AUTHORS: Srujit Biradawada & Friends (Aarti, Lucy, Laura, Sumer, Vincent & Joyce)
Identifying what are the major logistics and management issues in Tesla’s current production approach is critical. As important is the need for new, alternative solutions for these current roadblocks. However, if only the issues are presented and solutions are proposed but no specific metrics for quality management are implemented, most likely no actual progress will be made by the company. The most critical process performance metrics to be evaluated are related to quality, time, costs, and customer satisfaction.
The most frequent complaints Tesla gets are related to paint and trim, in-car infotainment and electronics package, and body hardware, according to Consumer Report magazine, which surveyed more than 500 Tesla owners. Additionally, the limited range of 300 miles on a full charge of battery concern some potential and current customers. The company also struggled for a few years to make a profit. In the company’s most recent quarterly update, Tesla reported $143 million in net income, contradicting the loss that many people were expecting (Tesla, Q3 2019 Update). However, despite the fact that the company produced and delivered more cars than in any other time in the company’s history, it still lost $408 million.
Considering the above-mentioned facts, we suggest the company to perform a root cause analysis or Six Sigma process with the intention to understand what is causing the problems on Tesla’s processes. To eliminate these problems, is important to go to their roots. As a first approach on a root cause analysis, one needs to define the problem. We anticipate the problems being related to quality, time, costs, and customer relations. Then it’s time to collect data related to these problems and identify what is causing it. Finally, with a clear understanding of the problems, the company can then identify solutions, implement the change and monitor these processes. In a similar way, the DMAIC (Define-Measure-Analyze-Improve-Control) Six Sigma Process also outlines steps for the company to follow and improve its existing processes. Another important process recommended to Tesla would be process benchmarking. Understanding what other companies are doing will help them improve performance.
There are countless management alternatives to measure performance. The following are suggestions we consider effective and applicable to Tesla’s needs.
- Quality control measurements
- For quality control measurements, we recommend Tesla to perform a Reliability Quality measurement to address the current concerns with their battery’s durability and vehicles’ maintenance. Through this process, Tesla will be able to understand whether their batteries and cars will work for a long time without failing or requiring maintenance.
- Time control measurements
- For time control measurements, Tesla can implement delivery speed measurements, which will say how quickly the operations or supply chain can deliver a car or offer a service once the customer put in a request. Some additional analysis related to time would be Cycle time analysis, which will help the company to better understand how long it takes to complete the entire business process – from the moment a customer makes a purchase until the time they receive their car. Moreover, the percent value-added time analysis can also improve the understanding of what activities performed by Tesla provide more value to the company and its customers and how much time is spent on those activities.
- Costs control measurements
- Recently, Tesla opened its Gigafactory in Shanghai. With the new space outside the US, the company expects to increase production and efficiency. On the company’s quarter update, they stated that their focus is on cost control and the company’s growth. Any cost savings during the supply chain process can impact significantly the company. Understanding and improving the entire supply chain process, increasing productivity, and reducing waiting time for customers are just a few of the alternatives that can impact cost. Even though Tesla is a young company, there are many opportunities for business improvements. We recommend the company to go through a business process reengineering (BPR) to rethink some of their business processes to increase performance, impacting not only cost but also quality, service and production speed.
- Customer satisfaction measurements
- Tesla has a unique approach when it comes to car deliveries – cars are distributed directly to customers instead of using a dealership. With that, Tesla has a closer look on the customer relationship process. However, many customers are still concerned about the time that it takes from the moment they purchase a Tesla until the day of delivery. We recommend Tesla to implement a Delivery Reliability system to measure the ability to deliver products or services according to established expectations.
Design and Conduct a program evaluation
The CEO of Tesla, Elon Musk, has made several bold predictions that makes the world feel like we are living in a sci-fi movie world. He is dealing with lots of issues like sending people to mars, shifting solar power production, how to connect the computer to human brains. In the meantime, he should pay more attention to the main issue, Tesla is having a hard time to fulfill their orders due to the high demand in the marketplace. Besides, the vehicle’s battery design has been drawing a lot of attention. Here are some suggestions that might improve the Tesla logistic supply chains. Elon Musk has promised several bold actions, including quickly scale up production to 500,000 cars a year. It’s possible he underestimated the inevitable difficulties in mass-producing a product with 10,000 individual parts, and that’s led to way too many 2 a.m. nights tinkering with robotics on factory floors.
Another issue with suppliers that need to draw attention is that suppliers forget to deliver the supply chain will always blame the company. As we mentioned, Tesla uses several suppliers and external partners to source materials and technology for its electric vehicles, suppliers are often pushed in the deadline or being too flexible to waiting for the production process. As we mentioned Tesla needs to give suppliers enough time to process and produce parts and elements directly.
“Sorry, we’ve gone from production hell to delivery logistics hell, but this problem is far more tractable. We’re making rapid progress. Should be solved shortly,” Musk said in a tweet in response to a customer complaint on delivery delay. The main improvement that tesla can do is reduce the number of parts used or suppliers to make products, Making products, parts in the house.
To improve visibility and accessibility, we recommend using RFID technology to improve operational efficiencies and establish a better relationship with their business partners. Radio-frequency Identification can identify each unique SKU and distinguish between styles, colors, and sizes, all the time allowing complete traceability throughout the supply chain.
Lack of automation could cause inefficiency in production, RFID-based inventory audits can identify apparel items that are out of season and therefore need to be removed from the shelf or hard goods such as pharmaceuticals or consumer packaged goods which may have an expiration date. (Mathews 2015) It is offered personalized, interactive marketing messages as customers tour a store either via a smartphone, tablet or on in-store screens. This includes relaying messages about the apparel, making accessory suggestions or highlighting personalized offers and promotions. RFID could help companies to make sure stock levels are meet customers’ demand.
In order to reduce vehicle transportation time and improve the timeliness of scheduled deliveries, Tesla have purchased and is continuing to purchase their own car-hauling truck capacity for vehicle shipments. It can help them to control and lowering prices to focus on customer service. One of the ways is to hire efficient tracking company to track the car deliver and to ensure customers receive the order on time. We mentioned most of the parts are manufactured in Asia, and partly delay the process, so one of the ways is to improve the international shipping, or manufacture a few parts closer to save shipping time and be more efficient in logistic structure.
There are several ways that you could test how efficient is your logistic process.
- Process evaluation is used to measure the activity of program, and the quality of the process. It could answer the problem like has the project reached the target group? Are participants and other key stakeholders satisfied with all aspects of the project? What if any changes have been made to intended activities?
- Impact evaluation is used to measure the immediate effect of the program and is aligned with the program objectives. I can help company to inspect how well has the project achieved its objectives and how well has the desired short-term changes been achieved?
- It measures the program effectiveness immediately after the completion of the program and up to six months after completion.
- Outcome evaluation measure the long-term effect of the program and is generally used to measure the program goal. It ultimately measures how well the program goal has been achieved.
- At the end it is also good to conduct summative evaluation which to evaluate the entire program cycle to help answer those questions: Do you continue the program? If so, do you continue just as it is? What elements could have helped reduce the cost and satisfy customers?
Previously we mentioned the Gigafactory supply chain vertical integration which may improve the logistic process and reduce cost of supply chain. With the evaluation method, we can also evaluate how effect is the process. Tesla expects the Gigafactory will drive down the per kWh cost of their battery pack by more than 30 percent. Tesla could possibly take an Apple/Foxconn funded manufacturing partnership approach. It could potentially mark up the price of his high-end finished vehicle, whereas most battery manufacturers/developers are stuck in an incredibly competitive market, requiring massive scale, with little pricing power and visibility to end consumers,
All in all, with highly automated logistic process, Gigafactory vertical integration plan, RFID technology into the retail industry enhance and increase the speed, accuracy, detailing and visibility of operational information updates for specific units of business production. With the well-supported automation technology, we can also improve the logistic process in Tesla Supply Chains.
Role of Program Managers when Justifying Conclusions and Making Recommendations
As mentioned in the section above, Program Evaluations are mainly of three different types:
- Process Evaluation,
- Impact Evaluation, and
- Outcome Evaluation.
Once the type of program evaluation is selected and the program objectives are defined, robust evaluation questions should be created to make sure all the evaluation objectives are met. Program objectives are defined taking into consideration the goals and objectives of Tesla, the target consumer that Tesla serves, resources at hand, desired outcomes (both short and long term), program activities and any other program outputs. The program evaluation scope is defined by asking questions like what is the purpose of the evaluation, who will use the evaluation results, what key stakeholders need from the evaluation, and other relevant resource and logistical considerations (Boston University MPH modules, 2015).
Once the scope of the evaluation is defined, credible evidence should be gathered. Certain key performance / outcome indicators are set to define a program’s success. Once these indicators / metrics are selected to answer your evaluation questions, the next step is to find and gather the data. Here, existing data sources (secondary data) should also be leveraged to answer as many questions as we can. In the case of Tesla, the program manager should study the supply chain and logistics operations of other automobile companies to understand how they carry out their logistics operations using RFID and answer as many questions as possible. Primary data should be gathered by making randomized observations around the identified performance / outcome indicators and using the data collected through RFID.
Here are some of the ways, RFID technology can help Tesla to ease their supply chain operations (Printronix, 2018):
- Increased visibility: Using active RFID tags on different parts like Tesla batteries and other imported parts can help Tesla gain more visibility into their inventory and make it easier to locate items in their Gigafactory and the Fremont assembly factory. 1D and 2D RFID barcodes can serve as a significant component in developing traceability programs to track Tesla parts throughout the world.
- Speeding up the inventory process: RFID technology uses non-line of sight (NLOS) data capture process, inventory can be taken much faster, at times in minutes. This can help Tesla speed up their shipping and importing process. This will give Tesla the ability to verify incoming or outcoming shipments in a matter of seconds.
- Eliminate manual tasks: RFID technology can be used to document construction statuses when testing components and vehicles and perform automotive inspections during the assembly process which usually performed by workers. Automotive giants like Volkswagen are currently pushing for RFID-tagged prototype parts from their multiple suppliers. This helps them to better core processes like construction status documentation for test vehicles. The suppliers are labeling the prototype parts in accordance with industry recommendation VDA 5509 using RFID transponders. These RFID coded prototype parts can be identified within seconds and even after installing in the vehicle, thus eliminating the need for manual tasks associated with documenting the construction statuses during vehicle and component testing. This technique enables the test vehicles to talk to the development engineers, which supports the analysis process and contributes to its efficiency. Data collected through these trials could be used to identify logistics-related issues within Tesla’s supply chain and contribute to the program evaluation (Schmidt, 2015).
Once the program evaluation data is collected using some of the RFID uses discussed above, the next step is to analyze the collected data and compare it to the identified standards and finally come to conclusions. The comparison between the findings / analyzed data and the selected standards should be done to explore the impacts to the program. This comparison can go in two ways – the evaluation has no effect or it does have an effect. If it has an effect, is it meaningful and in adherence to the program goals is important to define.
Program managers should follow the following steps while interpreting data and justifying their conclusions (Boston University MPH modules, 2015):
- Consider the caveats and limitations of the evaluation: It becomes important to interpret the evaluation results with keeping the evaluation and program goals in sight. Program evaluations are prone to manual errors and biases, so it is critical to take into consideration some of the cognitive biases and spot check the data for any outliers. Validity and reliability of the results should be checked for and documented in the reporting.
- Consider alternate explanations: Every finding is always bound to have an alternate explanation. Thus, it becomes important to socialize your results and findings with others, especially the front-end workers assembling the parts and involved in regular day-to-day logistics activities to make sure our interpretations are correct.
- Compare program outcomes with historical data: Vetting the findings with those of the previous years is extremely critical to trend the data and check performance. At the same time, it is important to take into consideration changes made during the year which might have impacted the results. This helps program managers to identify which changes worked well and which did not.
- Compare actual findings with intended outcomes: This is a very important step. Comparing actual findings to intended outcomes helps a program manager identify anomalies. Findings which are not in line with the intended outcomes should be taken aside and analyzed. Root cause analysis should be done to identify why they didn’t match the intended outcomes. This analysis can then be used to better Tesla’s supply chain.