business
The Problem limited supply at Telsa Motors
Company Description
Tesla Motors, Inc. is in the automotive industry and partly in the energy storage industry. The company dominates the United States electric vehicle market. Tesla manufactures innovative cars and other products which give value to their customers (Cooper, 2015). As an automotive business it offers, automobiles, electric vehicle powertrain components, and batteries. Despite an expanding product offering, the company is only known for its electric vehicles. Tesla’s Model S sedan is the most popular electric car globally (Cooper, 2015).
Apart from cars however, the company also produces powertrain components for electric automobiles. Additionally, it manufactures batteries for industrial as well as home use. Tesla Motors, Inc. is enjoying massive success in the global market as an innovative automotive business. The company has edged competition in the automotive industry as a major manufacturer of electric cars in the global market. The company’s competitiveness and long-term success in the world automotive market is dependent on several factors, one of them being its innovative nature (Winton, 2014).
As a popular global manufacturer of electric cars, the company is gaining overwhelmingly in the global market. Despite massive success, limited global operations remains a major challenge limiting its success in the global expansion. The electric motor manufacturer is known for high level of change, after introducing the globe’s first fully electric car. Innovation is an internal structure that empowers Tesla to develop profitable products.
Additionally, Tesla brand is a strong symbol of renewable energy solutions and innovation (Martin, 2016). Because of this strong brand, the company has attracted and retained new customers. Another strength characteristic of the Tesla’s brand is high control of its vehicle production. For instance, Tesla manufacturers its vehicles in company-owned plants or facilities in the United States. Most companies in the United States and other countries of the world do not own their manufacturing facilities or plants.
Problem at the Company
While Tesla is enjoying massive success in the global automotive sales especially in the sale of electric cars, the company is grappling with a limited supply chain which is hurting its business model. The limited supply chain at the company has been attributed to its limited market presence especially at the global stage. For example, Tesla generates a higher fraction or portion of its profits in America. Not popular in the developing world, including the fast-rising Chinese market.
A Limited supply chain is an internal strategic weakness limiting the ability of Tesla to grow based on the rapid growth of global markets- especially in the developing world. The limited supply chain in the company is related to limited market presence which limits product distribution in other areas of the world. A report by Hogg (2016) explains that the company warned it may be incapable of meeting the growing production of vehicles plans unless the manufacturing capacity was increased and its supply chain arrangements bolstered.
According to the report, in the first quarter of 2016, the company issued several warnings associated with its manufacture and distribution of Model 3. The company admitted that while the production facilities in Fremont California were being expanded, it was facing major challenges in procurement of Model 3. Even though parts are sourced from many direct suppliers, many of them are single sourced, which presents several challenges. Elon Musk admitted that the limited supply chain is exposing the company to several sources of component shortages or delivery failure.
While the limited supply chain and its disruption is an obvious risk in any business, any moves aimed at changing the supply chain could end up raising business costs. Few suppliers for instance are having challenges or difficulties meeting the company’s requirements (Hogg, 2016). The limited supply chain is a business distribution problem which is likely to affect the ability of the business to succeed especially in the overseas markets.
Research Variable for the Problem
A limited supply chain can be caused by many problems, most of which can be addressed by the company by conducting research and implementing the research’s recommendations. While there are many variables that can be used in researching ways of improving the supply chain, there is one major variable that can be researched, and data findings presented for discussion- that is lead time (Chopra, & Sodhi, 2014). According to Chopra and Sodhi (2014), lead time is a major variable in supply chain management since it influences how much of the products are shipped or distributed to the market.
Customers do not like waiting since it causes frustration. For car manufacturers like Tesla, the consequences of extended lead times can exceed the mere level of annoyance or frustration since it can end up costing the company huge sums of money. In a supply chain, the lead time is the time amount that elapses between the start of the production process to when the production is completed, and the product subsequently released to the market. Lead time is often examined closely in project management, supply chain management and manufacturing since companies usually want to reduce the amount of time taken to deliver products to the market (Chopra, & Sodhi, 2014).
As a variable in supply chain management, there are several factors that affect lead time, and which can be used to make the process better. However, not all these factors can be used to address the problem at Tesla. There are unique factors which can be attributed to the lead time variable at Tesla, and therefore the company must initiate a research process to determine which of these factors are unique to them.
For instance, shipping delays, building completely onsite, inventory, supply chain sources, and stock outs are some of the factors affecting lead time as a variable (Chopra, & Sodhi, 2014). For instance, in Tesla’s case, supply chain sources could be a factor affecting its supply chain lead time. Consolidating suppliers is a major challenge in Tesla’s supply chain lead time. Managing lead times require a lot more than managing the suppliers. Coordinating multiple vendors or suppliers can be a challenge, and therefore consolidating them can help solve the headache.
Method of Collecting Data
Collecting data on the lead time variable can either be qualitative or quantitative. Two methods of collecting data for this variable is quantitative interviews and questionnaires. The types of interview proposed for the collecting of data are: telephone interviews and Computer Assisted Personal Interviewing. While interviewing can be a quantitative method of collecting data, it can also collective other qualitative aspects of lead time such as factors affecting it. Telephone interviews can be fully automated using Computer Assisted Telephone Interviewing since this saves data processing time (Lyons, 2015).
Since Tesla is an innovative company based on technology revolution these two systems can be used since they have higher response rates and are less time consuming (Lyons, 2015). Secondly, questionnaires can be used in collecting the data. Here, the company makes use of rating scales and checklists. While mail questionnaires can be used here, the company can benefit more from web-based questionnaire since most of its purchases are done on the company website. Customers can be exposed to web-based questionnaires which are less detailed and quicker. Such questionnaires help in understanding the company’s supply chain, and ways of improving it.
References
Chopra, S., & Sodhi, M. S. (2014). Reducing the risk of supply chain disruptions. MIT Sloan Management Review, 55(3), 73.
Cooper, C. (2015). The Truth about Tesla: The Myth of the Lone Genius in the History of Innovation. Race Point Pub.
Hogg, R. (2016). Tesla warns supply chain issues could scupper its growth plans. Automotive Logistics. Retrieved from: https://automotivelogistics.media/news/tesla-warns-supply-chain-issues-could-scupper-its-growth-plans
Lyons, A. C. (2015). Approaches to collecting data. Qualitative research in clinical and health psychology, 74-91.
Martin, R. (2016). Tesla-Solar City Success Depends on Battery Technology That Doesn’t Yet Exist.
Winton, N. (2014). Tesla Success Forces Long-Term Skeptics to Relent, a Bit. Forbes. com (online).