirements in which logistics is a core distinguishing feature: it is advisable to have a system capable of handling orders generated by unpredictable demand, placed by customers who require customised options, where returns are commonplace, and where dealing with incidents and exceptions are part of the service process.
Recently established digital companies, and traditional companies reinventing themselves in e-commerce too, must be sure to develop an operational back-end capable of responding to customer demands in this thriving sales channel. Carles Roig
Has worked in Scandinavia, France and Latin America. Has held a variety of executive posts in large companies: co-CEO of Nedlloyd Districenters; regional director of AITENA and LOACSA (BBVA's logistics services corporation); manager of Schenker; and managing director and board member of Logipoint (Dragados SPL).
Director of ESADE’s Part-Time MBA. Carles combines teaching in ESADE’s Department of Operations Management and Innovation as a professor of Supply Chain Management, Strategy and Operations Management, with his work as a corporate consultant and adviser.
In the course of his career, he has worked a great deal for companies in several sectors, including particularly: Volkswagen, Seat, Nissan, JATCO and NSK (automotive); HP Consolidation Center, HP Sales, IBM and Digital Equipment (computing); Sanyo and Fisher (electronic FMCG); Nutrexpa, Nestlé, United Biscuits, Ralstom Purina-Group Europastry (food); Planeta DeAgostini and RBA (publishing sector); Oral 'B and Revlon (cosmetics); Electrolux, Bosch, Siemens and Candy (white line); and Inoxcrom (office supplies). He has also developed projects for Dragados SPL, retail chains, town halls and autonomous regions of Spain, and for many SMEs.
He is a regular speaker at national and international symposia and conferences, and has published several articles and studies. He has been a professor at ESADE since 1998. Each member may bring a maximum of one guest.
See you there!
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