VIETNAM NATIONAL UNIVERSITY HO CHI MINH CITY

UNIVERSITY OF ECONOMICS AND LAW

----------

GROUP PROJECT

SUPPLY CHAIN
MANAGEMENT OF TESLA

Group member:

1. NGUYỄN VĂN TRƯỜNG K184081046

2. TRƯƠNG QUANG LONG K184081113
3. HUỲNH KIM NGÂN K184081116
4. PHẠM LÊ HOÀNG KHÁNH K184081106
5. PHẠM THỊ NGỌC VY K184081136

HO CHI MINH CITY, 5st May 2021

 TABLE OF CONTENT
Introduction .............................................................................................................................. 1
Theoretical Basis ...................................................................................................................... 2
Chap 1: Company Overview .................................................................................................... 4
Chap 2: Analyzing the supply chain strategy including strategy fit ........................................ 6
2.1 Strategy Fit and current Global Strategy......................................................................... 6
2.2 Tesla Strategic Analysis .................................................................................................. 6
Chap 3: Analyzing the supply chain logistic management ...................................................... 8
3.1 Warehouse ....................................................................................................................... 8
3.2 Distribution ..................................................................................................................... 9
3.3 Technology ...................................................................................................................... 9
3.4 Production ..................................................................................................................... 10
Chap 4: Analyzing the supply chain network ........................................................................ 12
4.1 Tesla’s facilities ............................................................................................................ 12
4.2 Robots in Tesla’s plants ................................................................................................ 14
Chap 5: Supply chain logistics operation ............................................................................... 15
5.1 Sourcing ........................................................................................................................ 15
5.2 Inventory ....................................................................................................................... 16
5.3 Transportation ............................................................................................................... 17
5.4 Service ........................................................................................................................... 18
5.5 Marketing and Sales ...................................................................................................... 19
Chap 6: The Integrated Supply chain Management ............................................................... 19
6.1 Tesla plans deep vertical integration of battery supply ................................................ 19
6.2 Vertically Integrated...................................................................................................... 20
6.3 Benefits of vertical integration ...................................................................................... 22
6.4 Drawbacks of vertical integration ................................................................................. 22
Chap 7: Information technology used in supply chain management ..................................... 23
7.1 Data-Driven manufacturing ......................................................................................... 23
7.2 Advantages of Data-driven manufacturing ................................................................... 23
7.3 Digital Supply Chains ................................................................................................... 24
Chap 8: Tesla Sustainability in Supply Chain ........................................................................ 25
8.1 Responsible Material Sourcing ..................................................................................... 25
 8.2 Cobalt Sourcing ............................................................................................................. 25
Chap 9: Tesla ‘s Supply Chain SWOT ................................................................................... 27
9.1 Strengths ........................................................................................................................ 27
9.2 Weaknesses ................................................................................................................... 27
9.3 Opportunities ................................................................................................................. 28
9.4 Threats ........................................................................................................................... 28
Chap 10: Conclusion & Recommendations ........................................................................... 29
10.1 Conclusion................................................................................................................... 29
10.2 Recommendations ....................................................................................................... 30
Reference ................................................................................................................................ 32
 Introduction
Problem statement
Esla, Inc. is an American electric vehicle and clean energy company based in Palo Alto,
California. Tesla's current products include electric cars, battery energy storage from home to
grid scale, solar panels and solar roof tiles, as well as other related products and services. Tesla
is ranked as the world's best-selling plug-in and battery electric passenger car manufacturer,
with a market share of 16% of the plug-in segment (which includes hybrids) and 23% of the
battery electric (purely electric) segment 2020 sales (Wikipedia). The success and growth of
tesla have amazed the whole world. There are many factors that lead Tesla to become the
massive electric vehicle field, and its supply chain is one of them. This paper would decode
what's special about Tesla's supply chain which contributed to its spectacular success today.

Research question
As stated above, the research question is how Tesla creates and manages its supply chain,
how the company overcomes or prevents similar supply chain issues and still be a top player
in their field.

Objectives

The objective of this report is to analyze Tesla supply chain analysis including analyzing the
supply chain strategy including strategy fit, supply chain logistic management, the supply
chain network, supply chain logistic operations, and integration. At the same time, it also
highlights the direction of sustainable development for Tesla supply by using SWOT analysis
and giving some recommendations for Tesla to be a sustainable global leader in the electrical
transport field.

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 Theoretical Basis
Supply chain management (SCM)
Supply chain management is the management of the flow of goods and services and includes
all processes that transform raw materials into final products. It involves the active
streamlining of a business's supply-side activities to maximize customer value and gain a
competitive advantage in the marketplace (Supply Chain Management (SCM): What You
Need to Know ,2021).

Supply chain network

Typically involved in long-term decisions related to the number, type, location and capacity
of facilities (for example, production plants and distribution centres); the flow of raw material,
intermediate and finished products throughout a supply chain; and a set of suppliers to select.
These decisions are integrated because they impact upon each other.

The end goal is to deliver the required services as cost-effectively as possible. Supply chain
networks help decision-makers determine the best sourcing and inventory practices to meet
demand. Ultimately, an effective SCNet creates efficiencies, meets or exceeds customer
demand, and provides the lowest costs via an efficient network (Supply Chain Management
(SCM): What You Need to Know ,2021).

Vertical integration
Vertical integration is a strategy whereby a company owns or controls its suppliers,
distributors, or retail locations to control its value or supply chain. Vertical integration
benefits companies by allowing them to control processes, reduce costs and improve
efficiencies (Vertical Integration ,2021).

Just-in-time
The just-in-time (JIT) inventory system is a management strategy that aligns raw-material
orders from suppliers directly with production schedules. Companies employ this inventory
strategy to increase efficiency and decrease waste by receiving goods only as they need them
for the production process, which reduces inventory costs. This method requires producers to
forecast demand accurately ( What Is Just in Time? ,2020).

Match Capacity Strategy

The match capacity strategy (tracking strategy) is the middle way between the Lead and Lag
Strategies. As opposed to significantly boosting capacity according to anticipated or actual
increases in demand, the Match Strategy focuses on little, incremental adjustments to capacity
determined by shifting conditions in the market. Although match demand strategy (tracking

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capacity strategy) requires much more effort and is difficult to achieve, it is far more risk-
averse than other capacity planning alternatives (Match Capacity Strategy ,2021).

Lead Capacity Strategy

A lead capacity strategy (lead demand strategy) is a proactive approach which adds or
subtracts capacity in expectation of future market demand. Lead strategy is an aggressive
strategy with the objective of improving the service level and decreasing lead time. Lead
strategy is directed at lowering stockout costs. A large capacity does not necessarily mean
high inventory levels, however it can imply higher cycle stock costs. Manufacturers like this
strategy as it minimizes risk (Lead Capacity Strategy ,2021).

Ansoff 's matrix

The Ansoff Matrix, also called the Product/Market Expansion Grid, is a tool used by firms to
analyze and plan their strategies for growth. The matrix shows four strategies which are market
penetration, product development, market development, diversification that can be used to
help a firm grow and also analyzes the risk associated with each strategy ( Ansoff Matrix -
Overview, Strategies and Practical Examples ,2021).

Porter’s model
Porter's Five Forces Framework is a method for analysing competition of a business. It draws
from industrial organization (IO) economics to derive five forces that determine the
competitive intensity and, therefore, the attractiveness (or lack thereof) of an industry in terms
of its profitability. An "unattractive" industry is one in which the effect of these five forces
reduces overall profitability. The most unattractive industry would be one approaching "pure
competition", in which available profits for all firms are driven to normal profit levels (
Wikipedia ,2021).

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 Chap 1: Company Overview
About Tesla
Tesla was founded in 2003 by a group of engineers who wanted to prove that people didn’t
need to compromise to drive electric – that electric vehicles can be better, quicker and more
fun to drive than gasoline cars. Today, Tesla builds not only all-electric vehicles but also
infinitely scalable clean energy generation and storage products. Tesla believes the faster the
world stops relying on fossil fuels and moves towards a zero-emission future, the better.

Launched in 2008, the Roadster unveiled Tesla’s cutting-edge battery technology and electric
powertrain. From there, Tesla designed the world’s first ever premium all-electric sedan from
the ground up – Model S – which has become the best car in its class in every category.
Combining safety, performance, and efficiency, Model S has reset the world’s expectations
for the car of the 21st century with the longest range of any electric vehicle, over-the-air
software updates that make it better over time, and a record 0-60 mph acceleration time of
2.28 seconds as measured by Motor Trend. In 2015, Tesla expanded its product line with
Model X, the safest, quickest and most capable sport utility vehicle in history that holds 5-star
safety ratings across every category from the National Highway Traffic Safety Administration.
Completing CEO Elon Musk’s “Secret Master Plan,” in 2016, Tesla introduced Model 3, a
low-priced, high-volume electric vehicle that began production in 2017. Soon after, Tesla
unveiled the safest, most comfortable truck ever – Tesla Semi – which is designed to save
owners at least $200,000 over a million miles based on fuel costs alone. In 2019, Tesla
unveiled Model Y, a mid-size SUV, with seating for up to seven, and Cybertruck, which will
have better utility than a traditional truck and more performance than a sports car.

Tesla vehicles are produced at its factory in Fremont, California, and Gigafactory Shanghai.
To achieve our goal of having the safest factories in the world, Tesla is taking a proactive
approach to safety, requiring production employees to participate in a multi-day training
program before ever setting foot on the factory floor. From there, Tesla continues to provide
on-the-job training and track performance daily so that improvements can be made quickly.
The result is that Tesla’s safety rate continues to improve while production ramps.

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To create an entire sustainable energy ecosystem, Tesla also manufactures a unique set of
energy solutions, Powerwall, Powerpack and Solar Roof, enabling homeowners, businesses,
and utilities to manage renewable energy generation, storage, and consumption. Supporting
Tesla’s automotive and energy products is Gigafactory 1 – a facility designed to significantly
reduce battery cell costs. By bringing cell production in-house, Tesla manufactures batteries
at the volumes required to meet production goals, while creating thousands of jobs.

And this is just the beginning. With Tesla building its most affordable car yet, Tesla continues
to make products accessible and affordable to more and more people, ultimately accelerating
the advent of clean transport and clean energy production. Electric cars, batteries, and
renewable energy generation and storage already exist independently, but when combined,
they become even more powerful – that’s the future of Tesla.

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 Chap 2: Analyzing the supply chain strategy
including strategy fit
2.1 Strategy Fit and current Global Strategy

Tesla's new approach builds on its core competencies while still being attentive to both the
external and internal climate. With the Model 3 appealing to the consumer market, Tesla is
hoping to break into the mainstream, and rising environmental issues, government funding for
renewable transportation, and rising oil prices will all help it (Lynch, 2015).

2.2 Tesla Strategic Analysis

Tesla’s Intensive Strategies (Ansoff's matrix)

Market Penetration (Primary Strategy): Tesla, Inc.'s new key intensive growth approach is
market expansion. By increasing advertising revenues in existing markets, this intense
approach allows for business expansion. For example, the company intends to roll out and sell
more of its electric vehicles in the United States by aggressive promotions. The company
maximizes its profits from the sectors in which it already works in this manner. This
aggressive expansion campaign ties in with Tesla's overall strategy of gaining a strategic edge
by expanded market share. The company's sales profits can be increased by vigorous
campaigns, according to a corporate goal focused on this intense approach.
Product Development (Secondary Strategy): Tesla Inc.'s secondary intensive growth
approach is product production. The corporation expands through this intense approach by
designing innovative goods that produce new revenue. This approach is implemented by the
corporation by designing innovative goods with emerging technology that have a low
environmental impact. The group, for example, sells solar panels and created the Tesla
Roadster, the world's first fully electric sports car. By concentrating on exclusive high-tech
vehicles and associated goods that lure target buyers, this intense approach supports Tesla
Inc.'s differentiation generic competitive strategy. In this regard, one of the strategic goals of
this aggressive growth policy is to ensure significant investments in research and development
(R&D).
Market Development: Business expansion is a tertiary intensive growth technique used by
Tesla, Inc. This policy entails expanding into new countries in order to increase revenue and
expand the global industry. For example, by opening new offices and facilities around the
globe, the organization steadily extends its market presence. The business currently sells in
just a few nations, but further international growth is planned in the future. Tesla's mission
and vision statements, which emphasize market leadership in the automobile industry and
energy solutions for transportation and other industries, are supported by this comprehensive
approach. When a brand enters new markets, the differentiation generic approach allows
market growth by making innovative goods that draw buyers. A strategic goal of Tesla Inc.'s
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market growth intensive approach is to expand the company's global business by forming
partnerships with other businesses that make it easier to penetrate new markets.
Diversification: Diversification is used by Tesla, but only as a minor part of its intensive
growth plan. This intense approach aids the company's growth by allowing it to start new
businesses. The company, for example, wants to develop new battery products for a range of
non-automotive uses. However, the company's financial result is currently unaffected by this
aggressive expansion policy. To expand its automotive and energy solutions businesses, Tesla
focuses much of its resources on market penetration and product growth. To maximize the
chances of success with this intense growth approach, the enterprise should use the distinction
generic strategic strategy. Tesla's R&D spending should be increased in order to find potential
market markets, which is a corporate goal related to diversification. Another strategic goal of
this intense approach is to buy other companies or form joint ventures to produce completely
new goods.

Tesla’s Generic Strategy (Porter’s Model)

Wide separation is Tesla's general strategic approach. This generic approach for gaining a
strategic edge is focused on the invention of goods that set the business apart from the
competition. Tesla Inc.'s offerings, for example, are competitive because they use modern
environmentally friendly technologies, despite the fact that internal combustion engines are
still used in the vast majority of vehicles today. Using this generic competitive approach, the
firm is able to appeal to a wide range of prospective buyers, including those who are
particularly interested in environmentally friendly goods. Initially, Tesla's generic approach
for strategic advantage was distinction oriented. The organization used the distinction oriented
approach to highlight the individuality of its products while focusing mostly on early adopters
in the high-end electric car industry. These early adopters are well-heeled consumers and have
a strong desire to buy new goods. Tesla's generic competitive approach has moved to strong
differentiation now that the brand is well-known and manufacturing costs are falling. Because
of the company's lower manufacturing costs and growing name recognition, it will reach a
wider range of buyers in the automotive industry.

To maintain a sustainable edge, Tesla, Inc.'s general approach necessitates the alignment of
strategic goals. One of the company's strategic goals, for example, is to accelerate spending in
research and development (R&D) in order to produce new technologies to meet consumer
demand for improved clean energy solutions, such as batteries for different applications.
Another strategic goal of Tesla's general competitive approach is to improve competition by
expanding its market presence in order to increase revenue and brand awareness.

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 Chap 3: Analyzing the supply chain logistic
management
3.1 Warehouse

Tesla also signed a leasing agreement for three warehouses measuring 1.3 million square feet
in the Oaks Logistics Center in Livermore, California, which is just 20 miles northeast of the
Fremont plant. Elon Musk, the company's CEO, has voiced worries about running out of space
at the company's Fremont plant on many occasions. Tesla will increase manufacturing and
logistics activities in support of high-volume Model 3 demand by having a modern Tesla
Warehouse that is about 25% the size of the plant.
The Oaks Logistic Center is a modern facility built between 2014 and 2015 that consists of
three different warehouses ranging in scale from 295,000 to 634,000 square feet. The site is
conveniently situated just 20 miles northeast of the Fremont factory and in the general
direction of Tesla's Gigafactory. As a result, it could conveniently serve as a staging point for
Gigafactory 1 battery packs and other components arriving in Fremont.

The new Tesla Warehouse plant is conveniently located between Highway 84 and Interstate
580, as well as the Port of Oakland and the Livermore Municipal Airport. The site is also next
to the Lawrence Livermore National Laboratory, which focuses on energy as a core field of
Tesla's research and development.

Tesla has a vast number of warehouses in the United States (including one in Taiwan), the
majority of which are rented. Tesla's main production plant, which is also owned by the
corporation, is based in Fremont, California. This location is used for both warehousing and
processing. Apart from this building, which is about 5.5 million square feet in area, the
company's other facilities for storage and distribution are situated at the following locations:

• Livermore California.
• Lathrop, California
• Sparks Nevada
• Taipei City, Taiwan.
• Elkridge, Maryland and
• Bethlehem, Pennsylvania.
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The warehouse is used for transportation, administration, and operation in Taipei City,
Taiwan. In addition to North America, Asia, and Europe, the organization has rented a range
of other factories and warehouses around the globe.

3.2 Distribution

The delivery channel level is zero since Tesla uses its own network. In a zero-level channel,
the retailer sells directly to the final customer (Kotler & Keller, 2012). With the use of
Showrooms, Galleries, Pop-up markets, the Website, and retail stores, the internal revenue
channel collects profits through direct marketing campaigns and trade shows (Bilbeisi &
Kesse, 2012, p. 2017). Attempting to buy a Tesla vehicle in any other manner would result in
a failure. In one case from 2014, a San Diego man purchased a 2012 Model S at an auction
for around half the price, only to discover that Tesla will not unlock the vehicle, sell him parts,
or provide service (Staahl, 2014). Tesla has full leverage of their branded goods and they own
and control all facets of distribution.

Tesla will extend sales activities as they see fit and they have complete leverage of the
distribution plan. Tesla's service centers are also expanding their delivery and sales. Including
all key company practices in this endeavor helps Tesla to boost revenue. Tesla has also
discovered that establishing a service center in a new geographical region will boost demand.
As a result, they've combined their supermarket approach with sales facilities staff in service
centers to broaden their retail presence more quickly (Tesla, 2016, p. 7). Tesla currently has
438 Tesla Motors Stores and almost 100 service centers around the world as of September 1,
2019.

3.3 Technology

Tesla's emphasis on technology advancement is one of the key reasons behind the company's
rapid rise in popularity and revenue. Tesla has achieved the opportunity to use technical
methods to promote process change through creativity (Mangram, 2012). Tesla, for example,
has customized the Model S for some countries, such as China and Japan, using technologies.
Since most of the focused clients do not drive and instead hire drivers, the company has
changed the back seat to be more comfortable in China. Tesla, on the other hand, has begun
selling right-hand drive vehicles in Japan. Apart from onboard self-driving systems and a wide
dashboard that helps the car owner to better monitor his driving experience, Tesla also offers
a Tesla app that allows drivers to navigate their vehicles from the outside.

9
Tesla has invested in solar energy production, which is also known as Tesla solar paneled
roofs or Powerball batteries. As a result, the use of green energies is picking up speed. The
corporation purchased SolarCity to demonstrate its commitment to embracing the technology
(Cox, 2017). Tesla has also improved the convenience and versatility of driving by technical
processes. When a driver drives off and on the highway, the organization has increased the
speed limit for Traffic-Aware Cruise Control and Autosteer. Side Collision Warning improves
the Model X's protection capability. Side Collision Warning improves the Model X's
protection capability. This capability is only available when the Model X is powered at speeds
ranging from 30 to 85 mph (Cox, 2017).

Tesla has also made research and development investments in robots, the Internet of Things,
and artificial intelligence. In 2019, the corporation invested $1.34 billion on research and
development. Given their vertical integration, it makes sense to invest in robotics and artificial
intelligence to improve processes. Autonomous vehicles that connect with one another via the
Internet of Things are the future of transportation. Tesla has now completed stage 3 of the five
stages of autonomous vehicles (graded from 0 to 5), and is working to achieve level 5. (Reese,
2016). There are possible enablers to take advantage of.

Tesla electric cars have two self-driving modes: Autopilot and Full Self-Driving, each with its
own set of capabilities (FSD). Tesla vehicles built after October 2016 will have Autopilot
hardware, allowing for the installation of Autopilot software at the time the upgrade is
purchased; the FSD will be the more sophisticated self-driving device, which will be more
expensive. The below are the functions of these two self-driving systems:

The following are the components of the Autopilot function at its most simple level:
• Enable the car to drive at the same pace as the nearby cars while keeping a close eye
on traffic density.
• Self-turning: using the control scheme described above, assists the driver in cornering
in a clearly defined lane.

The FSD update will have the following features:

• When in Autopilot mode (Beta), auto-find your way: automatically brings your car into
and out of the expressway lane, including lane shift tips, auto-navigation at
intersections, automatic turn signals, and exiting the highway in the correct place.
• When the car is in Self-Turn mode, automatic lane shift aids the task of shifting lanes
on the highway.
• In just one button, assist the car in parallel or perpendicular parking.

3.4 Production

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Tesla uses a vertically integrated supply
chain to produce, produce, deliver, and
repair their vehicles, avoiding conventional
manufacturing moves. Tesla's advanced
supply chain is working to reconfigure their
Fremont Factory to incorporate high degrees
of robotics automation into different
production processes. Tesla's extensive use
of autonomous robots and a tightly
interconnected supply chain is the
company's primary source of value generation. Tesla will use the vertically integrated
automation method to bring smaller, often outsourced subsystems into their own production
network, allowing for faster turnover and shorter product improvement cycles. It also provides
for greater production stability, process management, and supply chain alignment. Tesla is
also constructing a massive battery factory in neighboring Nevada, taking integrated
production even further. This plant would take in raw materials such as copper to aluminum
and transform them into assembled battery packs to fuel the automobile industry.

Due to a secured partnership with a Ganfeng lithium provider, Tesla now has a marginal
comparative edge over other firms. Throughout 2020 and likely for years to come, Tesla will
have access to 20% of their necessary Lithium supply.

11
 Chap 4: Analyzing the supply chain network
Cost, location, quality, and value are typically considered when selecting suppliers, third-
party logistics (3PL) firms, distribution centers, and retail stores; however, Tesla has done
business a little differently without complete success. Tesla designs, manufactures, sells, and
services their vehicles through a vertically integrated supply chain, skipping traditional
manufacturing steps.

4.1 Tesla’s facilities

Electric vehicles and energy storage products are designed, developed, manufactured, and sold
by the company. These electric cars are designed on the technology of the lithium-ion battery
(LIB). Tesla Motors delivers and sells its products through an international network that
includes over 350 suppliers and various facilities worldwide. Tesla's supply chain network
consists of ten facilities located around the world that house all processes related to design,
engineering development, production, warehousing, assembling, administration, market
forecasting, and sales and customer management services.

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Tesla’s factory in Fremont, California is one of the world’s most advanced automotive plants,
with 5.3 million square feet of manufacturing and office space on 370 acres of land. Following
the City of Fremont’s approval of Tesla’s expansion plans in 2016, the company will nearly
double the size of the facility to almost 10 million square feet, creating thousands of new jobs
in the coming years.

Map of the facilities at the Tesla Factory in Fremont, California

The Gigafactory plays an important role in the future strategy of Tesla. The Gigafactory is a
new Tesla factory located in Reno, Nevada. In 2020, the factory should reach full operative
capacity (Bloomberg, 2016). It enables the production of 500,000 vehicles per year
(AssoElettrica, 2014). The primary goal of the Gigafactory is to consolidate the production of
13
all LIBs for both electric vehicles and energy storage devices in a single facility in order to
capitalize on scale effect advantages. According to Musk and Tesla Motors executives
(WIRED, 2016), the construction of the Gigafactory will result in a 30%–50% reduction in
LIB costs by 2020.

Leaving nothing to chance, Tesla is also continuing to invest in a network of supercharger

stations across the country. Customers should have a viable alternative to the ubiquitous gas
stations that they take for granted when driving ordinary internal combustion engine vehicles
as a result of this.

4.2 Robots in Tesla’s plants

The robots enlisted within Tesla's plants aren’t humanoids that roll around making quips in
monotone voices. Rather, they are robotic arms and small drive units designed to assist the
associates, keeping cost at a price the customer wants to see.
Tesla is providing a glimpse of the future within many of its fulfilment centres, where humans
and robots work harmoniously to get packages to customers on time. Tesla plants have over
5,000 engineers and more than 160 specialist robots, including 10 of the largest robots in the
world. While it’s true robotic automation has taken over certain duties, some of the robots in
the plant are able to change tools on their own to perform different tasks. For instance, the
robot that installs the seats is also able to change tools to grab the windshield, put some glue
around it, and install it in the car or else install the rear window.

In centres equipped with robotics, robots still struggle to deal with inconsistencies in assembly
tasks — and that human worker flexibility remains a critical step in manufacturing.

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 Chap 5: Supply chain logistics operation
5.1 Sourcing

Concerned about competitors obtaining inside information or purchasing necessary parts,

Tesla is rather secretive about the more than two dozen Model S parts suppliers, but many of
them have been uncovered by diligent researchers. Tesla manufactures the car's basic
electronic components – the electric motor, battery pack, and charger – but other parts are
sourced from suppliers in the United States, Europe, and Asia.

15
Moreover, Tesla Motors has formed various alliances with various suppliers in order to ensure
a steady flow of key inputs required for LIB production (i.e., lithium, cobalt, etc.). Tesla has
announced a supply agreement with Pure Energy Minerals in Nevada's Claytone Valley
(Fehrenbacher, 2015). Simultaneously, in the last decade, the reuse of LIB has grown in
importance and attention. The LIB lifetime can be extended by reusing it for a second or third
time.

Tesla demonstrates the importance of supplier relations in supply chain management, as

procurement and production guarantees are more likely to encounter hiccups when a
partnership is new. Suppliers needed proof of dependability and good faith before they were
willing to allocate resources, but once that was done, hesitant suppliers were even willing to
relocate nearby. Furthermore, suppliers calculate a "cost-to-serve" based on the complexity of
the procurement process, the value of the business, and the strength of the relationship — and
would prefer to be treated as production partners rather than just suppliers.

Unless the country authorizes the company to adhere to the set minimum local component
norm of sourcing, Tesla does not source their components or raw materials locally from where
they are operating. This means that if there are no guidelines, Tesla will source such materials
wherever they see fit. Quality assurance is a technique for preventing defects or errors in
manufactured products and mitigating risks during the delivery of services or solutions to
clients (Tesla Laboratories, 2010). Tesla's quality control strategy ensures that all clients
receive high-quality products and services. The Senior Program Manager has been authorized
with the task to ensure that all quality assurance issues are handled. Examples of such factors
are; the Quality Control Plan’s oversight, daily direction, implementation and so on.

5.2 Inventory

To reduce risk, they keep very little inventory, instead of putting most of their customers on a
several-month waiting list. Tesla can reduce the amount of capital and risk associated with
16
storing excess inventory by keeping little inventory and essentially producing on demand.
Tesla can redirect capital to continue growing and refining other areas of their business by
tying up fewer resources in inventory storage.

However, Tesla has experienced inventory management issues on several occasions due to a
large number of unsold new vehicles, which have resulted in production delays. The company
has a growing inventory of unsold vehicles and batteries that do not work properly, which it
sells at a discount. Because of the high inventory, Tesla reduced production because they did
not want to add to the already massive amount of existing inventory. Even though the country
is demand-driven, the inventory of completed but unsold units has increased by more than
3,900 units in the last year, amounting to approximately $880 million in accumulated
inventory (Bailey, 2017).

Furthermore, due to the implementation of the Just-in-time philosophy for inbound inventory,
Tesla's partnership with Toyota has helped reduce inventory costs. However, because it
assembles according to consumer demand, it keeps outbound inventory to a minimum,
reducing the need for space for finished products (Tao, 2014). This also reduces the risk and
cost of storing excess inventory.

5.3 Transportation

When it comes to delivering vehicles to customers, logistics is a challenge. Originally, Tesla

simply delivered car-to-door. Personal delivery, for every single car. This is tremendously
inefficient as a truck loaded at the factory would have to go to as many as twelve different
stops along the way to deliver its vehicles. But Tesla has invested heavily into shipping its
cars by truck and because of the low volumes that it sends to any one particular area, there are
no savings to using rail. So Tesla has modified its delivery system to use ship-delivered to
abroad then uses trucks to deliver up to 12 cars at a time to a showroom, then use local drivers
to deliver the cars to the final destination. This means a single truck might make only one or
two stops instead of 12. Tesla understands that shipping by trucks is more expensive than by
rail, but wants the flexibility to deliver more locally. In addition, by developing the Tesla
Semi, is working to bring down the cost of operating trucks to be more cost-competitive with
rail.

Tesla also introduced a novel door-to-door vehicle delivery service to its customers.
Customers can look to take delivery of a Tesla and can choose between a “Express,” “Tesla
Direct”, or “Carrier Direct” method. Tesla has expanded its vehicle delivery options to adjust
to the ever-changing conditions. Tesla provides different delivery options depending on
customers' schedule and preference of location. The Tesla Advisor will contact customers to
schedule a delivery option that is accommodating to them.

Express Delivery
After arriving at the delivery location, locate and access Tesla by using the Tesla app.
Customers will be provided with required registration documents, along with temporary
17
registration and plates, depending on the location. After submitting the final payment and
accepting delivery in the Tesla Account, the customer can unlock and access Tesla through
the Tesla app. Express Delivery is available at all Tesla delivery centres. Some states may
vary based on signatory requirements.

Tesla Direct
Tesla is delivered directly to the provided delivery address. Once Tesla has arrived, sign any
remaining documents and drive away within minutes. After submitting the final payment and
accepting delivery in the Tesla Account, the customer can unlock and access Tesla through
the Tesla app. Tesla Direct is only available in certain areas to customers within an approved
distance from their local Tesla delivery centre. Not all customers will qualify

Carrier Direct
This fee-based option is available for customers who prefer to have their car delivered, and
who live more than 220 miles from the nearest Tesla delivery location. These deliveries are
performed by independent carriers for a fee, based on the customer's final delivery location.
The delivery date will come directly from the carrier service. Tesla will provide a delivery
date, which will be confirmed by the independent carrier once your car is in transit. After
receiving a delivery timing update from the independent carrier, accept delivery of your Tesla
in the Tesla Account, sign and mail any remaining documents in the car via a prepaid shipping
envelope within 24 hours.
Customers who choose a delivery method will be guided to their vehicle via the Tesla app's
location tracking tool. New owners will be able to locate their vehicle on-site by navigating
the app's real-time map.
“All required documents will be waiting inside the car with highlights indicating where to
sign. When you’re ready to get on the road, simply pass your documents to the advisor at the
exit for review, and we’ll mount a temporary tag and license plate,” notes Tesla.
For outer-centres deliveries, Tesla will coordinate shipping to the customer preferred location
through a third party which is a locally-approved shipping company. The shipping company
will deliver Tesla directly to the registered place and will connect with the Tesla app directly
for payment. Prices are set by the shipping provider and may vary due to unexpectations.

5.4 Service

Tesla had a number of high-profile customer service complaints in the past. However, Tesla
customer service practices have improved during the last few years. The electric vehicle
company aims to own the customer experience and accordingly, does everything on its own,
from production to sales. Tesla does not sell through dealerships so that customer experience
is not subjected to a third party.

In its attempts to deal with customer complaints issues more effectively, the electric automaker
allowed customers “to escalate their issues directly to a company executive” (Ryan, 2017).
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Tesla provides post-sales service at company-owned service centres and at Service Plus
locations. The company is building 100 new service centres on top of 150 service centres it
currently has. Moreover, Tesla is also rolling out 350 new on-demand service vans across the
country (Ryan, 2017)

5.5 Marketing and Sales

Tesla marketing and sales practices are unconventional. Tesla's marketing strategy is known
as "Zero Dollar Marketing." The opportunity to gain broad mainstream media attention is a
significant source of value in terms of raising brand awareness on a global scale. Tesla engages
in the sales of used cars as well. Moreover, Tesla’s used car business supports new car sales
by “integrating the sale of a new Tesla vehicle with a customer’s trade-in needs for their
existing Tesla and non-Tesla vehicles.” The company sells Tesla and other brand vehicles to
the general public and via third-party auto auctions. Tesla sells its vehicles online and in
company-owned showrooms. The electric automaker does not use dealership networks to sell
its products.

Chap 6: The Integrated Supply chain Management

6.1 Tesla plans deep vertical integration of battery supply

Tesla is largely self-contained — a significant portion of the Tesla supply chain is company-
owned, and each division within the company supply chain produces a different product. The
products are then combined to satisfy a common need. Daniel Harrison, analyst at Ultima
19
Media, commented: “As our recent battery supply chain presentation at ALSC Live
mentioned, the localisation of battery cell plants is a strong clear trend as EV volumes ramp
up, but this is much less so for the cathodes, anodes and raw materials. Tesla’s plan for an
(almost) complete vertical integration from battery components to finished vehicles is unusual
within the automotive industry and is perhaps only matched by BYD in China – an OEM and
a cell manufacturer.”

Tesla’s vertical integration was born out of need. They were doing something no one else was
doing. Tesla has a fully operational plant in California and they also have some short-term
goals that are impressive. In a time when everything is being manufactured in Mexico or
China, Tesla plans on building a supply park adjacent to their plant so that they will be able
to manufacture all their parts on site.

They also built a giant battery factory in Nevada to meet their needs for batteries for their cars.
The need for batteries that are designed to Tesla’s specifications has become so critical and so
hard to find that they almost must build their own. One of the key “bottlenecks” causing delays
for manufacturing has been battery issues. Unfortunately, the battery plant experienced some
of their own woes which required some redesigns.

6.2 Vertically Integrated

Vertical integration is the process of acquiring and controlling different parts of the same
production chain. Integration can happen backwards (buying companies closer to the raw
materials side of the spectrum), or forwards (buying companies closer to the consumer side of
the spectrum.

Today, Tesla makes their own batteries, electronics, parts, and even the car seats. This allows
them to build highly customized and superior components. It’s not just about quality. In 2016,
Tesla CEO Elon Musk said that Tesla would be increasing vertical integration in order to
“have the ability to produce almost any part of the car at will” and “alleviate risk with
suppliers,... if 2% of suppliers aren’t ready, we can’t make the car.” Fast-forward to 2020. The
dividends of vertical integration have really started paying off for Tesla, and the stock price
has grown nearly tenfold since 2016 to an all-time extremely high.

20
The Fremont facility is not only a full-service auto plant, but its near-term plans include the
construction of a supplier park in the immediate vicinity, with a focus on large, heavy parts
with numerous variations. Besides, the Gigafactory will take in elemental raw materials like
copper and aluminium and produce finished battery packs to feed the car plant.

Source: Tesla Value Chain

The vertically integrated automation system allows Tesla to incorporate the smaller and
generally outsourced subsystems into their own manufacturing process to allow for quicker
turnaround and shorter product improvement cycles. More importantly, it allows for
manufacturing flexibility, process control and increased supply chain coordination.
Meanwhile, Tesla’s outbound logistics include warehousing and distribution of their vehicles
after manufacturing and assembly operations.

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6.3 Benefits of vertical integration

Considerations that are key to the success of this type of integrated supply chain strategy
include:

• Cost
• Control

With vertical integration of the supply chain it is possible to reduce the costs of transportation
throughout the chain, but that relies heavily on proximity and the geographical location. Musk
has the vision of building a compound where every step of the supply chain is managed in
close proximity, the problem is that his cars need 10,000 parts to function. In another setting
where there is not the need for 10,000 parts for production that integration could be simplified.

Costs for transportation of supplies and parts is not the only savings that can be realized.
There are time savings and labor savings as well that can be realized with a vertical integration
of the supply chain. Of course, it can also improve your competitive advantage. For example,
if there is a scarce resource that is firmly allocated to your supply chain that your competitors
cannot get, you win.

Control is also a huge benefit. You can easily improve supply chain efficiency with this
model, have access to downstream distribution channels that you may not have any other way
and more. There are many attractive potential benefits, but there are also some disadvantages
as well.

6.4 Drawbacks of vertical integration

Tesla’s problems are a tale of caution when it comes to this model. There are some serious
potential risks with this model that can include:

• Increased costs
• A decrease in flexibility of product design
• Balancing issues

This model can ramp up costs due to a lack of competition. When suppliers compete
for your business it drives costs down, when you have a single select supplier, costs can get
out of control. There may be additional bureaucratic costs as well.

Flexibility can be constrained as well. Changing designs or changing models can be

difficult if it will take a lot of new development.

In short, Balancing upstream and downstream supply and demands can get difficult.

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 Chap 7: Information technology used in supply
chain management
Because of vertical supply chain Tesla has significant data-base manufacturing to optimize its
value chain.Tesla is harnessing artificial intelligence and machine learning to build one of the
most innovative neural networks in the world. Automating Intelligently Is Tesla’s
Manufacturing Advantage

7.1 Data-Driven manufacturing

Important decisions that impact the manufacturing process should always be based on facts,
not guesses, wishes, theories or opinions. Today’s emerging technology helps by enabling
both people and the equipment to collect and process the facts they need to achieve better
results.

The accelerated deployment of low-cost sensors and their connection to the internet has
created a lot of hype about the future of manufacturing. The Internet of Things (IoT) and its
application of big data and analytics has led to the creation of the next generation of
manufacturing. This involves using data to reduce costs through new age sales and operations
planning, dramatically enhanced productivity, supply chain and distribution optimization, and
new types of after-sales services.

Data-driven manufacturing is clearly the next wave of manufacturing operations to drive

efficient and responsive production systems. Manufacturers are finally in a better position to
incorporate data into their daily decision-making activities in a meaningful and productive
way.

7.2 Advantages of Data-driven manufacturing

1. Deriving unexpected insights for decision-making

Developing unexpected data-driven insights by using advanced analytics can reveal further
opportunities to make quick and accurate decisions. The right data allows Tesla to focus on
the most important problems and opportunities. A clear understanding of whether Tesla
manufacturers are measuring the right things by establishing KPIs for problems can help easily
solve them.

2. Deep insights into manufacturing processes

Advanced analytics can help Tesla unearth unseen opportunities to increase production yields.
Many times they may assume that all possible process improvements have been implemented,
using data they can further dig into deeper prospects for improvement. With these data-driven

23
insights, solutions to problems that have been lingering for a while can also be found, further
enhancing the scope of operations using existing resources.

3. Cost savings

A manufacturing company that uses real-time, shop floor data as well as sophisticated
statistical assessments can easily take what were once isolated data sets, aggregate the data,
and then analyze it to reveal critical insights.This can go a long way in reducing operating
costs while accelerating the speed of the results.

4. Predict market trends

The data-driven manufacturer can leverage analytics platforms for enhanced prediction of
customization demands. This happens by identifying fluctuating patterns and trends in
customer behaviour. Data analytics allows a granular view of manufacturing processes that
enable smarter and more accurate production decisions guided by predictive analysis.

7.3 Digital Supply Chains

Perhaps most importantly, Tesla is pioneering the practice of digitally shipping products rather
than physically shipping them. It's all about how the instrument panel, massive navigation
screen, and even engine control algorithms automatically update over the cloud whenever the
company releases a new product.

Tesla is positioned to sell new capabilities to existing customers indefinitely because the
vehicle was designed from the ground up as a hybrid of mechanical and digital technology.
These include not only information features such as gauges, GPS upgrades, or entertainment
systems, but also physical add-ons such as speed, braking, and so on.

24
 Chap 8: Tesla Sustainability in Supply Chain

8.1 Responsible Material Sourcing

Tesla is committed to only sourcing responsibly produced materials. The Tesla Supplier Code
of Conduct (“Code”) and their Human Rights and Conflict Minerals Policy outline our
expectations of all suppliers and partners who work with them. Tesla is committed to making
working conditions in their supply chain safe and humane, ensuring that workers are treated
with respect and dignity and that manufacturing processes are environmentally responsible.
Tesla suppliers are required to provide evidence of management systems that ensure social,
environmental, and sustainability best practices in their own operations, as well as to
demonstrate a commitment to responsible sourcing into their supply chains.

Their complex supply chain is a unique hybrid of the traditional automotive and high-tech
industries, and encompasses suppliers from around the world. Many of their Tier 1 suppliers
(i.e., direct suppliers) do not purchase all of their raw materials directly and instead obtain
them from their suppliers and sub-suppliers. Therefore, reliably determining the origin is a
difficult task, but the due diligence practices required of Tesla suppliers adds transparency to
help them and suppliers adhere to the responsible sourcing principles of our Code.

Tesla Tier 1 automotive suppliers are required to register and complete the domestic and
international material compliance requirements in the International Material Data System
(IMDS) to meet EU and other international material and environmental related regulations.
This requirement is mandated for all suppliers who supply their products or raw materials to
Tesla as part of Tesla production-parts approval process. Tesla, along with partners and
independent third parties, conducts audits to observe these principles in action. If there is a
reasonable basis to believe a supplier partner is in violation of the Code, Tesla will transition
away from that relationship unless the violation is cured in a satisfactory manner.

8.2 Cobalt Sourcing

Tesla continues to improve their supply chain due diligence program and efforts to conduct a
country of origin inquiry with respect to their entire supply chain. These efforts are similar to
their conflict minerals program and in line with the OECD Guidelines on Responsible
Sourcing from Conflict Affected and High Risk Areas (“OECD Guidelines”). In addition to
following their due diligence program requirements, all suppliers, sub-suppliers, and mining
companies within Tesla’s supply chain are required to adhere to their Code, including taking
a proactive approach to reducing environmental and resource impacts. All of their suppliers
25
are also expected to follow their Code of Business Conduct and Ethics, including avoiding
any activities related to corruption, conflict of interest, or money laundering.

In order to further increase the transparency of the cobalt supply chain, They collect detailed
data from relevant suppliers using the Responsible Minerals Initiative’s (“RMI”) Cobalt
Reporting Template. Because Tesla recognizes the higher risks of human rights issues within
cobalt supply chains, particularly for child labor in the Democratic Republic of the Congo
(“DRC”), Tesla have made a significant effort to establish processes to remove these risks
from their supply chain. They also recognize that mining conducted in a responsible and
ethical manner is an important part of the economic and social well-being of those
communities. They review all information provided by suppliers for red flags and risks
associated with ethical sourcing. Where they can be assured that minerals, including cobalt,
are coming from mines that meet our social and environmental standards, they will continue
to support sourcing from the DRC and other regions.

Tesla has also established dedicated internal resources to manage responsible sourcing efforts.
Periodic reports on progress and identified risks are provided to Tesla’s Responsible Minerals
Steering Committee, which is comprised of stakeholders throughout the organization, and
acted upon according to company targets and objectives

Tesla’s batteries use nickel-rich cathode materials which contain less cobalt than other widely
used cathode chemistries in the industry, with Tesla's ultimate goal being to eliminate cobalt
completely from their cells. For portions of their battery cell sourcing, they procure cobalt
materials directly from producers that are verified as compliant with Tesla’s Code. Tesla
works with participants along the value chain to shorten the supply chain by eliminating third-
party cobalt refiners and by ensuring that Tesla’s material is stored in clearly marked and
segregated areas of the plant and is toll processed on dedicated lines for Tesla’s production.
For other parts of their supply chain where Tesla does not directly procure cobalt materials,
cobalt may be sourced from many different countries, including the DRC. For material
originating from the DRC, Tesla’s battery cell supplier and sub-suppliers are required to
purchase refined cobalt material exclusively from qualified conformant cobalt refiners as per
the Responsible Minerals Assurance Process standards set forth by the RMI.

While Tesla’s battery supply chain is the most significant portion of the cobalt sourcing
activities, their supply chain due diligence efforts are not limited to these suppliers. Tesla also
engages with any suppliers that use cobalt in part-material composition and work to collect
additional information from them on the origin of these materials and their associated risk
reduction efforts. Tesla leverages the automotive industry’s IMDS to best identify those of
their automotive suppliers whose parts include cobalt. In addition, their energy production and
storage business segment suppliers are asked to provide information on their cobalt sourcing,
so they can apply the same standards to Tesla Energy suppliers as they do for Tesla automotive
suppliers and sub-suppliers.

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 Chap 9: Tesla ‘s Supply Chain SWOT

9.1 Strengths

Overall, Tesla’s supply chain has a number of insights to offer. these things fit well within
Tesla’s supply chain:

1. Vertical integration: Tesla has complete leverage over its manufacturing process.
Although reducing or eliminating third-party interference, Tesla ensures that its goods
are of consistently high quality.
2. Facilities: Tesla builds a variety of facilities, including showrooms, Gigafactories, and
Superchargers, in order to maintain complete control over its business processes. The
aim of building these facilities is to make using Tesla's goods as simple as possible.
3. Swift Growth: Tesla's supply chain is notable for its rapid expansion. The business is
currently present on five continents. Similarly, as compared to 2015, Tesla saw a 100
percent increase in 2016..

9.2 Weaknesses

But, as we all know, there is a silver lining to any cloud; so, Tesla’s supply chain gets a number
of issues to improve.

1. Scaling supercharging network: Despite the fact that the company is actively investing
in expanding its supercharging network, the amount of Superchargers currently
available is insufficient to meet the needs of electric car owners..
2. Managing dealership issues: Managing distributor issues: Selling goods to dealers is a
much less attractive option: the final product's cost rises, and consumers become
dissatisfied. As a result, Tesla is tasked with promoting direct sales whenever possible.
3. Diversification: When we talk about Tesla's goods, we usually mean electric vehicles,
which are very fashionable but also very expensive. Since Tesla cars are only available
to a small percentage of potential customers, diversifying its product portfolio may
provide a significant benefit to the company. Consumers around the world are likely to
become interested in lithium-ion battery storage, solar panels, roof tiles, and other
related items.
4. Tesla tries to scale high and fast but gets bogged down by a faulty supply chain due to
a lack of funding and a narrow supplier base. Supply chains are critical to an
automaker's success, In particular with Tesla, they work primarily on a build-to-order
basis, which means bottlenecks in parts supply could be a big headache but the most
27
 critical part of the automaker's supply chain is its relationship with suppliers - that
current problems Tesla has faced with.

9.3 Opportunities

Of course, the business gains access to a slew of new opportunities:

1. Sales expansion: There are reasons to believe that as people become more aware of
environmental issues, they will consider purchasing an electric vehicle
2. Business diversification: In addition to electric vehicles, Tesla can sell solar panels and
other products that are popular with environmentally conscious buyers.
3. Supply chain expansion: As the company grows, it will be able to extend the supply
chain to include middle-income countries.

9.4 Threats

Finally, Tesla should consider a bunch of external factors that can be potentially dangerous
for its development.
1. Competition: As electric vehicles become more common with consumers, more
companies are attempting to compete with Tesla. Ford, Toyota, and Honda have all
implemented aggressive competitive strategies.
2. Fluctuations in material prices: Recently, the cost of lithium, a material used in Tesla's
energy storage device, has risen significantly. As the final product is becoming more
costly, it is reasonable to conclude that increases in commodity costs have an effect on
revenue.
3. Dealership regulations: To stop spikes in selling businesses, Tesla's approach includes
supplying goods directly to consumers. Direct sales are prohibited in some states (for
example, Texas), and dealerships are required. Naturally, the final product is becoming
more costly, and only a few consumers are willing to pay for i

28
 Chap 10: Conclusion & Recommendations
10.1 Conclusion

In general, it can be concluded that the major issue faced by the company was collapse in
market share due to the delays in manufacturing of automotive vehicles. Besides this, the other
aspects of risks entail manufacturing, cash flow, consumer adoption, along with the legal as
well as governmental regulations. In order to cope with and resolve the current challenges and
gain a strong competitive position, Tesla must recognize the risks that exist in the external
market environment and make efficient use of its core competencies, capital, and capabilities.
Aside from that, the organization conducts value chain and VRIO analyses to identify the tools
and skills that lead to the business's long-term competitive advantage.

Currently, Tesla's supply chain management and activities are based on the concept of total
control and autonomy. Tesla designs, manufactures, sells, and services through its own sale
and service network. Moreover, consumers in the U.S. can go online to order their Tesla. This
aids in customer satisfaction because of the wide array of customizations. Tesla also has
partnerships with Daimler and Toyota. This helps keep costs low for purchases of some basic
component parts. However, Tesla can’t capitalize on economies of scale because of its lack of
size.

Tesla has managed their inventory throughout their supply chain not just by working with
different types of suppliers than the regular automobile company. They have used battery
suppliers as well to fuel the cars they produce as well. They collaborated with Daimler and
Toyota for basic component parts. Tesla also keeps very little inventory to minimize risk
which in term increases the overall level of customization from consumers ordering their
tesla.The idea of insourcing for tesla is something that will give them a great structure of
overall control which will also allow them to maintain the technology that tesla has expressed
as their core competencies. Furthermore, production used to be paused to upgrade the
assembly line and add capacity to the body shop. At the end of the day, all of the additions
were done to increase the global demand for tesla. Tesla’s gigafactory has been announced to
be located in Sparks, Nevada for the main goal of Elon Musk to be able to produce 500,000
by 2020. Capacity Planning is an important part of Tesla’s success. Tesla currently employs
a Match Capacity Strategy, which helps maintain a small amount of inventory on hand. Tesla
essentially produces on-demand, minimizing the amount of capital and risk tied up with
storing excess inventory.

Currently, Tesla does very little in terms of forecasting or trying to manage their demand and
struggling to manage their increasing demand year after year, keeping customers on waiting
29
lists for months at a time. Typically, this leads to a shortage of inventory, which we have seen
with Tesla.

Sales and Operational Planning is a huge part of Tesla’s supply chain and arguably what they
are most known for. Tesla uses the direct sales method. Cars are custom-built, once again
making the available inventory nearly zero.

In terms of strategic planning, Tesla has a current roadmap to get to 500,000 vehicles by the
year 2020. They can reach this number through the use of the new gigafactory, and the
predicted population growth in 30 years. Tesla has grown throughout the years, we’ve seen
what its goals are with the Gigafactory, and they will revolutionize the market and create a
successful supply chain in the coming years.

10.2 Recommendations

According to the strategic review conducted, the main strategy recommendation that Tesla
should emphasize is improving its manufacturing performance. It is important for the
company to extend its business into the international market while also expanding its product
lines to include public transportation vehicles. However, the company must ensure that their
existing manufacturing plants and systems are capable of sustaining efficiency; otherwise, the
expansions would be unsuccessful.

Besides this, Tesla has been required to work on the extensive diversification of the supply
chain because the existing suppliers are of single source and thus, forging a stronger supplier
potential and power for the forthcoming delays.

Besides that, considering the existing rates of expenses that are quite high, it is of utmost
significance for Tesla to figure out ways in order to curtain the costs or else expand their
investing and financing operations.

In the future, we propose Tesla should apply a lead capacity strategy because of the high and
aggressive proposed demand for their next-generation cars. This preemptive inventory will
benefit Tesla and keep customers happy. Tesla furthermore needs to focus on demand
management and forecasting to avoid waste and hopefully taking their customers off those
waiting lists for months at a time

We also recommend Tesla using the life cycle analogy method. We chose this method because
it’s typically used for newer products hitting the market, focusing on already existing products
similar to Tesla products.

All in all, Tesla owns everything. To meet order demands, however, Tesla's supply chain
network (SCN) must be optimized by identifying three top criteria that focus on supply and
product manufacturing flow. During the manufacturing process, the value stream of the
30
product, which includes raw materials, components, and sub-assemblies, never stops. Speed
and agility for suppliers who can provide faster tooling lead times, raw materials, and parts,
as well as technological collaboration with the company's digital supply chain to push out
updates to existing customers, are among these criteria. Furthermore, Tesla must consider
supply chain coordination strategies, product flows, information flows, and risk mitigation
when selecting suppliers. Supplier relationship management is critical for delivering products
on time and on budget while minimizing disruptions to manufacturing flow management.
At last, Tesla needs to plan to keep more standard inventory on hand so it’s not 100% made
to order anymore. This will reduce wait time as we see demand being higher than ever by the
year 2046. A study done by Google shows that electric cars will dominate 90% of the market
by 2030 in wealthy cities, which also forces Tesla will have to provide much more funding
for increasing quality control.

31
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