Supply chain involves the provision of goods by a stakeholder. The process involves goods being brought from a stakeholder and delivered to another stakeholder. It coordinates the flow of materials, services, and information within an organization and its ecosystem. A good supply chain design should ensure efficient allocation of resources and address ethical implications. It also includes other aspects of operation such as sales and order processing, transportation and distribution, operations, inventory and materials management, finance, and customer service. This paper describes the supply chain design for Tesla Company and illustrates how the organization has achieved phenomenal success in the motor vehicle industry.
Tesla Company purchases over 2000 parts that are sourced globally from at least 300 suppliers. In this respect, the company has to develop close relationships with suppliers. The company’s goal is to promote sustainable transportation by delivering compelling electric cars to the mass market. Tesla Company designs, develops, manufactures, and sells high-performance fully electric vehicles and electric powertrain components. The company also launched a home battery division that seeks to provide alternative power sources for homes. The company has developed a Giga factory and a battery factory that will help it meet the demand for its electric vehicles. Figure one below depicts the supply chain for the company consisting of its supplier and other independent units that serve to the development of the electric cars.
Tesla Motors Company has to ensure that it reduces the time it takes to source for materials and deliver vehicles to customers. In this respect, the company has developed a Giga factory that was made using materials sourced from North America. The geographical closeness to suppliers reduces the time taken to source for the materials significantly. The company has also built strategic alliances that allow it to expand its supply chain. The company has partnered with Lotus to help it fast track production in England. The partnership also allows Tesla Motors to avoid storage costs of unsold cars. The Roadster Model is manufactured by using Lotus equipment and the two companies share the same platform. Additionally, the company partnered with Panasonic to deliver its battery needs. Panasonic is the world largest manufacturer of the automotive grade lithium ion battery. The Lithium-ion batteries are used in the Tesla Model S vehicles, which allows the company to meet its margin and costs for Tesla Model S vehicles. The collaboration with Panasonic also allows Tesla to scale up its Research and development sector for the development of the next generation of automotive grade cell batteries. Furthermore, Tesla has a partnership with Daimler that allows Tesla Motors to develop advanced electric vehicles and battery systems. Besides, the company has partnered with the Toyota Company to develop production systems, electric vehicles, and provide engineering support.
The company has gone to great lengths to sustain the availability of vehicle parts. In this respect, the company has made partnerships with suppliers such as Sotira from France to supply the carbon fiber body used in the manufacture of its vehicles. Lithium is a rare mineral whose availability is constrained. The Panasonic partnership allows Tesla Motors to import lithium from China
Another significant part of Tesla’s supply chain is the Giga factory. The plant is meant to make all production needs in-house. The current supply chain that involves the sourcing of raw materials from far away countries is inefficient and results in delays. The Giga factory will save the company a lot of money. It will also help bring down the cost of its batteries. Currently, the cost of manufacturing batteries makes up 25 percent of electric cars production. Therefore, the Giga factory will help Tesla Motor develop a $35, 000 Tesla electric car for the middle class.
Another factor that makes Tesla Motors successful is the option to do direct sales. Tesla Motors sells cars directly to customers, unlike the traditional method of selling them through dealerships. The electric vehicles also upload software online that allows technicians to repair the vehicles without actually touching the cars. The company’s philosophy of customer service is unlike any other automotive company. Tesla Motors often sends technicians to the homes of their clients to maintain their vehicles. The convenience makes customers prefer Tesla Motors vehicles, and this translates to high repurchases. The company has also invested in making vehicles with few moving parts thereby reducing the rate of failure, which means the company does not rely on service centers to support the car. Bypassing middlemen allows Tesla Motors to make higher profits from the car sales.