Topic: TESLA’S GLOBAL SUPPLY CHAIN

Table Of Contents
1.0 Introduction.................................................................................................................3

1.1 Introduction...........................................................................................................................3

1.2 Research Objective................................................................................................................3

1.3 Research Structure.................................................................................................................4

1.4 Research Methodology..........................................................................................................4

1.5 Research Limitations..............................................................................................................4

2.0 Main Body....................................................................................................................5

2.1 Tesla's Supply Chain Management Structure: Battery............................................................5

2.2 Tesla's Supply Chain Strategies..............................................................................................7

2.2.1 Lean Supply Chain...................................................................................................................................7
2.2.2 Tesla's Lean Strategies Procedures.........................................................................................................7
2.2.3 Agile Strategy..........................................................................................................................................9
2.2.4 Tesla's Agile Strategy.............................................................................................................................10

2.3 Supply Chain Analysis..........................................................................................................11

2.3.1 Lean Supply Chain.................................................................................................................................11
2.3.2 Agile Supply Chain.................................................................................................................................12

3.0 Recommendations.....................................................................................................13

3.1 Outsourcing Some Functions...............................................................................................13

3.2 Healthy Competition............................................................................................................13

3.3 Customer Satisfaction..........................................................................................................13

4.0 Conclusion..................................................................................................................14

5.0 References.................................................................................................................15
 1.0 INTRODUCTION

1.1 Introduction

Global supply chain management (GSCM) is the science whereby the manufacturer

plans how the goods and services will reach to the end users (Prologis, 2022). As the

term supply chain implies, it is an interlinks of many functions, companies and

individual. Indeed, the GSCM has become one of the paramount functions of the

business in the 21st centaury. The supply chain process starts with the individuals who

supply or produces raw materials to the manufacturer, the individuals who performs

logistics function that enables the movements of goods and services to warehouses and

distribution centers where wholesalers and retailers collects and resell the goods and

services to the end users. (Tien, Anh & Thuc, 2019). The effective GSCM focus on

ensuring there is control in demand and supply, improving the speed with which product

lines reach customers and the flexibility with which consumers transactions are handled.

Moreover, Supply chain management integrates related control activities to achieve the

primary goal. Supply chain management focuses on cooperation and coordination

throughout many organizations in a customer-driven environment.

1.2 Research Objective

The report objective is to analyze the lean and agile strategies using the Tesla case

study and recommends ways through which companies such as Tesla can emulate.
1.3 Research Structure

The research will focus on three parts: the first part is the overview of Tesla supply chain

structure, the second, is the lean and agile supply chain strategies and finally, the study

will focus on recommendations.

1.4 Research methodology

The research adopts the literature review methodology based on the Tesla’s case study.

1.5 Research Limitations

The research will rely on secondary sources of information which may have been

biased. Also, the gaps in literature review may lead to omission some key information

which may affect the credibility of the study.

 2.0 MAIN BODY

2.1 Tesla's supply chain management structure: Battery

Material management is involved in supply-side logistics, which focuses on the

movement of resources (Supply Chian Movement ,2022). Tesla relies on multimodal

transportation for battery transportation. Companies like Albemarle and Livent ship

lithium by sea freight to their principal processing factory in China. The processed

material is subsequently sent to Sumitomoto in Japan for cathode manufacturing.

Sumitomo then transports the cathode from Japan to Panasonic in Nevada for cell

production through ocean transport and rail freight (Coffin & Horowitz, 2018). Because

of its vast bulk, heavyweight, and cost-effectiveness, it is carried to the Battery factory

via rail. After Panasonic creates the cells, Automated guarded vehicles transfer them to

Tesla's part of the production. Panasonic also ships packs from Japan through ocean

transport. Due to California traffic, prices, and volume, Tesla moves the lithium batteries

to the Freemont production via train rather than truck. Rail transportation supports the

lean supply chain by lowering costs. The North American distribution network employs

modest warehousing. Most battery packs are kept inside the Battery factory and the

Freemont factory. To reduce strain at its Freemont facility, Tesla has erected a

warehouse near Lathrop accessible by road freight.

Demand-side logistics is associated only with the movement of finished products from a

manufacturing facility to a consumer(Supply Chian Movement ,2022). The truck is

delivered from Freemont to Tesla's delivery point, usually by rail, due to its low cost and

damage (Nikhil Kumar et al., 2020). Tesla's delivery point workers handle the final mile

transfer unless the client wants to pick it up in person from the delivery site. If a

consumer resides over 220 miles from a Tesla delivery site, transportation is allocated

to different carriers for a charge. A closed-loop supply chain focuses on retrieving value

added by recycling the complete product or most of its pieces (Battini, Ivanov

&Gianesello, 2017). The closed-loop strategy comprises creating and managing a

system to maximize value generation throughout the production cycle, with flexible

resource recovery following returns. Tesla accepts final battery pack returns, but they do

not accept commercial vehicle returns. Customers can reject the delivery if the vehicle

has factory problems, and some models in the United States allow deposit

reimbursements. Tesla believes prolonging battery life is preferable to extending

recycling for environmental and economic reasons. Consumers can still bring their

vehicles to a Tesla repair center to get the battery replaced. The battery pack is wholly

reused, and no discarded batteries wind up in the environment. Tesla currently uses

third-party recovery companies, but in 2019, it declared that recovery would be

performed within the Gigafactory. There are substantial operational challenges with

reusing from a process flow standpoint.

First and foremost, the batteries are intended for long-term use rather than regeneration

(Coffin& Horowitz, 2018). As a result, dismantling is costly and time-consuming.

Second, the procedure is energy-intensive, and extracting the resources was previously

inexpensive than recycling. 'Panasonic's natural resources are used in the regeneration

process to create new cells. Panasonic depends on third-party organizations like

Redwood to recover damaged cells that fail to test. The batteries are trucked to

Redwood in Carson City, Nevada, and the basic materials are then returned to the

Gigafactory.

2.2 Tesla's Supply Chain Strategies

2.2.1 Lean supply chain

The lean concept has grown in prominence in the industrial industry, where significant

improvements may be made (Najar, 2022). Production processes could be upgraded to

minimize resources and waste while sustaining operating efficiency. Quality is a critical

component in lean production. Achieving minimal breakdown in the production process

reduces wastage and promotes the 'company's efficiency. Customers usually do not

return high-quality products, which shows that less material will be necessary for

refunds and quality defects. Lean has shown to be an efficient team management style

for some of the most demanding sectors, including software design, building, and

production. The approach plays a significant role because it is simple to learn and

immediately impacts when properly executed. Tesla has four lean principles.

2.2.2 Tesla's lean strategies procedures

The first strategy of Tesla's lean strategy is the pull system (Battini, et al. 2017). A pull

system is a production strategy used to reduce waste during the manufacturing process.
Elements used in the production of batteries are only replaced after being consumed.

As a result, Tesla only produces sufficient battery packs to satisfy the client. This

principle ensures that all Tesla resources are directed toward developing lithium

batteries that can be sold out quickly and cost-effectively. The pull system principle

works backward, commencing with customer needs and using signals to prompt action

in each preceding stage of the manufacturing process. Customer preferences drive the

battery manufacturing process. Thus, the lean supply helps the entity to serve the

customers effectively and increase production process.

The second lean supply chain strategy used in the Tesla battery factory is one-piece

flow. Instead of traditional mass manufacturing, this principle is used (Coffin& Horowitz,

2018). Unlike large-scale production, pack manufacturing is completed before moving

on to the next. The one-piece guide is commonly used in lean organizations to achieve

just-in-time production. The rechargeable batteries parts are moved through the facility

quickly and efficiently. Carrying battery packs as a group takes a long time in mass

production. One-piece flow is generally more efficient, reducing the amount of work and

deterring slowdowns. The one-piece principle's concept is only to generate and process

what the customers demand. As a result, this principle decreases the risk of

overproduction and promotes more efficient work.

The third lean supply chain strategy is takt time. Takt time is the maximum time it takes

to produce products to enhance customer satisfaction (Najar, 2022). Takt, which is

determined by market demands, establishes the pattern for all procedures in Tesla to

guarantee continuous flow. Takt time aids in reducing excessive production and, as a

result, stabilizes and prevents stock build-ups.

2.2.3 Agile strategy

The agile supply chain refers the ability of the supply chain entity such as Tesla

responsiveness, the competency level, the quickness and the flexibility to manage the

supply chain (Gligor, 2016). The agile supply chain make use of the real-data to forecast

the demand and supply of the product. The real time data helps the supply chain entity

to update their information and thus this helps the organization to improve on the overall

efficiencies and the productivity of an enterprise. The agility supply chain eliminates

the problem of overstocking that comes with the lean strategy. Updated information

helps the entity to supply the right daily stocks since it provides the real time data for

demand. Unlike, the lean strategy that relies on overstocking.

Agile supply chain strategy provides the organization with the real time data that

eliminates the issues of overstocking (Najar, 2022). Consequently, agile supply chain

ensures the firm is responsive to the demand of the customers. Also, agile supply

ensures the managers remain competent because they use the up-to-date information

to make supply chain decisions. Thus, making the decisions based on the real-time

increases the quickness of the supply chain process. Furthermore, the agile supply

chain ensure that the entity can be flexible incase the firm need to customize its

products. In that case, when Tesla battery needs customization, the entity is able to

respond quickly with the help of agile supply chain since it is flexible and the decision ca

be adjusted quicker than the lean supply chain.

The agile supply chain also aids the entity to adopts trends in the market quicker.

therefore, when the supply chain trends change due to economic or political factors, the

enterprise using the agile supply chain can navigate the turmoil that comes with such

challenges and ensure the success of the firm during the turmoil period (Prologis,

2022). Also, the lean supply predictive and quantitative analysis is not viable since it

does not use the real time data and thus the agile supply provide the enterprise with an

opportunity to provide the firm with accurate and predictive scenarios that can transform

the organization future.

2.2.4 Tesla's agile strategy

Tesla have adopted the agile supply chain based on four strategies; The first agile

strategy of Tesla is consumer enrichment (Prologis, 2022). Agile is more customer-

focused than lean, which is more waste-focused. Tesla battery production is more

involved with enhancing the customer experience through different factors such as

monitoring and identification. Tesla is also concerned with aspects such as quality

management. Customers' requirements fulfillment is a critical component of Tesla's agile

manufacturing.

The second agile supply chain strategy of Tesla is competitive enhancement (Battini, et

al. 2017). This principle promotes a more competitive and sustainable environment—

collaborating with companies that share similar production ideas and mindsets. In the

production of battery packs, Tesla collaborated with Panasonic. As a result, Tesla

adopted a much more adaptable and flexible supply chain.

The third agile supply chain strategy principle used by Tesla in battery production is

entity organization (Hove-Sibanda & Pooe, 2018). The supply chain of tesla is well

organized such that it ensures the battery reaches to the end users with ease. Tesla

responds quickly to changes in situations such as market demands, preferences, and

production because of its ability to organize its agile supply chain. As a result, tesla's

production is adaptable and ready for future developments.

The fourth essential agile supply chain strategy is leveraging impact (Birkel & Hartmann,

2020). Tesla continuously monitors the effects of human capital because humans have

knowledge, skills, and a desire to better productivity and the production process. Tesla

also keeps up with current production trends and technological advancements,

improving rechargeable batteries production facilities.

2.3 Supply Chain Analysis

2.3.1 Lean Supply Chain

The Tesla’s lean supply chain has its ups and down; first, the lean supply chain adds

value to the customers because, the strategy helps Tesla to reduce the wastage and the

items or qualities that do not add value to the batter product (Sriyakul, Prianto&

Jermsittiparsert, 2019). The reduction of the unnecessary process during the

manufacture and the distribution of tesla battery boosts the company profitability as the

entity is able to reduce the unwanted costs. Secondly, tesla lean supply chain in its

batterer products has helped the firm to identify areas that it can reduce the waste

products. Thus, the company is able to identify the transportations of the waste and the
required labor on time. This increases the efficiency of the organization and thus

improving the overall battery productivity and the logistics process. Third, removing the

unnecessary steps by tesla in its lean supply chain leads to customer satisfaction as the

customers acquire the battery in the stipulated time thus making them happy and

satisfied.

2.3.2 Agile Supply Chain

On the other hand, Tesla being agile and adaptable requires that the distribution

network handle unpredictability and a steady inflow of unique, creative products with

efficiency and agility (Havenga, 2018). An agile supply chain strategy takes a pause-

and-see approach to market requirements, deferring finished product commitment until

actual demand is determined, also known as procrastination. For instance, this could

involve sub-assemblies of parts into modules in a relatively low process, with the

assembly process taking place near the demand location to localize the product.

Through cooperation and partnership with important customers and suppliers, an agile

supply strategy should be flexible to market demands and employ data as a

replacement for inventory. There is a lot of good in both approaches. Still, it is not very

reasonable in the automotive industry to throw away years of positive experience from

lean production to embrace a new vision from another sector.

 1.0 RECOMMENDATIONS

2.4 Outsourcing some functions

Tesla made use of a well-organized supply chain system using lean supply chain

strategies (Battini, et al. 2017). However, a few points, such as outsourcing some

production processes, need to be addressed and executed more accurately.

Outsourcing is viable and feasible and thus it will be more beneficial to the company as

it will help the company to focus on areas that it is doing better and outsource function it

is not doing well. That way, the firm will increase customer satisfaction, improve

efficiencies and increase the production of batteries.

2.5 Healthy competition

Tesla has so far established a healthy competition with its main rival in the automotive

industry (Havenga, 2018). However, this is not enough and the company should adopt

more policies that will ensure the company promotes environment as it enhances its

battery products to be marketable. Thus, environmental suitability measures should be

on the card as the firm adopt agile supply chain competitive strategy.
2.6 customer satisfaction

On the other hand, Tesla's agile strategies are more concerned with ideally building the

battery rather than its value (Wieland, 2020). Tesla, should therefore employ some agile

development strategies by promoting customer satisfaction. These is achievable though

delivering on time, promptly and taking into account face-to-face conversations with

customers to satisfy consumer desires.

3.0 CONCLUSION

The efficiency of a company's logistics system determines its success. A well-designed

supply chain will facilitate revenue growth. The essential requirement for improving any

company's performance should be a good supply chain. As a result, a company requires

a concerted effort from all levels of the organization. Tesla should also seek ways to

improve their distribution network function to ensure that their supply meets future

demands at a reasonable cost. Consequently, the world is changing every day.

Therefore, it is advantageous for an organization to have a Lean and agile supply chain

in a modern competitive industry.

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