Factors Influencing Tesla's Location Decisions and Layout Designs

The report covers the factors that influences Tesla Company in establishing factories and stores at specific locations. It includes the pros and cons of the options that Tesla can choose from in its location decisions. The report also includes an evaluation and description of its supply chain that develops and delivers services as well as how they could become more sustainable and green.

Running head: TESLA INCORPORATION 1
Tesla Incorporation
Student name
Lecturer’s name
Institution

TESLA INCORPORATION 2
Table of Contents
Introduction......................................................................................................................................4
Tesla’s Location Decisions and Layout Designs.........................................................................4
Pros and cons of the options to Tesla...........................................................................................5
Green and sustainable Supply Chain...........................................................................................6
Recommendations........................................................................................................................6
References........................................................................................................................................7

TESLA INCORPORATION 3
Executive Summary
The following report covers the factors that influences Tesla Company in establishing factories
and stores at specific locations. Additionally, the text includes the pros and cons of the options
that Tesla can choose from in its location decisions. The report also includes an evaluation and
description of its supply chain that develops and delivers services as well as how they could
become more sustainable and green.

TESLA INCORPORATION 4
Introduction
Tesla was established in 2003 by several engineers who wanted to prove that people did
not require to compromise to drive electric. Tesla builds not only electric cars, but also scalable
energy storage and generation products. Tesla’s drive is reducing the reliance on fossil fuels
quickly in the world, moving towards a zero-emission future, which is better. Tesla conducts its
operations through two segments including; energy generation and storage and automotive
(Świrydowicz, 2018). The automotive sector involves the design, manufacturing, development
and selling electric automobiles. The energy generating and storing segment involves designing,
manufacturing, installing as well as the sale and lease of stationary solar energy system and
energy storage products to commercial and residential consumers (Reuters, 2019). Tesla markets
its automobiles via its own sales and service network. It provides energy storage products
including the 14-kilowatt hour (kWh) power wall 2 that comes with an integrated inverter suiting
residential applications as well as the 200kWh Power pack 2.
Tesla also offers bi-directional inverter used in industrial, commercial and utility
applications. In 2008, the company launched the Roadster which highlights the company’s
cutting-edge battery technology. From there, the company developed the first ever premium all
electric vehicles through the Model S brand. The model has been classified as the best in every
category. Tesla is ranked as a leading seller of plug-in passenger manufactured vehicle both as an
automotive group and as a brand, despite being in the industry for only ten years (Lichtenthaler,
2018). Tesla automobiles are designed at the company’s factory located in Fremont California,
which also serves as the company’s vehicle components manufacturing factory. The company
applies a proactive approach to increase the safety within the factory. Employees have to

TESLA INCORPORATION 5
undertake a multi-day training program before joining the factory which continuous through on-
the-job training as well as routine track performance provided by the company.
Tesla’s Location Decisions and Layout Designs
The factory in Fremont is Tesla’s first assembly plant, referred to as Tesla Factory. It is a
370-acre site inclusive of a 5,500,000 square-foot building complex. Tesla also has a Gigafactory
situated in Reno, Nevada which occupies 1.9 million square feet and has 4.9 million square feet
of usable area over multiple floors (LeBeau, 2018). The factory develops Power packs, Power
walls and battery cells, partnering with Panasonic. In addition, it makes Model 3 drivetrains and
battery packs. Tesla’s second Gigafactory is situated in Buffalo, New York on a site that was
once a Republic Steel Plant. The site is run by the company’s Solar City unit. The factory whose
worth is $750 million, occupies 1.2 million square feet and employs close to 500 workers.
Tesla has stores and sites beyond the USA as it gradually spreads its services and supply
chain across the globe. In Canada, the company opened its first store in the Yorkdale Shopping
Centre located in Toronto, Ontario province on 2012. Since then the company has opened
multiple stores operating in Montreal, Vancouver, Calgary as well as Quebec City. The company
also has facilities across Europe with its first store opening in London on June 2009. Its
European headquarters are situated in Amsterdam and has a 62,000 square foot service center
running in Tiburg, Netherlands. The service center operates alongside an 835,800 square foot
assembly site that adds battery, software as well as drivetrain to the vehicles body reducing EU
import tax (Kissinger, 2018). Tesla has also invested in Asia through showrooms and service
centers operating in Hong Kong, Shangai as well as Beijing. The company came to an agreement
with the Chinese authorities allowing the company to construct a factory in Shangai, China,
which will be the first Gigafactory outside the United States.

TESLA INCORPORATION 6
With multiple sites, stores and company facilities across the globe, Tesla’s management
has to carefully evaluate the location before setting up a store or plant. They consider different
factors while deciding the locations and layout designs of these sites. Among the things that they
consider are; availability and supply of raw material. Raw materials form the basic components
of finished goods, making it the most important factor to consider when choosing a factory
location. Usually, a plant is situated close to the source of the raw material. Tesla’s automobiles
use more than 2,000 purchased parts which are sourced worldwide from over 300 suppliers
(Benchmarkminerals, 2016). The sources are currently the single source suppliers of the
company for the components. Tesla uses several raw materials in its business such as copper,
steel, nickel as well as aluminum. The costs of these materials are always changing depending on
the global demand of these material and the market conditions. In order to ensure sufficient
supplies needed to meet its manufacturing requirements, Tesla set up its factory sites across
different regions in America, Asia and Europe, this allows the company to get its supplies from
all these regions at a low cost attributed to the reduced expenses of importing and exporting
tariffs.
Another factor that the management at Tesla considers while deciding the location of its
facilities is the proximity to the market. All finished products ought to go through the market for
consumer consumptions. Tesla is located worldwide, with stores across Europe in Germany,
London and Spain as well as Asia in Japan and China. The new Shanghai plant that will be a
mega factory, is suitable as a target market for the Tesla automobiles since the city which is
heavily populated anticipates to adopt electric vehicles which will be suitable in minimizing the
toxic smog from carbon emitting automobiles (Kohnhorst, 2018).

TESLA INCORPORATION 7
Pros and cons of the options to Tesla
By considering these two factors while setting up its sites and stores, Tesla ensures it
strategically places its facilities. The company looks to enjoy several benefits from implementing
these factors into its location set-up and management. In terms of feasibility, Tesla enjoys several
things when building its sites. One benefit is Tesla will identify the best suppliers and resources
in the region where it situates the sites and stores (Kihlstedt, 2019). By conducting a feasibility
of the location, Tesla is able to catalog the resources available for its uses as well as estimating
the urgency for more resources. Another advantage is that Tesla will be able to understand
demand. The feasibility research enables Tesla to assess if a real demand exists for its services or
products, in its anticipated location (Hall, 2015). The other advantage of the feasibility is that it
allows a validation of a prospective timeline. When creating a formal planning phase of the site,
Tesla can apply data generated by the study that will assist in setting deadlines and milestones.
Setback are also bound to be faced by Tesla while conducting feasibility assessments. A major
disadvantage is the cost of finding an appropriate location to set up a factory site as well as
Tesla’s stores. Feasibility studies are expensive as consultants spend a substantial amount of the
company’s revenue in terms of travelling expenses, accommodation and purchasing research
material.
In terms of limitations, Tesla’s factory sites and stores locations are situated in areas
whose accessibility is easy and less limited. Tesla stores are established in major cities such as
London and populated buildings such as malls that are vibrant with a 24/7 economy hence does
not limit consumers from accessing the Tesla vehicles and products. The major limitation
challenging Tesla in deciding the location of its sites and stores is government regulations
(America, 2013). With facilities across the globe in different regions, Tesla faces different

TESLA INCORPORATION 8
taxation and licensing policies to construct and maintain its facilities that are situated in foreign
lands. Some countries are strict on foreign companies setting up stores and factory sites within its
territory. Tesla is therefore limited from constructing structures that are not in line with the host
countries’ authority.
As a result of considering the availability of resources as well as the proximity to the
market in deciding the location of its sites and stores, Tesla is collecting substantial revenue
throughout the year from car sales across the globe (Vartanian, 2019). A negative implication
from Tesla building multiple stores and sites across the globe is that it is destroying the
environment. Habitats are destroyed to pave way for a new Tesla facility.
Green and sustainable Supply Chain
Green supply refers to the manner in which innovations in supply chain management as
well as industrial purchasing are considered with regard to the environment. It involves
integrating environmental thinking into supply chain management such as material resourcing
and selection, product development, manufacturing procedures as well as delivering the final
product to the consumer. Tesla could incorporate several things in its supply chain to create a
green and sustainable supply chain. They include; focusing on source reduction to minimize
waste. The company should develop re-use waste management and recycling programs focusing
on handling waste after it has been developed (Negi, 2014). The programs assist in minimizing
waste as well as preventing it during the production phase instead of managing it after generating
it. Also, the company could select raw material from sources who focus on green supply. Tesla
needs to ensure it knows where the suppliers’ components and material are originating from,
their manufacturing practices, procedures, energy usage, the wastage it develops as well as their
sustainability projects.

TESLA INCORPORATION 9
Recommendations
Tesla, Inc. has the power to remain successful in the electronic car business in the
forthcoming years. The company however needs to address several issues to maintain its
competitiveness and boost its profitability. The company should improve its international
presence. The company needs to set up new facilities and sales operations in developing
countries with a high- potential to grow its business. Tesla also needs to significantly invest in
research and development to develop technologically advanced products which are competitive.
Tesla could also diversify its supply chain to minimize supply-side risks.
References

TESLA INCORPORATION
10
America, P. (2013, August 13). Tesla’s Revolutionary Supply Chain. Retrieved from supplychain 24/7:
https://www.supplychain247.com/article/teslas_revolutionary_supply_chain
Benchmarkminerals. (2016, August 11). TESLA FACES RAW MATERIAL REALITY WITH
EXPANDED GIGAFACTORY. Retrieved from Benchmark Mineral Intelligence:
https://www.benchmarkminerals.com/tesla-faces-raw-material-reality-with-expanded-
gigafactory/
Hall, J. (2015, April 15). Tesla Motors Extends Innovation to its Supply Chain. Retrieved from
My Purchasing Center: http://www.mypurchasingcenter.com/logistics/articles/tesla-
motors-extends-innovation-its-supply-chain/
Kihlstedt, A. (2019). The Problem with Feasibility Studies and a New Approach. Retrieved from
Capital Campaign masters: https://capitalcampaignmasters.com/problem-feasibility-
studies-new-approach/
Kissinger, D. (2018, September 12). Tesla Inc. SWOT Analysis & Recommendations. Retrieved
from Panmore Institute: http://panmore.com/tesla-motors-inc-swot-analysis-
recommendations
Kohnhorst, A. (2018, June 8). Elon Musk is Building a Tesla Factory in Shanghai. Retrieved
from Radii: https://radiichina.com/elon-musk-is-building-a-tesla-factory-in-shanghai/
LeBeau, P. (2018, November 13). A look inside Tesla’s Gigafactory: The key to the automakers’
success. Retrieved from CNBC: https://www.cnbc.com/2018/11/13/a-look-inside-teslas-
gigafactory-the-key-to-the-automakers-success.html
Lichtenthaler, U. .. (2018). The world’s most innovative companies: a meta-ranking. Journal of
Strategy and Management,, 11(4), 497-511.

TESLA INCORPORATION
11
Negi, S. (2014, January). Green and Sustainable Supply Chain Management Practices- A Study
of Wal-Mart. Retrieved from ResearchGate:
https://www.researchgate.net/publication/278783443_Green_and_Sustainable_Supply_C
hain_Management_Practices-_A_Study_of_Wal-Mart
Reuters. (2019). Tesla Inc. Retrieved from Reuters:
https://www.reuters.com/finance/stocks/company-profile/TSLA.O
Świrydowicz, K. C. (2018). Acceleration of tensor-product operations for high-order finite
element methods. The International Journal of High Performance Computing
Applications, 13(4), 1094342018816368.
Vartanian, T. P. (2019). Advantages, Disadvantages, Feasibility, and Appropriateness of Using
Secondary Data. Retrieved from Oxford index:
https://oxfordindex.oup.com/view/10.1093/acprof:oso/9780195388817.003.0003

TESLA INCORPORATION
12