Tesla’s Tesla’s Supply Chain Contents 0101 0303 0202 0404 CURRENT STRATEGY CURRENT SUPPLY CHAIN STRUCTURE ANALYSIS OF PROBLEMS SUPPLY CHAIN DRIVERS 0505 RECOMMENDED SOLUTIONS Contents 0101 CURRENT STR.
Tesla’s Supply Chain Contents 01 CURRENT STRATEGY CURRENT SUPPLY CHAIN STRUCTURE 03 SUPPLY CHAIN DRIVERS ANALYSIS OF PROBLEMS 05 02 RECOMMENDED SOLUTIONS 04 Contents 01 CURRENT STRATEGY CURRENT SUPPLY CHAIN STRUCTURE SUPPLY CHAIN DRIVERS ANALYSIS OF PROBLEMS RECOMMENDED SOLUTIONS Competitive Strategy Product Luxury electric vehicles with the latest smart technologies and innovations 01 To accelerate the world's transition to sustainable energy Customer Background 02 Middle class consumers who are willing to pay a premium Customer Profile 03 Concerned about the environment, sustainability, and has interest and belief that EVs are the way of the future 04 Location Consumer base is primarily in the US, but there is a growing presence in both Europe and Asia Supply Chain Strategy Responsive ● Aims to provide quick response, high service level and delivery to customers ● Products are sold at a premium ● Allows for detailed customisation of products ● Modular parts shared across different product lines Efficient ● Introduction of lower priced alternative products ● Multiple price cuts in pricesensitive markets ● Online sales only and does not partner any retailers or dealerships ● Construction of larger scale manufacturing and R&D sites (Gigafactories) on multiple continents Contents CURRENT STRATEGY CURRENT SUPPLY CHAIN STRUCTURE SUPPLY CHAIN DRIVERS ANALYSIS OF PROBLEMS RECOMMENDED SOLUTIONS 02 Supply Chain Structure Deep Vertical Integration Supply Chain Features Plan to reduce reliance on suppliers and build most parts on site No partnerships with retailers/dealerships Eliminates middlemen to lower costs and exert greater control over supply chain Robust centralised information system Information is readily shared across all Teslaowned supply chain components Storage at Distributor with Tesla’s Network Design Pickup/Carrier/Last Mile Delivery Product Flow Information Flow Suppliers Customer Flow Factories DC/Warehouses Customers Recycling Plant Tesla-Owned Contents CURRENT STRATEGY CURRENT SUPPLY CHAIN STRUCTURE 03 SUPPLY CHAIN DRIVERS ANALYSIS OF PROBLEMS RECOMMENDED SOLUTIONS Tesla’s Facilities Factories On 01 Fremont, California Continents 03 Giga New York 02 Giga Shanghai Giga Nevada 04 Giga Berlin 05 Giga Shanghai Giga Berlin Giga Nevada ● Produces batteries ● Designed with a functional focus ● ● Focuses on Efficiency ● Large-scale factory to achieve economies of scale to minimize cost Uses innovative manufacturing, reduction of waste, optimization of co-located processes Enables Tesla to make its vehicles more affordable Inventory Inventory turnover ratio ~ 6.1 Inventory to current assets ratio ~ 15% Relatively low Relatively high Higher inventory needed for retail-based business model Retail-based business model less efficient in clearing stock Transportation Tesla’s Top Vendors by Country 2021 to Tesla Suppliers Sea -> Truck Germany China Japan South Korea Supply chain may not be as responsive as many vendors being located overseas poses risk of higher lead times and uncertainty Tesla clearly favours efficiency and lower costs over responsiveness Information Orders are placed online by customers and order data is captured digitally Historical order data can be used to forecast future demand using analytics Customers can select preferred delivery dates online Consolidated data can be used for delivery planning Sourcing Procures most parts from suppliers, many of which are purchased from a single source Model S uses over 2,000 purchased parts sourced globally from over 300 suppliers BTR New Material Group Panasonic Copper Foil Surface Treated Spherical Graphite Top Vendors Schuler-Pressen Presses LG Chem Lithium-ion Battery Pricing USD 81,190 USD 38,690 USD 91,190 USD 41,190 Contents CURRENT STRATEGY CURRENT SUPPLY CHAIN STRUCTURE SUPPLY CHAIN DRIVERS ANALYSIS OF PROBLEMS RECOMMENDED SOLUTIONS 04 Problem 1: Unresponsive Supply Chains Efficient ● Volatility in supply chain due to heavy reliance for parts from single sources ● Tesla only manufactures basic electrical components of the car such as the battery and electric motor ● In 2021, Tesla had to temporarily halt for two weeks in its California carassembly plant due to a lack of parts Problem 2: Mismatch in Demand and Supply ● There seems to be a mismatch is the demand and supply of Tesla vehicles as evident in the excess inventory that Tesla had in Q4 2020 which had low demand ● There were instances of Tesla overpromising its production rate to customers but ended up not meeting them ● Tesla’s Model unveiled in 2016 had been promised to over 400,000 drivers around the world that have paid $1000 up front to secure their vehicle, but production has been slow, as of the 4th quarter of 2018 only 55,840 had been delivered Problem 3: Vulnerability of Supply Chain due to Uncontrollable Factors ● Uncontrollable factors such as bad weather conditions such as severe snow storms affected ground transport which as a result affected the supply and delivery of car parts (Eg Texas winter storm in February 2021 resulted in the closure of Tesla’s manufacturing plant in Texas for a period of time, resulting in delays in delivery) ● Political instability in countries where Tesla relies on for raw materials may add further threaten Tesla’s supply chain stability Contents CURRENT STRATEGY CURRENT SUPPLY CHAIN STRUCTURE SUPPLY CHAIN DRIVERS ANALYSIS OF PROBLEMS 05 RECOMMENDED SOLUTIONS Solution To Unresponsive Supply Chain RESILIENT SUPPLY CHAIN IMPLICATIONS ● ● SUPPLIER DIVERSITY Source components from multiple suppliers reduce reliance on single supplier ● ● ● QUALITY SUPPLIERS Vet suppliers before engaging them Exploit data driven culture Reward and punishment system ● ● STRATEGIC ALLIANCES Stronger negotiating power Constant supply of high quality critical components Increased supply chain management cost Increased coordination Solution To Mismatch In Vehicle Model Demand And Supply LEAN MANUFACTURING PULL SUPPLY CHAIN ● Manufacture on demand ● Offer customisation options while keeping finished product inventory low MANPOWER PRODUCTIVITY ● Manpower utilised for value adding activities IMPLICATIONS Decrease in supply chain responsiveness Solution To Vulnerability Of Supply Chain Due To Uncontrollable Factors ANTICIPATE DISRUPTIONS ● ● Plan for yearly weather disruptions Keep suppliers informed RISK MANAGEMEN T ● ● ● Use data to set benchmark KPI’s such as Time to recover and Time to survive Minimize effect of disruption Alternative modes of transport SUPPLIER PROXIMITY ● Inbound goods from suppliers outside impact zone unaffected Thank You ... countries where Tesla relies on for raw materials may add further threaten Tesla? ? ?s supply chain stability Contents CURRENT STRATEGY CURRENT SUPPLY CHAIN STRUCTURE SUPPLY CHAIN DRIVERS ANALYSIS OF...Contents 01 CURRENT STRATEGY CURRENT SUPPLY CHAIN STRUCTURE 03 SUPPLY CHAIN DRIVERS ANALYSIS OF PROBLEMS 05 02 RECOMMENDED SOLUTIONS 04 Contents 01 CURRENT STRATEGY CURRENT SUPPLY CHAIN STRUCTURE SUPPLY. .. USD 91,190 USD 41,190 Contents CURRENT STRATEGY CURRENT SUPPLY CHAIN STRUCTURE SUPPLY CHAIN DRIVERS ANALYSIS OF PROBLEMS RECOMMENDED SOLUTIONS 04 Problem 1: Unresponsive Supply Chains Efficient