Tesla is the world’s leading electric automotive manufacturing company. There are other electric automotive companies like Ford and Toyota. But Tesla has remarkably attracted the attention of customers due to the visionary leadership of Elon Musk. There are various reasons behind the global success and growth of Tesla; its effective supply chain is among one them. Today, we’ll discuss the Tesla supply chain management; its strategies, advantages, and disadvantages.
Tesla Supply Chain Management Strategies
Some of the main strategies of Tesla supply chain management are as follows;
Tesla employs a vertical integration strategy, it allows the company to reduce the cost of finished goods and not rely on suppliers. The company has the capability to manufacture various automotive components, it helps the company to manage SC challenges and quickly make changes in the parts. Tesla develops more software and hardware than any other automotive competitor, and they depend on suppliers for this purpose.
Relationship With Vendors & Suppliers
Tesla establishes a direct relationship with suppliers and vendors for semiconductors, and they move supplies much more quickly than traditional manufacturers that depend on 1st tier suppliers. When there is a shortage of chips, the company procures current chips from vendors and suppliers; launching updates in its software and system fills the gap, which is something that other automobile manufacturers can’t do.
Worldwide Production Units
Tesla has got manufacturing units in various countries and states like battery assembling units in New York, Buffalo, Nevada, and other production units in Netherlands and Lathrop. The company has got various flagship stores without intermediaries and middle parties. It helps the company to earn standard revenue and profitability without involving any 3rd party.
Tesla follows a unique structure and strategic approach by vertically integrating methods and technologies throughout the SC network; ranging from sourcing of material to shipping the vehicles. In fact, the company doesn’t employ sellers or any other intermediaries for the promotion of its vehicles. The automobile brand follows a logistics strategy by the name of “Tesla Direct” and it offers a door-to-door automotive shipment carrier. Many experts and industry critics call it an inefficient approach for vehicle deliveries.
Collaboration With Toyota
Tesla is coordinating with Toyota to implement JIT (just in time) strategy to decrease the stock control expense. It allows the company to keep the outgoing inventory at the minimum level, and it reduces the finished goods storage space. It would also help the company to decrease the risk of holding excessive finished goods in the inventory.
The key to SC-optimized processes and structures are its quality control, procurement, and manufacturing structure. Tesla has got RMS (requirement management system) for ERP structure and venture planning and it is for manufacturing operations.
- Management System: helps in engineering and manufacturing processes
- Facility System: makes sure that its functions are safe and effective
- Intelligent Automobiles: integrate electronics and software technology in its vehicles and make them smart
Tesla employs sustainable supply chain strategies and practices by taking the following steps;
- Sustainable energy sources
- Artificial Intelligence
- Material Science
- Tech Trends
- Dealing with issues of labor, weather change, and material scarcity
Advantages of Tesla SCM
Some of the main benefits and advantages of Tesla supply chain management strategies are as follows;
The key to the success of Tesla SCM strategy is the usage of automation technology. In fact, the company employs automated technology for various SC processes;
- Tracking parts
- Process orders
It helps the company in the following ways;
- Transparent SC processes
- High efficiency
- Lower labor cost
Flexible Inventory System
The SCM strategy of Tesla amplifies the company’s capability to make adjustments in the inventory level. It helps the company to quickly react to the changes in customer demands and it makes sure that the company has a sufficient supply of material. However, it allows the company to decrease the production and delivery cycle short.
Transparency & Visibility
The SCM strategy of Tesla helps the automotive brand to achieve high visibility and transparency across various SC processes and operations. It benefits the company in the following ways;
- Recognizing potential issues
- Managing delays and shortages of components
- Taking corrective actions
- Managing inventory better
- Making sure customers receive parts on time
Disadvantages of Tesla SCM
Some of the main challenges and disadvantages to the Tesla SCM strategies are as follows;
Lack of Resources
The SCM strategy of Tesla is a bit new, and the company is developing various parts and pieces of its process. It means that the company doesn’t have sufficient resources to respond to the unexpected demands of customers.
The company heavily depends on the quick availability of parts and components from suppliers to its manufacturing plants. It demands the company establish a complicated network of logistics partners; the disruption in the network would cause delays in the production process.
Quality Control Issues
Tesla depends on its automation technology for processing and inventory management, and it amplifies the risk of quality control issues. The system would become obsolete if the company fails to maintain it properly. Therefore, the company should properly update its system in order to maintain the quality of its products.
Conclusion: Tesla Supply Chain Management
After an in-depth study of Tesla supply chain management; we have realized that the automotive brand follows a smart SCM strategy to manage its various SC processes. If you are learning about the SCM strategy of Tesla, then you should keep in mind the abovementioned factors, advantages, and disadvantages.
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