Strategic Quality and System Management

This paper analyzes the quality issues faced by Tesla Motors and their response to resolve them. It discusses the impact of quality on customer satisfaction and loyalty in the automobile industry.

Running head: STRATEGIC QUALITY AND SYSTEM MANAGEMENT
Strategic Quality and System Management
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Table of Contents
Introduction................................................................................................................................2
Overview of Tesla......................................................................................................................2
Quality issues experienced by Tesla..........................................................................................3
Critical evaluation of Tesla’s response......................................................................................6
Fishbone Analysis......................................................................................................................9
Recommendations....................................................................................................................10
Conclusion................................................................................................................................11
References................................................................................................................................12

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Introduction
As opined by Xu, Blankson and Prybutok (2017), the entities of service quality and
product quality are inherently linked to each other and have a profound impact on the
satisfaction level of the customers. Liu and Shankar (2015) are of the viewpoint that the
different kinds of product-harm crisis that the customers often face related to the products
that they have purchased have a negative impact on the satisfaction level as well as loyalty of
the customers. This becomes especially important from the perspective of the automobile
industry because of the fact that the amount of capital that the customers are investing for
purchasing different kinds of automobiles is significantly high. Thus, it there is a
manufacturing issue or for that matter of any kind of product-harm issue then this is likely to
adversely affect not only the brand or the image of the firm which is offering the concerned
automobile but it is also likely that the customers would switch over to other brands. The net
result of this is that the aspects of service quality and product quality have gained a
substantial amount of prominence within the cannon of the contemporary automobile
industry and the business prospects or the profitability of the firms greatly depends on the
ability of the firms to overcome the manufacturing defects in the automobiles offered by
them. This paper will undertake an analysis of the quality issues that the firm Tesla Motors
had faced in the recent and also the measures that they have adopted for the resolution of
these issues faced by them and the customers.
Overview of Tesla
Tesle Inc., earlier called by the name of Tesla Motors, Inc (2003-2017), founded in
2003 by Martin Eberhard, Elon Musk, Marc Tarpenning, Ian Wright and J.B. Straubel, is a
leading automobile manufacturing company of the world (Tesla.com 2019). More
importantly, it is seen that whereas the other automobile firms of the world are still banking

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on the traditional models and offering diesel and petrol vehicles, the firm under discussion
here specializes in the manufacture of electric cars. It is precisely this aspect of the
automobiles offered by the concerned firm that had enabled it to become one of the most
important as well as popular automobile firm of the world. Some of the most important
electric cars offered by the firm under discussion here are Model S, Model 3, Model X,
Model Y and others (Tesla.com 2019). As of 2018, the concerned firm was ranked as the
“world's best selling plug-in passenger car manufacturer” and recorded an increase in sales
percentage of 280% in the US market alone (Forbes.com). However, in the recent times it is
seen that the profitability as well as sales volume of the cars manufactured by the firm under
discussion here had decreased in a significant manner because of the different manufacturing
issues that the firm is presently facing (Poultney 2019). This can be ascribed to the fact that
the firm in a bid to enhance its profitability and also the number of vehicles manufactured by
it had compromised on the aspect of quality which in turn had adversely affected the business
prospects of the concerned firm.
Quality issues experienced by Tesla
An ever increasing number of customers or the users of the electric cars manufactured
by Tesla are coming forward and complaining about the different kinds of defects that the
cars brought by them had. For example, it is seen that the majority of the issues that the
customers are coming with are related to the manufacturing defects within the expensive cars
manufactured by the firm under discussion here (CNBC 2019). In this regard, it needs to be
said that one of the most important manufacturing defects that the majority of the users of the
cars manufactured by the concerned firm are complaining about in the present times are
related to the paint or the coating of the cars that they have bought (Stumpf 2019). In this
context it needs to be said that in 2015, “owner lawerence.b on Tesla's forums stated that he

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brought a Model S 85D (which cost him around $110,000)” and despite the price that he had
pay for the car the paint as well as the coating used for the car was below par (Stumpf 2019).
For example, the user clearly indicated that the car had severe manufacturing defects related
to ineffective paint or coating and some of the most important ones in this regard were
“peeling, insufficient thickness, and various marring on the doors” (Stumpf 2019). More
importantly, the user accepted the fact that the service center of the concerned firm was
proactive in acknowledging the defect and even fixed it for him yet the question remains why
the customers are being provided with such below standard cars when they are being charged
extravagant prices for the same. Furthermore, users of another model of the same firm,
namely, Model X, also complained regarding the same ineffective or below par paint or
coating issues within the highly priced cars that they purchased (Stumpf 2019). In this regard,
it needs to be said that the paint issue that the customers faced not only reduce the quality of
the products which were offered to them but at the same time reduced the service quality.
This can be explained on the basis of the fact that the cars which were delivered to the
customers failed to match the expectation level of the customers despite the fact that they
have exorbitant prices to purchase the same (Boudette and Musk 2018).
Another important manufacturing defect that the customers or the users of the cars
manufactured by the concerned firm in the recent time had complained about in the recent
times is the defect in the A-pillar of the cars (Stumpf 2019). In this regard, it needs to be
said that a customer who ordered a new Model S 90D found that the “A-pillar” of the car
which was delivered to him “had split straight up the center” (Stumpf 2019). In this case as
well, the service center of the firm was willing to offer the required help to the concerned
customer and even fix it yet it was clearly indicated by the service center that it was clearly a
manufacturing defect and not a mistake on the part of the customer. Needless to say, this
adversely affected the service quality of the cars but also the expectations of the customers

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related to the concerned firm as well. According to Boudette and Musk (2018), the
customers, over the years, have come to develop a trust as well as loyalty for the firm Tesla
and have at the same time greatly appreciated the innovative electric cars offered by it.
However, the different kinds of manufacturing defects in the cars which were delivered to the
customers not only affected this expectation of the customers but at the same time started the
downfall of the firm as well.
Another significant manufacturing defect was point out by the YouTuber Marques
Brownlee (MKBHD) who on getting a “Model S” car delivered by the firm under discussion
here found that “two power steering rack” were defective (Stumpf 2019). More importantly,
he noticed his fault when the car had not even been driven for 6,000 miles and yet again the
service center of the firm was quick to realize the mistake (Stumpf 2019). Needless to say,
these quality issues have adversely affected the brand or the market image of the concerned
firm and even its credibility and there are many individuals who have raised concerns
regarding the quality of the cars manufactured by the concerned firm (Forbes.com 2019). For
example, these issues have clearly raised concerns about the ability of the concerned firm to
compete on par with its competitors within the automobile business market and even match
up to their technological advancements. On the basis of these aspects it can be said that the
manufacturing hell that the firm Tesla can be attributed to the extensive production or growth
strategy which was being followed by the firm and also its inability to match quality with
quantity. The net result of this was that not only the product quality but at the same time the
service quality of the cars offered by Tesla declined in a steady manner and this turn
adversely affected the prospects of the concerned firm in a significant manner.

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Critical evaluation of Tesla’s response
The firm Tesla in the recent times in order to address these quality as well as
manufacturing issues had taken the help of different kinds of measures so as to improve the
quality of the electric cars offered by them to the customers. In this regard, Musk himself
acknowledged that resolving the different manufacturing issues that the cars manufactured by
the firm under discussion here was going to the top priority of the firm and thus the firm was
willing to invest a significant amount of its resources for the same (Poultney 2019). In an
article of the Forbes Magazine (2019), he said “We’re going to go through six months of
manufacturing hell. It’s going to be pretty great, but it’s going to be quite a challenge to build
this car”. The first thing which he did was to collect feedback from the customers of the
concerned firm from the different parts of the world and enlisted them as the top priorities of
the firm. More importantly, he was quick to acknowledge that the manufacturing issues that
the cars manufactured by the concerned firm had was due to the aggressive manufacturing
policy followed by the firm and also the ineffect6ive supply chain network which was used
by it. Furthermore, he promised the stakeholders of the firms that he would certainly improve
the product quality of the cars which were being offered to the customers is a bid to enhance
their service quality and also win back the trust of the customers as well (Boudette and Musk
2018). In this context, his comment “Floods, fires, tornadoes, ships sink, if anything
interrupts one of our supply chains, that will interrupt the production ramp” is important to
note (Forbes.com 2019).
One of the root causes of the manufacturing defects that the different customers had to
face in the cars that they purchased can be ascribed to the aggressive production strategy
followed by the firm (CNBC 2019). In order to resolve this issue, Musk declared that he
would lower the production rate of the concerned so as to enable it to focus on the attribute of
quality rather than on quantity on which the firm had focused till now. In this regard, it needs

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to be said that at the peak of this disaster, Musk himself reduced the production of the firm to
just 5,000 vehicles in a single week which was significantly lower than the volume of cars
that the concerned firm had been used to manufacturing in the prior times (Forbes.com 2019).
This move on the part of Musk can be attributed to the desire of the firm to resolve the
quality issues that the different customers related to the firm had to face on the score of
ineffective manufacturing policies followed by it. Another important which the firm followed
for the resolution of the defects that the cars manufactured by it faced was the improvement
of the supply chain processes used by it (Forbes.com 2019). For example, in the earlier times
it was seen that the firm took the help of the traditional supply chain system and thereby tried
to develop effective relationships with the different dealers who were associated with them
(Poultney 2019). However, it was seen that during the delivery of the cars manufactured by
the firm, the cars were not handled in an effective manner by the dealers and this in turn gave
rise to different kinds of paint or coating issues, A-split and other issues that the customers
complained of (Forbes.com 2019). The net result of this was that the firm realizing from its
past mistakes started to take the help of automation for the delivery of the cars to the
customers and thereby enhance the service quality of the cars which are being delivered to
the customers. The effectiveness of this method used by the firm lies in the fact that this not
only reduced the operations cost of the concerned firm but at the same time reduced the
defects in the cars which were incurred during the shipping of the cars.
Tesla for reducing the adverse affects of the dangers posed by the severe
manufacturing defects that the customers were facing related to the cars brought from the
concerned firm set out to enhance the experience of the customers in a bid to earn their trust
as well as loyalty and thereby to enhance the service quality of the cars. For example, unlike
the earlier times when the customers were left totally in the dark after ordering a car from the
firm and had no idea regarding when the car would eventually be delivered to them, the firm

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started a new policy through which the customers would be able to track the delivery of their
cars through a personalized web page that was created for them over the official website of
the concerned firm (Forbes.com 2019). This not only enabled the customers to get adequate
information regarding the cars that they have ordered from the firm but at the same time
significantly enhanced their experience while dealing with the concerned firm as well. More
importantly, it is seen that the firm is also trying to improve its customer support department
to reduce the hassles that the customers had to face after ordering their cars (Poultney 2019).
As a matter of fact, in the past it was seen that the customers had to wait for a significant
amount of time after they had reported the manufacturing defects or issues that they have
encountered or found in the cars ordered by them (CNBC 2019). However, in the present
times it is seen that the firm under discussion here had significantly improved its customer
care department for enhancing the experience of the customers and also for offering help to
them as and when required. In this regard, mention needs to be made of the “order-to-
delivery” initiative which is being presently used by the firm under discussion here which not
only helps the customers to know the status of delivery of their cars but at the same time
helps them to get their e-license and other kinds of post-purchase assistance from the firm
under discussion here (Forbes.com 2019). The net result of these initiatives undertaken by the
firm under discussion here is the fact that they have helped the firm to significantly reduce if
not completely resolve the different quality or manufacturing issues faced by it which
significantly affected its prospects.

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Two power steering rack, Defect in the A-pillar, Coating of the carsLack of quality control
mechanisms
Lack of proper planning
Staff termination Automation
Lack of upgradation of robots
AI tech still underdeveloped
Self-functioning
Human errors
Cost cutting
Training
No human interference
Unclear idea
Complex process design
Lack of communication design
Lack of KPIs
Lack of human involvement
Lack of Beta Testing
Fishbone Analysis

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Recommendations
Some of the most important measures that the firm Tesla can take the help of so as to
ensure that the manufacturing issues that it faced does not recur are listed below-
 Use of Total Quality Management (TQM): The effective of the concept of TQM
will enable the firm to create the kind of climate or culture within the workplace
wherein the employees would be motivated to perform as per their maximum
potential. This is important from the perspective of Tesla since the effective usage of
this is likely to enhance the quality of cars manufactured by them because of the extra
amount of effort that the employees would take in their work. Thus, it can be said that
the effective usage of this concept is likely to help the firm under discussion here to
ensure that no such issues arise in the future.
 Use of the strategy of time-based competition: The effective usage of this strategy
will not only enable the firm to reduce the time which is needed by the firm for its
product-development cycle but at the same time would speed up the delivery time
which is taken by the firm for the delivery of the cars to the customers. In addition to
the reduction of time the effective usage of this strategy is likely to enable the
concerned firm to improve the quality of the cars manufactured by it as well.
 Improvement of its delivery system: It is pertinent to note that because of the
ineffective supply chain system used by the firm under discussion here a significant
number of firms used to get damaged while they were being shipped from the firm to
the customers. Thus, it can be said that by improving the supply chain system which
is presently used by the firm under discussion here, it would be able to reduce the
number of defects in the cars offered by it to the customers in a significant manner.

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Conclusion
To conclude, the concept of quality had gained a significant amount of prominence
within the framework of the contemporary business world because of the large number of
options or choices that are available to the customers. More importantly, it is seen that the
firms in order to enhance their profitability often focus on quantity which in turn shifts their
focus from the aspect of quality. The long-term usage of this practice can have adverse
affects for the firms and can even reduce their profitability as well as adversely affect their
business prospects in a substantial manner. These aspects become clear from the above
analysis of the manufacturing issues faced by the firm Tesla.

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References
Boudette, N. and Musk, E., 2018. For Tesla,‘Production Hell’Looks Like the Reality of the
Car Business. New York Times.
CNBC 2019. As skeptics abound, here are 6 things Elon Musk must do to keep Tesla on
track. [online] Available at: https://www.cnbc.com/2017/07/19/6-things-elon-musk-must-do-
now-to-keep-tesla-on-track.html [Accessed 4 Apr. 2019].
Forbes.com 2019. Tesla Survived Manufacturing Hell--Now Comes The Hard Part. [online]
Available at: https://www.forbes.com/sites/lensherman/2018/12/20/tesla-survived-
manufacturing-hell-now-comes-the-hard-part/#56dd2a1bfae2 [Accessed 4 Apr. 2019].
Liu, Y. and Shankar, V., 2015. The dynamic impact of product-harm crises on brand
preference and advertising effectiveness: An empirical analysis of the automobile
industry. Management Science, 61(10), pp.2514-2535.
Poultney, L. 2019. Hey Tesla, how hard can it be to actually make a car?. [online]
Wired.co.uk. Available at: https://www.wired.co.uk/article/tesla-model-3-production-stock-
problems-engineering [Accessed 4 Apr. 2019].
Stumpf, R. 2019. Why is Tesla's Quality Control Still So Poor?. [online] The Drive.
Available at: https://www.thedrive.com/sheetmetal/9085/why-is-teslas-quality-control-still-
so-poor [Accessed 4 Apr. 2019].
Tesla.com 2019. Electric Cars, Solar Panels & Clean Energy Storage | Tesla. [online]
Available at: https://www.tesla.com/ [Accessed 4 Apr. 2019].
Xu, L.U., Blankson, C. and Prybutok, V., 2017. Relative contributions of product quality and
service quality in the automobile industry. Quality Management Journal, 24(1), pp.21-36.

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