Analyzing Supply Chain Management at Tesla Motors: A Detailed Report

This report provides a comprehensive analysis of Tesla Motors' supply chain management, focusing on various aspects crucial to its operational success. It begins with an introduction to supply chain management and a company description of Tesla Motors, highlighting its specialization in electric vehicles, solar panel manufacturing, and energy storage. The report delves into Tesla's supply chain processes, including production systems like lean manufacturing, supply chain management strategies, inventory management techniques, and distribution methods. It further explores supply chain sustainability, examining Tesla's sustainable practices in manufacturing and product offerings, and its efforts to integrate environmental considerations. The report also investigates supply chain risk management, identifying potential risks and the strategies Tesla employs to mitigate them, such as innovation and efficiency. Furthermore, it touches upon supply chain synchronization and agility, offering recommendations for improvement and concluding with a summary of key findings. The report emphasizes Tesla's commitment to innovation, sustainability, and efficient supply chain practices within the automotive industry.

Running Head: SUPPLY CHAIN MANAGEMENT 1
Supply Chain Management: Tesla Motors

SUPPLY CHAIN MANAGEMENT 2
Table of Contents
Introduction.................................................................................................................................................3
Company Description..................................................................................................................................3
Supply Chain Management of Tesla Motors................................................................................................4
Supply Chain Sustainability..........................................................................................................................6
Supply Chain Risk Management..................................................................................................................7
Supply Chain Synchronization.....................................................................................................................8
Supply Chain Agility and Responsiveness..................................................................................................10
Recommendations.....................................................................................................................................10
Conclusion.................................................................................................................................................11
References.................................................................................................................................................12

SUPPLY CHAIN MANAGEMENT 3
Introduction
Supply chain management is the process of managing the flow of products and services that
includes the movement and storage of raw materials, work-in-progress stock and of final goods
from point of manufacturing to point of utilization. The process of supply chain management
plays an important role in the development and success of a company (Christopher, 2016). It
allows the organization to attain sustainable competitive edge by adopting effective supply chain
and logistics strategies. The automotive manufacturing sector has various moving parts and not
only the ones on their products. The supply chain of automotive companies is complex and
continuously moving with the fluctuations in global economy.
This report focuses on the supply chain management of a leading automotive manufacturer i.e.
Tesla Motors. Tesla Motors is an America based multinational company which specializes in
electric vehicles, solar panel manufacturing and energy storage. The company is based in Palo
Alto, California USA. This report describes different aspects of supply chain in context of Tesla
Motors. The company has adopted an effective supply chain process and strategies. It includes
different aspects such as supply chain sustainability, supply chain risk management, supply chain
synchronization and supply chain agility and responsiveness. At the end, recommendations are
provided which can assist the organization to improve its supply chain in both domestic and
global markets.
Company Description
Tesla Motors is a leading organization that operates its business in global automotive
manufacturing industry. It is a multinational corporation that specializes in energy storage,
electric vehicles and solar panel manufacturing and it is headquartered in Palo Alto, California,
United States of America. The company was established in the year 2003 by Elon Musk, Martin
Eberhard, JB Straubel and Ian Wright. The operations of Tesla Motors are focused on offering
efficient automotive at comparatively affordable rates. As of March 2017, the organization has
sold more than 200,000 cars and it has become second largest electric car manufacturer all over
the world (Tesla, 2018). In 2015 and 2016, Model S of Tesla Motors is the best-selling plug-in
electric car in the world. In addition to vehicles, the company sells Power-pack batteries, Tesla
Powerwall, solar roof tiles and solar panels.

SUPPLY CHAIN MANAGEMENT 4
The company is using effective strategies which assist the organization to capture a larger market
share in the industry. One of the major strategies of the company is creative innovation. The
company uses natural energy and resources and innovate them to develop the products according
to the needs and demands of potential customers (Hill, 2013). It led Tesla Motors to gain a better
goodwill in the market and differentiate itself from other well-established players in global
automotive sector.
Supply Chain Management of Tesla Motors
Tesla Motors has captured the collective imagination of car industry in different ways since its
start-up in the year 2003. The company has been interesting because its production and
manufacturing decisions have been very surprising. It is operating its business processes and
activities by implementing an effective supply chain process. In the initial phase, the vehicles of
Tesla Motors were manufactured by Lotus in United Kingdom and delivered to the customers in
United States (Stringham, Miller and Clark, 2015). Later, it purchased a NUMMI factory in
Fremont, California. Moreover, the organization has invested a major amount to build the battery
packs at Gigafactory in Nevada. The current supply chain management of Tesla Motors is stated
below:
Production System
Tesla Motors is using an effective production system i.e. lean manufacturing. The company
produces its products in The Tesla Factory that is an automotive manufacturing plant situated in
South Fremont, California. Under this, the operation managers of the company emphasizes on
how the products of company affect the quality, costs and resources. This organization addresses
this concern via concurrent innovation strategy. For instance, to ensure the efficiency in
producing modern electric vehicles, Tesla is making continuous innovation in its supply chain
process. Moreover, the operation management maintains its emphasis on e-vehicles. It
maximizes the capacity of company to innovate automotive products (Hogg, 2016).
Supply Chain Management
In the case of automotive manufacturing company, it is essential to focus on the supply chain and
logistics process. Considering this fact, Tesla Motors emphasizes on sufficient supply and

SUPPLY CHAIN MANAGEMENT 5
effective supply chain. The company has established an international supply chain that aims to
support its production and manufacturing process. For example, higher productivity of
manufacturing plants of Tesla in United States takes the advantages from on-time shipment of
materials from foreign markets. As an automotive manufacturer which focuses on production in
US, thee operation management of Tesla systematizes the supply chain process while
continuously searching for the strategic partners in the sector (Jacobs and Chase, 2013).
Inventory Management
Inventory management is an important part of supply chain management process at Tesla
Motors. Under this process, cost and assistance production are two important decisions on which
company focuses primarily. At Tesla Motors, the inventory is managed on the basis of principles
which improve the quality. For instance, the company requires that holding inventory does not
influence the quality of raw material that is used for the electric vehicles of Tesla Motors (Swink,
et al, 2014). On the other side, for increasing the productivity and minimize the cost of inventory,
the Tesla’s supply chain includes just-in-time stock for some materials. There are some materials
at Tesla which are used as soon as they reach to the manufacturing premises of company. This
technique assists in minimizing the inventory costs of company.
Stores and Galleries
The stores and galleries of Tesla Motors are generally located in high visibility venues, high foot
traffic and shopping malls in Australia which people generally visit open-minded shopping
mood. Tesla’s stores are designed to be interactive and informative in an effective manner. They
are unlike the traditional dealership with many cars in stock which a salesperson is assigned with
selling. When a customer is not able to buy the car at store, there are various specialists who are
trained to give the answers to questions about e-vehicles.
Online Distribution
In addition to above supply chain processes, Tesla Motors adopts online distribution process so
that it can approach a larger population across the world. Customers can order their Tesla cars on
internet. They can simply choose their option and enter the contact details. After that, Tesla will
build at its factory in California and delivered to nearest service center of customers so that they

SUPPLY CHAIN MANAGEMENT 6
can pick up the vehicle. The company has a policy that if the buyer lives over 200 kms from
service center, the ordered car will be shipped to their home.
In this way, the company has managed its supply chain management process effectively and it is
focused on other aspects of supply chain which are given below:
Supply Chain Sustainability
Supply chain sustainability is an important concept of supply chain management process. It is a
business aspect affecting the supply chain and logistic network of a company in terms of risk,
environmental and wastage costs. There is an increasing requirement for integrating
environmentally effective choices into supply chain management process of an organization
(Darnall, Jolley and Handfield, 2018). Sustainability in supply chain is concept that includes the
supply chain activities and technologies which addresses the social, environmental and legal
faces of supply chain factors.
Looking at the business operations of Tesla Motors, it can be stated that company is using
various sustainable practices by offering electric vehicles and renewable energy usage. The
sustainability in Tesla’s supply chain can be seen from its manufacturing process and its product
and services. It has adopted a sustainable innovation model in its supply chain operations. From
its electric vehicles to solar energy and energy storage systems, Tesla’s products are related to
the sustainability. The major emphasis is to assist the world transition towards energy efficient
and better world. Both of its Model S and Model X are full electric and high productive vehicles
with excellent functionality. In addition to this, company develops solar energy and energy
storage systems (Hutchins and Sutherland, 2008). The energy storage systems and vehicles are
very much innovative and prepared with best technologies. The products of the company are
featured by their safety, performance, clean energy source and acceleration. Tesla Motors has
adopted advanced technology and process development for material remanufacturing, recycling
and reuse. It allows Tesla Motors to more of its supply chain, possibly assisting to enhance
manufacturing and in more sustainable manner, provided that it recycles the materials to be
produced in different parts (Whelan & Fink, 2016).
Tesla Motors is using a sustainable supply chain system under which the company is focused on
managing the pollution control. The company ensures that it holds the inventory that will be used

SUPPLY CHAIN MANAGEMENT 7
for the manufacturing of electric vehicles so that it can reduce the wastage and other related
costs. The company works closely with its suppliers and vendors to attain its sustainable
sourcing objectives i.e. to develop better relationships with suppliers, to source sustainable parts,
to ensure the fair employee practices and to include the use of renewable energy and other
environmental practices from beginning to final product (Mota, et al, 2015).
About Tesla Motors, it can be stated that it is one of the significant organizations that is
addressing climate change with their processes and products like fleet of cars and set of clean
energy technologies. The company has reduced the use of paper so that it can reduce the
pollution in the environment. It is focused on online distribution of raw materials and products.
In addition to this, company is using Just-in-Time inventory system for the materials which
cannot be stored for a longer time. It reduces the wastage and costs. The cars of company do not
operate on air (sBecker, Kugeler, and Rosemann, 2013). They run on electricity that in turn is
generated from diverse sources, from natural gas to nuclear fission to the darkest and dirtiest
fossil fuel of these cars. Thus, it can be stated that Tesla Motors has moderate sustainability in its
supply chain operations but still it needs to focus on supply chain.
Supply Chain Risk Management
An organization may face different risks and issues which can affect the supply chain process of
a company. Supply chain risk management is the process to implement effective strategies to
manage different risks along the supply chain on the basis of constant risk evaluation with the
aim of decreasing vulnerability and ensuring endurance. Under its supply chain process, the
company is facing the risks such as sometimes it experiences significant delays and
complications in designing, manufacturing and production upgrade of new electric vehicles.
Moreover, the company is not able to meet the growing vehicle manufacturing and delivery
plans that can harm the company’s prospects and business (Brindley, 2017). In addition to this,
Tesla Motors is facing the risks related to maintenance of long term agreements with its
suppliers. This restricted supply chain shows multiple possible sources of delivery failure and
shortage of auto parts for manufacturing of electric vehicles.
In order to mitigate these risks, Tesla Motors implements effective and efficient strategies which
can assist the organization to enhance its supply chain process (sBecker, Kugeler, and

SUPPLY CHAIN MANAGEMENT 8
Rosemann, 2013). This organization adopts an effective risk management process and strategies
so that it can manufacture and deliver its vehicles timely. Company uses different strategies and
process for managing its supply chain risks which are given below:
Innovation and Efficiency in Supply Chain Management
From its experience in the automotive industry, Tesla Motors has understood that innovation is
one of the drivers that can enhance supply chain operations of company (Ho, et al, 2015). One of
the major innovations at Tesla is about its production system and how they are using lean
production method. It assists the organization to reduce the costs and wastage of production. This
organization has big production site which never change. Additionally, the company uses
modern and effective technologies so that it can make the supply chain process more efficient.
Effective Relationship Management with Suppliers
Tesla Motors is facing some issues due to their relationship with suppliers. Due to the issue of
suppliers, the company has faced the delays in production of Model 3 electric vehicle of Tesla.
The company may face this risk in future as well so it should develop better relationships with
suppliers (Nykvist, and Nilsson, 2015). The company will pay the prices of raw materials
considering the global demand and market conditions for these materials.
Transparency in Supply Chain
In order to mitigate the supply chain risks, Tesla Motors is making efforts to maintain
transparency in supply chain process. Under this process, the company captures the level to
which information about the suppliers and locations are available to the final customers of
electric vehicles (Radius, 2017).
Thus, Tesla Motors need to develop an automated, efficient, processes, low-cost manufacturing
and supply chains which are required to support each volumes at the organization.
Supply Chain Synchronization
In today’s competitive business environment, supply chain synchronization has become the most
significant objective in developing greater levels of supply chain competitive edge. In a supply
chain process, synchronization is the process of getting all the suppliers and partners operating in

SUPPLY CHAIN MANAGEMENT 9
a way which is mutually seamless and supportive. The process of supply chain synchronization
begins with defining the roles and responsibilities. It is the process to ensure that all the partners
and players in supply chain know specifically that what roles and responsibilities they are
predicted to perform such as storing the raw materials and goods, adapting them, reconvening
quantities and price marking (Klug, 2017). It includes all the processes and activities related to
company’s supply chain tasks.
Tesla Motors use this process for managing all the tasks and responsibilities related to supply
chain process. It includes different processes like recording the orders, following schedules,
tracking the shipments, sharing the information of vehicle status, making invoices, taking
payments, return processing and handling the complaints. Tesla Motors has maintained its supply
chain synchronization very effectively. It has developed close relationships with many key
suppliers specifically in the procurement of cells and other system parts (Korus, 2016). To
develop synchronization, Tesla Motors has developed a The Tesla Supplier Portal that enables
the company and its suppliers to share key product and business information over the internet.
This portal includes all the information of about its suppliers and their responsibilities towards
company. In addition to this, it includes the duties of company towards its suppliers (Rushton,
Croucher and Baker, 2014). It includes the below-given information about the company and
suppliers:
 What tasks suppliers are expected to perform?
 When suppliers are expected to them? (deadlines and lead-times)
 How the suppliers are expected to perform them?
 What the outcomes are expected (customer satisfaction rating and sales quotas)?
Sometimes, Tesla Motors has faced various issues due to its suppliers. The company faced
delays in the products delivery because of suppliers. After that, the company shares a policy with
its all the suppliers so that processes can be managed effectively. If any of the supply partners
fails in the process, then entire supply chain process will be disrupted and there will be
operational conflict in the process (Muysinaliyev & Aktamov, 2014).

SUPPLY CHAIN MANAGEMENT 10
Supply Chain Agility and Responsiveness
In today’s changing marketing environment, supply chain agility and responsiveness is an
important aspect that assists the company to manage its supply chain process (Tse, et al, 2016).
Under this term, responsiveness is the competency of company’s supply chain to fulfill different
and changing demands of customers. Moreover, agility refers to the capacity of a company to
produce and deliver great quality products with shorter deadlines and changing volumes to
provide increased value to its customers (Mangram, 2012). By analyzing the supply chain
process of Tesla Motors, it can be stated that the supply chain of Tesla Motors is very responsive
and agile as the company is manufacturing and delivering the products considering the changing
needs and wants of customers.
Due to development of the needs and demands, the company is trying to stay agile as possible.
The supply chain responsiveness and agility can be found from its innovation related to network
and speed. All the employees at Tesla Motors work for more than 90 hours a week. This enables
the organization to respond quickly when confronting the issue of manufacturing and software.
Looking at the needs of customers, company has manufactured a luxury car with the hardware
and software. This software is directly connected to the cars and it allows the firm to collect the
feedback of customers (Krebs, 2016). For instance, there were various customers who
complained about comfort of seat of Model S. To respond customers’ issue and stay more agile,
Tesla Motors recreate and change the seats of Tesla car for free. It indicates the responsiveness
and agility of customers in their supply chain process. The company uses new and innovative
technology as its actual strength. Firstly, the company uses its software to collect the information
about customers’ changing needs and market trends, collect feedback and enable them to adjust
with the needs and respond very fast with an agile method in uncertain market (Abdoli Bidhandi
and Valmohammadi, 2017). It shows the supply chain responsiveness and agility of Tesla
Motors towards the changing needs and demands of customers.
Recommendations
After conducting the above analysis, it is hereby recommended to Tesla Motors that it should use
effective operations and supply chain strategies to improve its supply chain management process
in global business markets. To manage the above aspects, the company should focus on people,
environment and other related factors. It should ensure that it is not harming these components of

SUPPLY CHAIN MANAGEMENT 11
environment. Tesla Motors should focus on the sustainability so that it can have different
opportunities for the logistics process savings. In addition to this, the company should make
investment on CSR activities so that it can improve the performance of company and provide
value to the society. It will assist the organization to enhance employee loyalty, efficiency and
employee morale. Tesla Motors should implement ERP software in its process that would allow
the organization to increase efficiency and business profits while decreasing the wastes and
costs.
Conclusion
From the above analysis, it can be concluded that Tesla Motors is a leading player in global
automotive industry. The company is manufacturing its products by using different innovation.
The company offers electric cars to its potential customers which differentiates itself from other
competitors in the industry. The above report includes various supply chain aspects in context of
Tesla Motors. From the report, it can be found that organization is able to manage the different
characteristics of its supply chain like sustainability, responsiveness, agility and risk
management. The company is confronting some issues which have affected the growth and brand
image of company so it should refer the recommendations to improve supply chain processes in
national or international markets.

SUPPLY CHAIN MANAGEMENT 12
References
Abdoli Bidhandi, R. and Valmohammadi, C., 2017. Effects of supply chain agility on
profitability. Business Process Management Journal, 23(5), pp.1064-1082.
Brindley, C. ed., 2017. Supply chain risk. Taylor & Francis.
Christopher, M., 2016, Logistics & supply chain management, Pearson.
Darnall, N., Jolley, G.J. and Handfield, R., 2008. Environmental management systems and green
supply chain management: complements for sustainability?. Business Strategy and the
Environment, 17(1), pp.30-45.
Hill, J, 2013, electronic vehicle sale expected to grow globally to 1.8 miilion by 2023, Available
from https://cleantechnica.com/2014/08/12/electric-vehicle-sales-expected-grow-globally-1-8-
million-2023/. [Accessed on 31 May 2018].
Ho, W., Zheng, T., Yildiz, H. and Talluri, S., 2015. Supply chain risk management: a literature
review. International Journal of Production Research, 53(16), pp.5031-5069.
Hogg, R., 2016, Tesla’s supply chain set for a surge, Available from
http://automotivelogistics.media/intelligence/teslas-supply-chain-set-surge. [Accessed on 31 May
2018].
Hutchins, M.J. and Sutherland, J.W., 2008. An exploration of measures of social sustainability
and their application to supply chain decisions. Journal of Cleaner Production, 16(15), pp.1688-
1698.
Jacobs, R. and Chase, R., 2013, Operations and supply chain management, McGraw-Hill Higher
Education.
Klug, F. (2017). Analysing the interaction of supply chain synchronisation and material flow
stability. International Journal of Logistics Research and Applications, 20(2), 181-199.
Korus, S., 2016, Tesla’s Production Efficiency: The Next Moving Assembly Line, Available
from https://ark-invest.com/research/tesla-production-efficiency. [Accessed on 31 May 2018].