Surname Initials Student Number

Moropane MB 216015174
Maluleke AP 216042817
Mandindi M 216046116
Rathelele TP 201589677

Module Name and Code - OPERATIONS MANAGEMENT 1A (OPM11A)

Qualification - National Diploma: Transportation Management
Assignment Title – Tesla Motors: The birth of the Roadster

Company background

Tesla motors has its sights firmly fixed on the mission of expediting the world’s transition
from the excessive wastage of fossil fuels for energy to electric energy sources which is a
far more sustainable alternative, thus ensuring that humanity makes the best use of the
resources it has available to it today without compromising those of the generations that
will precede us. Tesla was founded by a group of ambitious tech-enthusiasts in 2003 who
shared amongst them a belief that electric vehicles did not have to be boring, that
environmentally friendly vehicles could be just as much fun to drive as the next best
supercar, and so they sought out to prove this to the world (Tesla, 2018).
Contents
Company background...........................................................................................................................1
The three main functions......................................................................................................................3
Strategic Operations Decisions applied in Tesla..................................................................................4
1. Design of Goods and Services...................................................................................................4
2. Managing Quality......................................................................................................................4
3. Process and Capacity Design....................................................................................................4
4. Location Strategy......................................................................................................................5
5. Layout Strategy.........................................................................................................................5
6. Job Design and Human Resources............................................................................................6
7. Supply Chain Management.......................................................................................................6
8. Inventory Management..............................................................................................................6
9. Scheduling.................................................................................................................................6
10. Maintenance...........................................................................................................................6
MEASURING PRODUCTIVITY: TESLA.........................................................................................6
CALCULATIONS...........................................................................................................................7
MAIN AREAS THAT ARE ESSENTIAL TO IMPROVING LABOUR PRDUCTIVITY:..........8
Tesla’s product development system with a specific focus on the initial Tesla Roadster...................9
............................................................................................................................................................12
Tesla’s approach to transforming resources into products.................................................................13
 The three main functions

Tesla motors perform the three functions (operation, finance/accounting and marketing) in
order to successfully create electric vehicles. These areas insure that the company creates
value for customers and to survive in the marketplace. Operation or production creates the
required vehicles to attract and satisfy customers while the financing function compares
the expenses with the returns while manufacturing and delivering the electric vehicles.
Through marketing the Tesla is able to take created vehicles to the potential customers
and generate demand. The following chart shows how Tesla organizes its firm to practice
these three functions.

Tesla motor manufacturing

Marketing
Operations Finance/accounting Sales promotion
o Facilities (Construction; o Disbursements/ credits Advertising
maintenance) Accounts receivables Sales
o Production and inventory Accounts payable Market research
control (Scheduling; material General ledger
control) o Funds management
o Quality assurance and Money market
control International exchange
o Supply-chain management o Capital requirements
o Manufacturing (Tooling; Stock issue
fabrication; assembly) Bond issue and recall
o Design (Product
development and design;
detailed product
specifications)
o Industrial engineering
(Efficient use of machines.
space, and personnel)
o Process analysis
(Development and
installation of production
tools and equipment)
Strategic Operations Decisions applied in Tesla

The tesla company uses all the 10 strategic OM (operation management) decision to make
effective decisions, achieve the company’s strategy and mission of response, low cost and
differentiation of its products from competitors. Below are the strategic OM decisions that
are applied effectively and efficiently at Tesla Motors.

1. Design of Goods and Services. This strategic decision entails what is required of a
company’s operations in each of the other OM decisions[ CITATION Jay17 \l 7177 ]. The
objective in this strategic decision area is that operations managers must successfully
address how the companies’ products determine or influence the quality, human resource and
cost[ CITATION Jay17 \l 7177 ]. In other words, match the company’s organisational capabilities
with customers’ requirements and demand. Tesla has been tackling the design of goods and
services with the use of concurrent engineering (implies speedier product development through
simultaneous performance of the various stages of product development)[ CITATION THO17 \l
7177 ]. The approach allows the company to be innovative and constantly introduce new
features of a car to the market in order to meet and exceed the changing customer’s
expectations[ CITATION THO17 \l 7177 ]. For example, Tesla has made model X cars, an
unique electric car that allows one to control the car using smartphone. Via a Bluetooth the car
knows you are coming, this allow you to open and lock the car from short distance[ CITATION
JOH18 \l 7177 ]. However, the firm plans to combine concurrent engineering (which lead to
expensive car model) with pricing strategy to cut production cost for the next model
3[ CITATION Ced17 \l 7177 ]. This will achieve greater profit returns for the company as more
the firm will sell their cars to more customers since the price will be affordable and production
costs will be low. Also, the profits generated from the sales of the new model can be used to
fund for other projects.
2. Managing Quality. The priority in managing quality is to identify the customer’s quality
expectations and develop procedures and policies to meet the expected quality[ CITATION
Jay17 \l 7177 ]. Tesla motors satisfy this objective by constantly researching customers wants
on the automotive market. Managing quality successfully will make Tesla to strongly compete
with the leading companies like BMW and Mercedes-Benz. In addition, the firm addresses this
strategic operation decision area through the firm improving cars and supply chain annually.
 For example, the company introduced the model 3 car in the marketplace which has better
features than previous models[ CITATION Tes18 \l 7177 ].
3. Process and Capacity Design. This strategic operation decisions is concern with
determining how Tesla produces cars along with the organisational resources, costs and
capabilities in achieving the production goals. Tesla Motors, Inc. integrates automation for this
concern. For example, the company has automated production and assembly machines along
with physical human labour. This method of combining human and technology helps Tesla
achieve high ratio of productivity through operational efficiency in the automotive business. The
automated machines does more of the job, this allow Tesla to cut labour costs and achieve
immense productivity since machines are tireless and works for 24/7. This approach has been
effective and efficient hence the company aims to stick to it until drawbacks are identified.
4. Location Strategy. Tesla motor company’s aim in this strategic decision area of operations
management is to locate its business effectively to suppliers, customers and workers while
bearing in mind the government, costs, logistics and infrastructure. Tesla uses leading
suppliers around world to provide essential resources for manufacturing products. For
example, tesla get automated-graded battery cells from Panasonic, these will be used to
produce an estimate of more than 80 000 cars in the coming 4 years[ CITATION Tes18 \l 7177 ].
In addition, these battery are under the Gigafactory 1 (a facility built to reduce the battery cost
and to manufacture more annually lithium-ion batteries than in 2013 worldwide) which will
increases productivity while reducing costs. According to [ CITATION Ced17 \l 7177 ], Tesla
seeks to improve its location strategy by placing its new model 3 on places where customers
can easier see it during open-minded situation of buying, such as in the Malls. This will catch
the eyes of customers and manipulate them to buy before thinking of another car leading to
increased sales.
5. Layout Strategy. In this Figure 1: facilities at the Tesla factory in California

decision area, the objective is to

maximize the efficient flow of
information, people and
materials. The tesla’s factory
located in California, has
5.3 million square feet of
manufacturing which maximise
capacity utilisation. The layout is
designed to increase
productivity of the firm[ CITATION Tes18 \l 7177 ]. The facility was home until 2009, tesla
bought the facility in 2010 and immediate introduced skylights to offer employees natural
daylight[ CITATION Tes18 \l 7177 ]. the daylight will increase worker’s productivity as it
 stimulate the mental and visual capabilities necessary to control and maintain the circadian
rhythms.
6. Job Design and Human Resources. Tesla has the goal to recruit, retain and motivate
human resources with the necessary skills and knowledge. Tesla’s mission in terms of human
labour is to “hire the world's best and brightest people to help make this future a reality.” The
firm attracts high qualified candidates through offering different job titles and satisfactory
compensation package consisting of both non-monetary and monetary incentives. Also, the
company offer internships to university students who are highly likely to be competitive and
diverse individuals. Students are essential to maintain the innovation which is one of the major
foundations of the company.
7. Supply Chain Management. This strategic decision area of operations management
focuses on decisions that
determine what is to be
purchased, from whom, and
under what conditions. Tesla
has a different supply chain
compared to most of the
automobiles companies. Its
supply chain does not include a
dealership who sell the
companies products on behalf
of the firm but rather sell their
products directly to the
customer[ CITATION Ruo14 \l 7177 ].
8. Inventory Management. To address this concern, teslar has taken the approach of holding
little inventory and customer have to be placed on waiting list for several months since it has
cut the dealership and sells its products directly to the customer[ CITATION Ruo14 \l 7177 ].
Keeping inventory low means that tesla minimise the risk tied up to holding excessive stock.
Such inventory management method lead reduced logistic costs and more than $30 million in
cash [ CITATION Tes13 \l 7177 ]. Placing customers on waiting list for several month allow for
more customization. Tesla utilise these approaches as a way to achieve organisational goals
and customer satisfaction.
9. Scheduling.
10. Maintenance.

MEASURING PRODUCTIVITY: TESLA

The formation of products and services requires changing resources into goods and
services. The all the more proficiently we roll out this improvement, the more profitable we
are, and the more value is added to the great or service provided. Productivity is the
proportion of outputs (goods and services) partitioned by the inputs (assets, for example,
labour and capital).
Measuring productivity at an assembly plant, is straightforward. It’s either:
 A physical measure – Which is the total number of cars produced in a given period
(a week, a month, a year) divided by the total number of worker-hours needed to
produce them.
 A monetary measure – The total dollar value of cars produced in a given period
divided by the total number of worker-hours needed to produce the car.
In the case of Tesla, the company imposes various techniques and measurement to keep
track of the company’s performance, which is primarily based on productivity. For
example, the company measures its manufacturing performance based on the number of
cars produced a day, for the customer service division, it considers the number of inquiries
resolved, emails answered, and complaints handled (Christopher, 2016).
The following are some of these measures used to determine Tesla’s productivity:
 Powertrain units per day (Auto production plant facility productivity)
 Automobiles per day (Tesla production plant facility productivity)
 Inquiries addressed per day (Customer Service productivity)

Tesla was aiming to wrap up 2017 production Model 3 at an average rate of 5000 units per
week. Instead, Tesla produced just 2425 Model 3s during its entire fourth-quarter. Further,
Tesla finished the year with a weekly production run rate of only about 1000 Models 3 cars
(Sparks, 2018). Recently Tesla Model 3 production has improved to 2000 units per week
in April 2018.
After the investigation behind the reason why Tesla could not reach its 5000 targets by
2017, it was discovered that Tesla has been underrating humans. Musk believed that
Robotic machines are more productive than humans and this led him to depend more on
machines to do the job with fewer humans monitoring them. After realising that their Model
3 production was facing challenges at the battery model assembly. Tesla said in its fourth-
quarter shareholder letter that it was addressing bottlenecks with more manual production
from human labour. A method Tesla CEO found surprisingly effective and led him to
employing more employees (Sparks, 2018).

CALCULATIONS:
Tesla is targeting to make 6000 Sedans weekly by the end of June (Analyst Muster). To
meet this goal of 6000 cars a week the Tesla factory in Fremont will produce Model 3s
around the clock, 24 hour a day, seven days a week, and will have 400 people per week at
both factories for several weeks (Hull, 2018).
6000 cars a week
24 hours a day
7 days a week
400 employees

6000/7days= 857.14 cars a day

Using a single factor productivity = Units produced/input used (Labour hours)

857.14/24hours
=35.714 cars produced per hour
The interpretation of this calculation is that the company will have to produce 36 cars an
hour in order to meet their target of 6000 of Sedans weekly which equals to the total of
(6000*4 weeks) 24000 cars a month by the end of June.
Challenges that Tesla go through when attempting to measure productivity:
In terms of hours, due to long hours of work and very short breaks Tesla employees have
a problem of fainting and getting sick on the job. This leads to a decrease on the number
of outputs that are supposed to be produced per hour/day and this might automatically
mean that Tesla won’t be able to reach its target for the month of June.

MAIN AREAS THAT ARE ESSENTIAL TO IMPROVING LABOUR PRDUCTIVITY:

Firms use a combination of labour and capital to produce their output. Labour consists of
the workers and employees who produce, manage, and process production. To increase
productivity, each worker must be able to produce more output. This is referred to as
labour productivity growth (Labour Productivity Growth, 2018).
Employing new workers – It is clear that Tesla need to employ new workers in order to
improve labour productivity by having their employees working on different shifts. Musk
has stated that 6000 cars will be produced by the end of June that employees need to
work 24hours and seven days a week which means that more working hours will lead to
having more employees. This will assist the company to reach its target, to give their
employees enough breaks and rest. By doing so, the number of complaints by workers
about working for longer hours without having enough rest and having employees
collapsing during working hours will be reduced and workers will become more productive
and effective.
Training Employees – In an organisation employee need to prepare in work particular or all
in all issues like safety and company rules to educate them. At the point when the
knowledge of the employees has been refreshed this will brings about greater efficiency
from the workers. Subsequently, the most ideal path for Tesla to enhance its work
efficiency is to prepare their employees in their space and in addition the common issues
(Render and Heizer, 2018).
Motivation through incentives – Employees can be motivated incentive programs. At the
point when workers are reacting to the incentives or reward, at that point the endeavours
that are kept by the workers will accomplish the objectives that will upgrade the offers of
the organization. Subsequently, work profitability can be accomplished (Render and
Heizer, 2018). Tesla need to ensure that they reward and acknowledge their hard-working
employees to improve their productivity and reach their target of producing 6000 Sedans
by June.
Innovation – Innovation is part of organisational climate which will update and modernise
the machinery and the production process that the company is following this will help the
employees to deliver a high measure of yield successfully. The faster the machinery works
the speedier the workers will finish the work effectively (Render and Heizer, 2018).
Maintaining good-work environment - The characteristic feature of good-work environment
is hygienic conditions, worker well-disposed condition. This empowers and rouses the
representatives in focusing on their work and along these lines work profitability
increments (Render and Heizer, 2018).

Recommendations:
Tesla must employ more employees to ensure that their target production rate for June is
met. This will assist in dividing workers for different shifts since the aim is to have the
production plant operating for 24/7 per week. Allow workers some rest in order to energise
and to become more productive.

Tesla’s product development system with a specific focus on the initial Tesla
Roadster

Successful product development necessitates that there be reasonable cash flow in the
business, specific acumen pertinent to the market that the business looks to serve and
lastly, there ought to be a team of people with complimentary skills who can bind their
ideas and expertise in order to successfully take a product from its ideation stage to the
market (Heizen, Munson & Render, 2017).

The initial Roadster’s product development stages not only ensured the success of the
initial Roadster, but they also paved the way for what Tesla has come to be known as
today. The initial concept was derived from the existence of a growing number of
environmentally aware tech-enthusiasts in the United States of America (U.S.A) who had
prompted the enactment of a zero-emissions mandate in California.

Tesla’s founders believed that there was a justified market for electric vehicles and so
they sought out to build one. What made this concept feasible is that Tesla’s founders had
very specific skills which complemented each other. Ian Wright was the Vice President
(VP) of vehicle product development, drawing experience from successfully holding a
similar role for another car manufacturer previously. Martin Eberhard was an incredibly
competent hardware professional whose intricate understanding of computers proved to
be hugely beneficial in the conception and growth of Tesla. Mark Tarpening possessed
impressive business acumen owing to his exposure in the corporate world, so much so
that he assisted Martin in putting together a feasible business plan and including detailed
specifications for the Roadster.

The caliber of customer that Tesla was targeting whilst in the process of building the
Roadster was a customer who had a love for high-end sports cars. The idea was to not
only create a vehicle for the growing number of environmentally aware tech-enthusiasts,
but also one that owners or lovers of traditional high-end sports cars such as Lamborghini
would appreciate. Given the aforementioned, the customer requirements to win orders
were simply just that the car had to have the same value as high-end sports cars, it had to
have a low resource cost to the planet and it had to be affordable.

The Roadster’s functional specifications as specified in the original business plan’s

executive summary boasted world class handling, the ability to go from 0 to 60 kilometers
in 3.9 seconds, 100 mpg equivalent, the Roadster would release zero tailpipe emissions, it
would have a 300 mile range and lastly, Tesla guaranteed that apart from the necessity of
replacing the cars tires as regularly as safety needs require, the car would not demand any
maintenance for the first 100 000 kilometers.
The car’s product specifications and functionality detailed that the car would make use of a
lithium-ion battery due to its resilience and power, compared with competing batteries. The
car's engine would be situated in the middle of the car as opposed to the front of the car as
per usual and the car would be lightweight as to not restrain the car’s range and in order to
ensure optimal weight distribution and safety, the car’s motor would have to be installed
behind the driver. Insofar as the body is concerned, Tesla decided on an external
development strategy which entailed forming an alliance with Lotus who provided Tesla
with an existing lightweight mid-engine car body, thus enabling both companies to draw
from each other’s strengths in order to further their individual organisational missions. To
finalise everything, Martin arranged to license the technology of an embryonic electric car
manufacturer called AC propulsion. AC propulsion’s technology formed the basis of the
development Tesla’s motor and controller.

Following all prior developments and plans, Tesla was certain in conducting it’s product
review that the Roadster’s product specifications were the best way to meet the
requirements of the customers they wanted to serve.

When the time came for Tesla’s founders to test the market, they leveraged an opportunity
they got at a car show in Los Angles in December 2003. There they got one of the
member’s of Lotus’ team to test drive the Roadster and the car and company gained
growing popularity from them onwards, the customers who interacted with the Roadster
thereafter believed with utmost certainty that the car meets their expectations.
Once the time had come Tesla to introduce their car to the market on a mass scale, their
promotion strategy entailed using the the Roadster to gain market acceptance and
thereafter penetrating other market segments following the Roadster’s success. Another
important promotional factor was that the Roadster’s price was half the price of the closest
competing high-end sports car. Insofar as channel decisions are concerned, Tesla thought
it best not to sell the Roadster through dealerships because this would deny the company
the benefit of being able to gather direct feedback from customers (Statista, 2018).

When evaluating Tesla in its current capacity, it is hard to deny the fact that the company’s
product development strategy has been a success. The success of the Roadster, as
anticipated, enabled Tesla to penetrate other market segments with relative ease and the
company has generally been on an upward trajectory since the launch of the Roadster.
Product development system of tesla
 California had just enacted a zero emissions mandate, and there was a growing number of tech-enthusiasts and environmentalists who were anti-oil. All of these
emerging issues prompted Tesla's founders to develop a high performance electric car .
Concept

Tesla's founding team comprised of Martin Eberhard who was a hardware professional, Mark Tarpening who had assisted Martin in compiling the initial Tesla
Roadster business plan with a comprehensive addendum including product specifications along with Ian Wright, VP of vehicle product development. The feasibilty
of the idea was further validated by a single truth: Neither one of them had to reinvent physics. A tech company call AC Propulsion had already created an electric
concept car. Tesla's team simply had to rally up all the appropriate individuals and companies.
Feasibility

Tesla Roadster customers wanted a high performance car which was affordable, had a low resource cost to the planet and carried the same value as high-end sports
cars and had advanced and effective safety measures.
Customer
requirements

The original Tesla Roadster business plan detailed the following specifications in the business plan's executive summary:
The Roadster could do 0-60 in less than 3.9 seconds.
The Roadster had world-class handling.
The Roadster boasted zero tailpipe emissions.
Functional The Roadster had a 300 mile range.
specifications The Roadster guaranteed zero maintenance for 100 000 miles, not including tyre related maintenance.

The Roadster was designed to be a fully electric vehicle powered by the most rapidly advancing battery at the time, la ithium-ion battery. Eberhard thought it best
for the Roadster to have light-wieight mid-engine in order to not limit the car's range and in order to en sure optimal weight distribution, he decided that the car's
motor should be behind the driver. In furtherance to the initial discovery, Tesla's founders knew and understood that they did not have to build a new body from
scratch, they simply just had to find a comapny that maufactures light-weiight mid-engine cars. That company was Lotus, hence the Roadster's inital offering had
Product the body of a Lotus Elise. Following this, Eberhard arranged to have a license sketched out in order to use some of AC Propulsion's technology in the making of
specifications and Tesla's motor and controller.
manufacturability

So far, Tesla's produt specifications were coherent with the customer's requirements.

Design review

Eberhard and Tarpening were very savvy in the how they entered the market. Tesla was officially introduced to the world at a car show in Los Angeles on the
twenty-eight of December, 2003. It was there that they managed to arrange for one of Lotus' team members to test drive Tesla's Roadster.
Test market

Insofar as promotions go, Tesla knew that they had to convince the market that electric cars are not slow, that high-performance batteries were available and were
used in all Tesla's in order to ensure optimum efficiency in Tesla vehicles to keep the car running for a reasonable amount of time. What Tesla's founders decided to
do was launch the Roadster as the inital model in ordee to gain attention. They realised that the manufacture of a speedy electric car would murder the notion that
electric cars were slow and thereafter, it would be easier to introduce new models to the market. In terms of chanbnel decisions, Tesla decided not to go the
Introduction to "dealership" route because this would starve the company of the opportunity to interact directly with their customers and gain valuable insights. Furthermore, Tesla
market mamnaged to position themselves as a company that sells high-end performance cars ata fraction of the price of the closest competing performance car.

Tesla has enjoyed massive success since going public in 2010. The company managed to sell in excess of 76 000 cars globally following the 2016 fiscal year. By
March 2014, Tesla's Model S had been acknowledged as the most faddish vehicle in Norway (Staista, 2018).
Evaluation
Tesla’s approach to transforming resources into products

According to Elon Musk CEO of Tesla,Tesla Motor is made or build through specialized
robots the modernist process stages al starts with raw material provided by Red Claud
Klondike strike which Tesla cars are build almost entirely from aluminum which comes
from bauxite ore. Boron steel which is used to reinforce the aluminum at critical safety
points. Titanium which the underbody of the Tesla Model S is made from ultra high
strength which protects the battery said Jeff Desjardins(2016). They start the process by
uncoiling the coils in the blanking machine that allows to flatten the metal person and cut it
into flat pieces which takes 1 part to assemble every 6 seconds therefore they get all the
necessary parts to meet the body of the vehicle out of the gigantic machines than to the
body Centre where they put the Model together by starting off with putting together the
underbody which is the main floor of the car than the body side which is the internal and
external outer frames and inside area then merge it together for the joining of metals they
use five different methods which is adhesive self piercing rivets cold metal transfers
conventional resistance welding and Delta spit welding system and after all has been done
the car is ready to be painted which is taken by gigantic robot which puts it into a conveyor
that conveys it into the paint shop which does the primer base as well than taken to the
general assembly after the painting has been done where the car is assembled by close to
3000 employee inside and outside where wheels ,chairs and so forth is put into place .
Tesla has replaced the smaller 18650 cells which have been in use for decades with
battery cells called 2170 in the model S Tesla , reason being they provide higher energy
densities and will cut costs. The model S Tesla can wirelessly upload data so technicians
can view and fix some problems online without ever needing to physical touch the Model S
Tesla (Jubril O. 2005).Tesla has supercharge stations where drivers can full charge their
Tesla vehicles in about 30 minutes for free and its said that Module S Tesla is a classic
example of missing the forest for the tress ( emphazing on the speed) and has an infinite
warranty for early adopters which is a bonus whereas the other models like the module 3
Sedan doesn’t provide the same features for example it has limited driving range of 215
miles per charge and the batteries are said to have faults and are not capable of holding
up to a long term therefore they will need a fresh battery every after a year or so .
According to Elon Musk Tesla Module S achieved the highest safety rating of any car ever
tested and set a record for the lowest probability of occupant injury from front side rear and
rollover accidents,all wheel drive instantly controls fraction and grips in all weather
conditions .Module S can get you anywhere you want to go with industry leading range
and convenience charging options all over the world and it has 360 rear side and forward
facing cameras provide maximum visibility detects nearby cars prevents potential
collisions and assists with parking (Autopilot advanced safety and convenience features ).

Tesla converts its products into service using direct sales instead of franchised dealerships
and it has created an international network of company owned showroom and galleries in
urban centres around the world , this is whereby Tesla gains an advantage in the speed of
its product development and creates a better customer buying experience.Tesla’s potential
customers deal with Tesla employed sales and service staff where its located in 318 areas
around the world and it proves its service through internet sales where consumers can buy
a Tesla motor online(Michael K.2014) .