5 page paper

MGMT 365: Term Project

Manufacturing and Delivery Issues of the Model 3

Prepared for Dr. Radovilsky

Summary

After years of anticipation, Tesla’s long-awaited Model 3 has finally hit the streets. Even though this sleek, fully electric car was expected to forever change the automotive industry, since its inception, the Model 3 has been nothing short of a logistical nightmare. For our group project, we will analyze this “nightmare” and formulate solutions to efficiently manage resources. Some of the issues that will be discussed will include the logistics in manufacturing and delivery of the Model 3. Since this affordable electric car is the first of its kind, there are many challenges that this company must overcome in order to become profitable. Our group will discuss certain layout and location strategies, while also using forecasting methods to discuss future profitability. Our goal is to develop a plan that can help Tesla operate more efficiently in the development, manufacturing, and delivery of the Model 3.

History

Tesla was originally founded in 2003 by two entrepreneurs, Mark Eberhard and Marc Tarpenning. These entrepreneurs had a dream. Their dream was to create electric vehicles that were more efficient than gasoline cars without having to compromise in appearance, speed, or safety. At the time, Toyota Prius was one of the more popular fuel efficient vehicles on the market. However, due to its appearance, these fuel efficient vehicles had the negative stigma of being ugly cars that made great commuters but lacked in style and performance. Mark Eberhard and Marc Tarpenning wanted to change this stigma.

In 2008, Tesla released the Roadster, their first all-electric vehicle. It soon became one of the quickest cars in the world and started to set records in acceleration, range, and performance. As Tesla continued to expand as a company, they began to refine their product and in 2012 it produced the world’s first premium all-electric sedan known as the Model S. This proved to be a pivotal moment for this innovative company. The Model S completely changed the world’s perception of electric vehicles, because it gave the consumers a fuel efficient vehicle that did not compromise in appearance or performance. Unfortunately, this all came at a steep cost which was not practical for the average consumer.

In 2017, Tesla Inc., released their first affordable all-electric vehicle known as Model 3. Using the profits from the previous models, this company was able to create an all-electric vehicle that was affordable for the average consumer. Two years later, this company was able to officially hit their goal of selling the Model 3 for $35,000. The idea of creating a car that was fuel efficient and stylish eventually transformed into a multi-billion dollar company. Not only did this company change the way electric vehicles are perceived, but it also changed the automotive industry forever.

Introduction

In this analysis, we will focus on the efficiency of the production and delivery of the Model 3. After years of anticipation, Tesla’s long-awaited Model 3 has officially hit the consumer market. Unfortunately, creating the first, all electric, stylish, budget vehicle has been no easy task. From the inception, Tesla has had to overcome many challenges and setbacks in order to turn this idea into a profitable business. Elon Musk did not merely want to copy the manufacturing procedures of other profitable automotive companies. Instead, he want to completely reinvent the auto industry as a whole. As a result, Tesla had to endure difficult growing pains. The culmination of setting unrealistic forecast goals as well as having inefficient layout and location strategies caused Tesla to spiral into what Elon Musk calls a manufacturing and logistical delivery hell. Throughout this study, we will analysis the main issues that have cause the Model 3s to get off on a slow start and offer suggestions to make this process function more efficiently.

Production Issue

Tesla’s Fremont factory was formerly the New United Motor Manufacturing (NUMMI) facility, which served as a partnership location for General Motors and Toyota. The NUMMI factory’s purpose was to allow General Motors to observe the just-in-time operations made famous by Toyota, while allowing Toyota to obtain an American production facility to bypass potential import restrictions. In October of 2010, Tesla, under the leadership of Elon Musk, began production at former NUMMI site, now dubbed the Tesla Factory. Rather than the focus on lean operations that occurred when GM and Toyota were producing, Tesla sought to buck the status quo for automobile manufacturing and instead utilize vertical integration, controlling as much of the supply chain as possible.

Model 3 production initially took place inside Tesla’s Fremont factory, which used a non- traditional production line with complicated body shop and general assembly stations connected by a complex conveyor system. Relying ambitiously on automated robotics, the intricacy of the Model 3’s design led to a manufacturing process rife with issues. Upon the Model 3’s release, Sandy Munro, founder of Munro and Associates, disassembled the Model 3 part by part. While he complemented Tesla on some of the body design and gushed about the engineering with regards to software and intelligence, he claimed there were too many parts requiring assembly and installation. He noted that while most auto manufacturers use a fiberglass pan for the trunk, the Model 3 was using nine pieces which required rivets, bolts, and welding (Fields, 2018). Workers reported problems with battery installation and unacceptable gaps in the body panel, many of which made it past quality control to be delivered to customers. The production of drive train components became a problem as the company attempted to ramp up construction. The paint line was had long been an issue at the Fremont Factory, with fires and equipment malfunctions causing production shutdowns. Even the intricate conveyor system itself was prone to shutdowns due to calibration issues.

Finding the Balance between Autonomic and Manual Manufacturing

When he announced the Model 3, Elon Musk claimed that by the end of 2017, Tesla would be producing 100,000 to 200,000 (Ziegler, 2016). Tesla failed miserably to reach this goal, however, with only 2,685 Model 3s produced in 2017 (Matousek, 2018). What caused this company to completely miss their mark and underestimate their actual production rate? According to interview with CBS News, Elon Musk admitted that one contributing factor of the production woes was a result of being too reliant on technology. "We got complacent about some of the things that we felt were our core technology….We put too much new technology into the Model 3 all at once. This -- this should have been staged (CBS News Staff, 2018)." Even though this statement might seem like comparative advantage, it was actually hurting their efficiency. The assembly line was over complicated and Musk realized that he underestimated the importance of manual labor.

Since customers were complaining and investors were worrying, Musk knew something must be done to increase the production levels for the Model 3. The company quickly applied for a permit and erected a Sprung Modular Structure, or Tesla tent to house a dedicated Model 3 production line, known as GA4. The highly complex conveyor system used in the factory was abandoned for a more traditional conveyor system, focusing on human labor over complex robotics. In May 2018, the company implemented a night shift for round the clock production, hiring over 1000 workers (Muller, 2018). Production of the battery packs and drivetrain components were left to Tesla’s Gigafactory near Reno, NV, and shipped to Fremont as needed. Body panel design on the Model 3 was simplified somewhat to reduce gaps and other quality control issues which had previously slowed production. Tesla has continued to tweak Model 3 production, moving slowly towards increased automation of producing, transferring, and welding. While maintaining the round the clock shifts and increased staffing levels, Musk claimed in late 2018 that GA4’s production line was 95% automated (Lambert, 2018). Production analyst Pierre Ferragu, one of just a handful allowed to tour GA4, reported witnessing a Model 3 assembled “from an empty body to a fully functional car in a bit more than 40 steps and 90 minutes, on a line about 1,000 feet long.” (Pressman, 2018). In comparison, traditional auto production lines have more than 130 steps, though some of the difference is due relative simplicity of electrical engines and batteries in comparison with combustion engines. In 2018 Ferragu stated, “The road to 7,000 units per week seems easy, and limited capital expenditures will be required (in the low tens of millions) to get to 10,000 (Pressman, 2018).” Analysts George Galliers and Arndt Ellinghorst, who also toured GA4, generally agreed, estimating Tesla could easily produce 7,000 per week with minimal changes to the production line, but cautioned Tesla was unlikely to surpass that number without implementing changes to eliminate bottlenecks. Bloomberg’s Model 3 Tracker published a report on March 24, 2019, estimating just under 227,000 Model 3s have been produced total, with nearly 75,000 produced in the first quarter of 2019, putting production pace at around 6,000 per week currently (Inside EVs). Galliers and Ellinghorst noting that the line’s dedication to only producing Model 3’s allowed increased cycle times due to simplification. While they criticized issues with calibration that continued to plague production, they noted quality control has improved markedly, making Model 3’s chassis build nearer to other luxury brands (Morris, 2018). Comment by Ryan Munekawa: I can't find the reference for these numbers.

Current Production for Model 3

By most accounts, the Tesla Factory in Fremont has a potential capacity of producing 500,000 automobiles a year under optimal conditions. According to end of year financial statements, Tesla produced just under 100,000 Model S and Model X vehicles for the four-quarter period of 2018, while the company reported a total of approximately 250,000 vehicles produced in 2018 (Musk, 2018). From this information, we can extrapolate a production level of approximately 150,000 Model 3 vehicles in 2018. Tesla states it expects to deliver 360,000-400,000 vehicles in 2019, noting delivery levels are expected to be 10,000 units less than actual production levels due to exportation timeframes (Cumulative Tesla Model 3). Current production is about 6,000 vehicles per week using GA4, which is estimated to have a design capacity of 10,000 per week. The effective capacity, or amount Tesla can be expected to produce on GA4 given current resources and bottlenecks, is 7,000 vehicles per week. The company claims it is on target to produce 7,000 Model 3 vehicles per week in 2019, which would result in approximately 364,000 Model 3’s produced for the year. Whether this target is obtainable for Tesla is yet to be seen, as the company has experienced repeated issues in the production process, resulting in what was dubbed by Elon Musk as “production hell.” Comment by Ryan Munekawa: Where is the Reference? Comment by Ryan Munekawa: How do we know this? Comment by Ryan Munekawa: Citation?

The Utilization of ERP in Model 3 Production

Capacity planning is a crucial step in the utilization of ERP in an organization, ensuring there are adequate resources, such as people, machines, space, and time. Rough cut capacity planning (RCCP) is a declaration of what is required to meet gross production requirements, used to evaluate available capacity compared to MDS requirements prior to making detailed MRP plans. RCCP is used for longer term capacity planning. Capacity requirements planning, however, indicates the capacity required to meet net production requirements, verifying the ability to meet MRP plans, and is used on a shorter-term basis. CRP evaluates and validates the MRP. It also allows careful watch over critical resources, which has a greater potential to impact the organization due to cost, availability, or product dependency. By evaluating capacity against MDS/MRP, an organization verifies there is enough capacity to fulfill plans, enabling them to revise if needed. Capacity planning requires Tesla be able to accurately forecast demand, which necessitates consideration of current and future models as well as the effect of tax incentives and rebates. Tesla believes that even with the introduction of new models, demand for the Model 3 will continue to increase. After forecasting, they must then identify the maximum volume allowed by current technology and sales to the optimum operating size or production volume. Planning must continue to allow adaptation to change in technology and demand.

Flowchart for Production of Model 3 Comment by Ryan Munekawa: Where did we find this graph?

Capacity planning requires a company manage capacity to meet demand, or vice versa. Currently, demand for a Model 3 is greater than Tesla can produce under its efficiency levels. Tesla can manage demand by raising prices and lengthening lead times while identifying tactics to increase capacity. One strength of the Model 3 is that it is extremely integrated; chips are installed into the vehicles at the beginning of the assembly process, allowing each step to be recorded on the car’s computer and providing real time information. Tesla has been able to use this information to adjust production and assembly technique and processes, improving quality.

Tesla has experienced a myriad of production issues, from calibration issues and equipment failure on the assembly line to repeated quality control failures in body panel assembly and painting. Since the company began manufacturing the Model 3, major bottlenecks have been identified in the battery production and assembly, welding, and painting stations. Initially a bottleneck at the Fremont factory, all battery packs are now produced at the Gigafactory in Reno, Nevada. The Gigafactory, in partnership with Panasonic, manufactures and recycles batteries before shipping to Fremont, where battery assembly techniques have been repeatedly tweaked to increase efficiency and is no longer a slow point in production. Model 3 drive units are also now manufactured at the Gigafactory then shipped when needed. The drive units are composed of an alternating current electric motor, gearbox components, a differential, and an inverter, and produced by a complex combo of robot and human assembly before being tested. The Gigafactory’s specialized staff and equipment make it better able to handle the production levels required, freeing up valuable space in Fremont. While 98% of the Model S was constructed of aluminum, for reduced cost, the Model 3 incorporates steel blended with aluminum for the chassis, body panels, which are assembled using adhesive, rivets, automated and manual welding. The robot welding station was another major bottleneck due to problems with work quality and machine failure. GA4 initially shifted towards manual welding while Tesla improved the automated welders, before slowly shifting the station back towards heavy automation (Lambert, 2018). The paint station has long been a major bottleneck at both the Fremont factory and adjacent GA4 tent. Tesla had four fires in the paint station between 2014 and 2018 and workers reported repeated stoppages due to equipment failure (Kolodny, 2018). Early recipients of the Model 3 complained of major paint flaws, from inside panels and brackets not being painted to bubbles, chips, and even embedded hairs and fingerprints. The paint stations were not only slow, but producing shoddy work requiring Tesla to either accept returns or pay to have the paint fixed. To address these issues, Tesla examined the entire painting process. Red was identified as the most problematic color, and was initially abandoned, then later priced to reflect additional labor required. Black was instituted as the default color of the Model 3, with other colors available for an extra fee. Customers are still reporting major paint issues, likely due to Tesla’s attempt to continually ramp up production to levels the paint line can’t handle. An obvious potential solution would be to running tandem paint lines in a nearby Sprung modular structure to relieve the pressure on the bottleneck.

From the beginning, Tesla has taken an innovative and aggressive approach to electric vehicle manufacturing. Elon Musk has led the company in throwing out everything auto manufacturers have learned in past decades and starting over. While this approach has led to some major successes, it has also led to unscheduled shutdowns, crippling bottlenecks, and other serious production problems. Tesla embraces some ERP principles, showing a remarkable ability to identify and adapt to production issues once they have already occurred, but the company fails to properly plan and could benefit from the use of Enterprise Resource Planning techniques such as CRP and RCCP. The use of capacity planning could turn the organization’s heavy-handed approach to innovation into a more graceful and efficient manufacturing process for the Model 3 and all future endeavors.

Delivery Issues for Model 3

After years of trial and error, it appears that Tesla has found short-term solutions for the their production problem. Unfortunately, with the increase number of Model 3s being produced, it appears that Tesla has runned into another problem. In November 2018, Elon Musk went to Twitter and stated that delivery of Model 3 was a “Logistics Hell.” His tweet marked and captured the delivery issues that have marred the delivery of Model 3 to consumers. As a result, some individuals ended up cancelling their orders, because their wait time continued to get extended from weeks to months. Along with the extended delivery time, some of the models were delivered with scratched and cracked windows, along with other defective elements. Such developments have had a major impact on consumer satisfaction and have hurt the reputation of this growing automobile company. The specific issues being experienced with delivery of Model 3 are as followed.

Tesla did not have enough trucking capacity that would have allowed it to delivery Model 3 in time as promised to the client. This was contributed to by the unexpected demand in the United States. The Model 3 is relatively expensive when compared to other conventional cars meaning it was not expected that the demand would be that high. The company had only forecasted a growing demand hence had accessed a trucking capacity that would have met a growing demand (Boudette, 2018). From this, it can be said that the company had failed at forecasting in enterprise resource planning. It entails predicting demands of new and existing products based on various factors such as market trends, perceived customer needs and preferences, and economic performance among others.

Tesla had announced its plans to export Model 3 to Europe where reservation holders were even advised to pick up their car in a few days. It has informed them that the cars had already arrived at Zeebrugge port and they could have picked them at its Tilburg facility. However, the company was again unable to meet the capacity it had promised. The number of Model 3 cars arriving at the airport did not meet the demand. Tesla stated it was facing logistics challenges especially due to the fact that it was pursuing profitability. It was employing approaches that led to lower supply chain cost. It also had miscalculated the initial demand for Model 3 in Europe hence the production line did not align with the needs. In this regard, the delivery issues stemmed from the production line as the company did not put in place effective measures and approaches for meeting the projected demand.

The delivery issues faced by the company are as a result of poor planning and forecasting. The growth of the company in the US has given it a good footing hence should have enough resources for meeting demands either locally or internationally. Delivery dates for Model 3 have changed multiple times meaning that when the company was informing the consumers about the delivery dates, it had not put in place a plan for meeting them (Boudette, 2018). However, it is imperative to note that Tesla has recently show improvements in its management of logistics and might in the near future be able to meet the consumers’ needs in a timely manner.

Capacity and Challenges

Model 3 was a relatively cheaper electric car which is one of the reasons why it has seen an ever-increasing demand both locally and internationally. By the close of 2018, Tesla was producing slightly over 5,000 Model 3 in a week which was not meeting the local and international demands (Randall & Halford, 2019). This indicated that production was still a challenge for the organization due to the increasing demand for cheaper electric cars. The company does not have capacity for producing the Model 3 majorly due to the fact that the production line

also manufactures other previous models and as well as newer ones such as the electric truck. In essence, though there are challenges that have come with delivery, there are also challenged in the production line.

Plain and simple, Tesla had not put in place enough service centers for its products to meet the demand. For instance, when the Model 3 was delivered to Mexico for the first time, the model was launched at its Mexico City-Masaryk store which is not big enough for holding cars before the consumers can pick them up. In Europe, as earlier noted, upon reaching the Zeebrugge port, the cars were to be picked up at the Tilburg facility which cannot hold enough cars that meet the demand (Randall & Halford, 2019). Since this company operates on a “Make to Order” business process, each Model 3 is custom-made. As a result, Tesla must deliver the exact car to the precise service center. If the service center does not have the capacity to meet the demand, a bottleneck will occur in the delivery process, until the customer comes to pick up the vehicle. Due to the limited capacity, the company is forced to utilize the model where deliveries are made when orders have been placed introducing challenges to the logistics management. They are managed depending on the external information being received.

On the other hand, as reiterated above, Tesla has been focusing on cutting down delivery costs hence has not been outsourcing enough truck capacity for its Model 3. If the truck capacity is outsourced based on the consumer orders and reservations, the company will be forced to incur a high cost of delivery which will impact the much needed profitability for growth. Tesla is expanding and strategizing on how to grow rapidly so as to meet the global demand for electric vehicles in the next few demands. Its growth is primarily based on its model of prioritizing profitability. This means that logistics management is goal-oriented where the cheaper approaches and methodologies are seen as effective on the part of the organization (Randall & Halford, 2019). However, it is worth noting that the model is bringing about numerous challenges in relation to meeting consumer demands and satisfaction.

Suggestions for Improving the Delivery Process

There are a number of strategies that can be implement in order to deliver the Model 3 more effectively. Currently, Tesla has been operating on three different delivery methods: Tesla Direct, Service Center pick-up, and Carrier Direct. These delivery methods are based primarily on the location of the customer. For example, Tesla Direct is used for customers that are located approximately 30 miles away from the manufacturing plant. By using this location strategy, Tesla streamlines the delivery process for local deliveries around the factory. This cuts out several steps within the delivery process, including waiting for a truck to load several vehicles, drive time to Delivery Service Center, and the multiple stops that are required between the two locations (Young, 2018). Without a doubt, this delivery method will save time getting their product to the consumer. However, since this direct-to-consumer method is a relatively new, Tesla must re-evaluate the effectiveness and decided to expand or contract the 30 mile radius in order to improve delivery efficiency.

The second delivery method that Tesla utilizes is called the service center pick-up. In this method, customers who live within a 160 mile radius within a service center can personally pick-up their customized car and drive it off the lot. In order to give a visual description, the red dots represent the current service centers that are currently located throughout the United States (See Figure 1).

(Figure 1, 2018)

Through our initial analysis, we noticed that there was a significant bottleneck problem that was occuring at the service center locations. This was later confirmed on October 16, 2018, when Elon Musk admitted that there were major gaps in the geographic locations of their service centers and he will spend the next 3-6 months addressing this issue (Field, 2018). Although Elon Musk surprised the company in early March 2019 by stating he will start to shut down brick and mortar service centers to alleviate cost, he later rescinded those claims and reopened many of the stores that were initially shut down (Hall, 2019). It was decided that these having brick and mortar stores were essential to increase demand and expand the company’s geographical footprint. By utilizing ERP, Tesla should use the center of gravity method in order to determine the best location for these new service centers. Current statistic show that most Model 3 owners are in California by a large margin, followed by Washington (Figure 2).

(Figure 2, 2019)

Using these numbers as an example, we noticed that there is an imbalance of service centers between California and Washington. To illustrate, California currently has 28 service center and Washington only has 3 locations (Tesla Inc. Staff, 2019). By using the center of gravity method to determine the locations for new service centers, Tesla can reduce the bottleneck problem that has been happening during the delivery process of the supply chain.

The final delivery method that Tesla currently uses is known as the Carrier Direct. This method is used for customer who are located greater than 160 miles of the closest service center. During our analysis over the delivery process we found that this method also perpetuated the Model 3s bottleneck problem. For this method of delivery, Tesla utilizes 3rd party carriers to deliver their product to the customer. Unfortunately, these 3rd party deliveries result in many brand-new Model 3s arriving to their destination with damages that occurred while in transit. The easiest short-term solution to alleviate this problem is to create more service centers around their consumer. This will save the company significant time and money by having the consumer come directly to them, instead of individually having a 3rd party deliver their product to the customer.

A long-term solution for this delivery problem is to completely remove the need of a 3rd party to deliver their product. By eliminating the “middle-man,” Tesla will save money and have complete control on how their products are being delivered. On November 2017, Elon Musk revealed his plan on creating an all-electric semi truck (Lambert, 2019). Although these trucks will be initially used to transport equipment between factories, it is possible that these trucks will be eventually utilized to transport new Model 3s to consumers. Having these resources will increase the efficiency of the company as well as decrease the cost of delivery.

Conclusion

First, it is imperative that it expands its production line so that it can meet the ever-rising demand for cheaper electric cars. The best way of doing so entails establishing a few more production facilities in other regions such as Europe and Asia. The facilities should be strategic and in close proximity to the identified markets. Europe is seeing growth in demand for electric vehicles hence it should be a major priority. Even in the US, it can establish more facilities as a means of expanding the production line.

Additionally, Tesla needs to invest in establishing a supply chain especially across the US. Companies, such as Amazon, have had success in having a robust supply chain that is made up of an interconnected network of warehouses that are close to the identified markets. Tesla should also invest in establishing a network of warehouses across the country and internationally in means of enabling a robust supply chain. Having systematic supply chain will ensure that the Model 3 deliveries are made after orders have been placed. This calls for a major investment but can be done in phases hence Tesla does not need to invest a fortune at a go. The network will ensure that deliveries can be in much shorter times hence realize a high customer satisfaction level.

Further, when it comes to contract and partnerships with suppliers, it is imperative that the company reconsiders the nature of the terms of the contract. As earlier noted, there are deliveries that have been made with cracked and scratched windows which means that the damages occurred when on transit. It is the duty of the supplier to ensure that the car models do not suffer any damages as it is Tesla that is on the receiving end. More so, the company can outsource suppliers that offer better terms in terms of costs and delivery schedules in its objectives for lowering costs and enabling better services to its customers. In the long-run, the company can focus on creating its own trucking capacity in order to cut down the overall costs. Also, in doing so, it will attain easier management of inventory as it will not rely on input from other external actors. Finally, the company needs to upgrade its inventory management system so as to keep track of car models on transit and estimate the exact time the models will be delivered to the consumers. It has occasionally given consumers misleading information relating to delivery. This should not go on when there is an inventory management system that tracks all the models on transit hence provide the consumers with credible and reliable information regarding deliveries.

Production and Assembly Defects Comment by Ryan Munekawa: **Good information, but does not flow with the project. Consider incorporating these elements within production problems/solutions.**

Tesla’s Model 3 is the most cost-efficient electric vehicle that the company has developed in order to appeal to the masses. It was as designed to “accelerate the world’s transition to sustainable energy.” However, Tesla has had issues with the efficiency of their Model 3 production and has struggled in ramping up production since the vehicles launched date in July 2017. The demand for the vehicle appears to be there but there has been many reports about the vehicles sub-standard build standard. Moreover, the company currently produces the Model 3 from one facility in Fremont, California, which has placed challenges on the company on delivering their vehicles to their customers on time.

The automaker has missed its impulsive target to produce 5,000 Model 3 vehicles per week. Tesla believed that by automating the manufacturing process in its factory it would make the assembly process more efficient, faster and less expensive. The company went against the traditional car company norm of creating an assembly line of workers by constructing an automated production line of more than a thousand robots and machines. Tesla believed that this method would enable them produce the Model 3 in high volumes and sell it for at a low cost of $35,000. However, the company quickly learned that the machines complicated the process because they were not convenient for certain functions. The company had to then shift course and hire more humans to complete some of the tasks more swiftly and accurately than a machine would.

Tesla has shown tenacity by growing the number of vehicles it has produced. As the below chart shows in the article Tesla Survived Manufacturing Hell--Now Comes The Hard Part the company’s deliveries continue to increase on a quarterly basis.

However, this success has also led to assembly defects such as:

· Blurry Backup Camera

· Rust

· Paint Issues

· Window, Door and Trunk Deficiencies

· Touchscreen Failure

· Lock Outs

· Car Shutting Down

Not only has the company had issues with the vehicles components but it has also had quality issues with the way the Model 3 has been built. Per the article Analysts Give Tesla Model 3 Poor Score In Build Quality, “UBS told clients that the Model 3 had shoddy welding, missing bolts and other build problems that led to a poor rating in the ‘fit and finish’ category. That put it well behind the cars UBS compared it to…” These type of issues could be troublesome for the company and may have a major impact on the confidence and satisfaction of its consumers. The success of the Model 3 is very important for Tesla since many consumers are now having more options on purchasing electric vehicles. Tesla’s business challenges appear to be coming from an insufficient ERP system that lacks inefficient processes in its manufacturing and logistics procedures.

Solutions

In order for Tesla to meet a higher volume of production of the Model 3 and correct their assembly issues, the company would need to improve their ERP system and consider technology that is more advanced. The improvement of their ERP system would help them refine their on-time shipments, inventory accuracy, and manufacturing schedule compliance.

In order to enhance the problems with the panels, Tesla must increase their quality control or add more scanning stations that can measure the outside and inside of the auto body in order to avoid panel gaps. Tesla can utilize robot-operated CT scanners in order to address early assembly defects without needing to strip down the vehicle. This process works by the robot working its way around the car and scanning the entire vehicle, which then provides a detail 3D image that would pinpoint a small detail. These wide-ranging robots have a span of about 10 feet or more depending on the programming. This type of technology is currently being used at BMW to check their parts, and the body condition of their vehicles; this has helped the firm detect defects before the vehicle leaves their facility.

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