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Management Essay Example: Operations, Logistics, and Supply Chain in Tesla Company

8 pages
1960 words
Middlebury College
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Tesla is an automotive company that was initiated in 2003 and is based in the United States. The company was founded by Marc Tarpenning and Martin Eberhard, but the two entrepreneurs gave the company the name Tesla. The main area of operation of the company is the production of electric cars and the in 2008 the company launched its first car. As a company, Tesla faces a lot of competitions from the already established automotive manufacturing companies. However, the company has made tremendous steps in the aspect of enhancing their customers requirements through the logistics, operations, and the supply chain management the company has adopted. As such, the overall performance of a company relies on the efficient management practices and the outlook layout as well as the framework of the operational practices that are involved in the business. Nevertheless, the operation and supply chain managers at this company face many issues in their line of work. This paper outlines the issues these managers face in new product management and quality management and control.

Successful operations of a company majorly depend on the logistics and supply chain management strategies. Logistics in this regard refers to the activities involved in the movement of goods and services into a company, within the organization, and out of business with the objective of meeting the customer requirements. It involves the two aspects of company's operations that is the internal movements and the outer movements of good and services. Supply chain management, on the other hand, refers to the systematic and strategized coordination of business operations within a specific company and across the business within the supply chain, with the motif of ensuring the efficient and effective performance of the company and the overall supply chain (Schneider, 2014, p.6). This means that for a company to compete effectively in the competitive business scenario in the current markets, it must strategize appropriate and efficient logistics and design effective supply chain management systems. Tesla Company strives to ensure that it has high productivity and efficiency in their operations management as an appropriate way to curb the stiff competition they face from other automakers and also maintain a good relationship with its customers.

New Product Development and Process

Since its inception, Tesla has been the leading or say the only electric car production company in the world. Their cars are beautiful and attractive to the consumers. Every year the company has to launch new car models and designs to meet the consumer's interests and also keep the market to themselves. Even though the market is not that wide, with time electric cars will be more popular than the regular cars, and we all know what this means. Well, it implies bigger and faster production of both in market cars and new cars. However, Tesla has a little bit of a bump on this side of creation.

After the unveiling of sharp designed Model 3 that was anticipated to be in the market for a long time, Tesla brought a new challenge to their production door. Even though according to the masses the car is not that eye-catching than the earlier version. With the massive production and resources that the company had put into making the car and yet some esteemed customers feel like it would have been made better. Anyway, the design of the vehicle does not matter because it is a car for the masses. Before the challenge would be revealed, the people who had made pre-orders for the car doubled. This was a much bigger number compared to the number of cars Tesla sold in the year 2015.

However, with this immense increase in the number of people interested in buying the Model 3, Tesla has an issue. Now with the public appetite for the model, Tesla has to pump its production to 250,000 vehicles of the Model 3. This is not part of the in-market output. In the past two to three years, Tesla has been working to its fullest to fulfill its delivery expectations only to fall short. The plant in California can make about 500,000 cars, but yet they can just manage a fraction of that. The company is currently making the Model S Sedan and Model X SUV which are all new models. The company's goal was to make the production of these two models to 100,000 by the end of 2016, and they failed. Now the big issue is that with all these expectations, the production of even a more significant number of the Model 3 cars have been brought into the mix and the company needs to act on the issue as soon as possible. It is a big challenge for the mangers and the whole production crew to come up with a such number of cars provided that their annual pace is 100,000 cars. This implies that the production needs to be tripled before the delivery of the model 3 which is scheduled to be at the end of 2017.

The automobile industry has established a lucrative number of innovations in the line of supply chain operations. The pioneering automakers such the Ford assembly and GM automotive firm are known to have invented efficient mechanisms in the supply chains, and this dramatically improves the overall supply chain systems that existed before. These two companies sold approximately 250,000 cars in March 2016 all solely in the US. Contribution in the supply chain system came about from the criticism that was there regarding the production of cars that consumed large volumes of fuel. Tesla Company remains outstanding in the manner in which its supply chain system works despite the fact that it was started in the year 2003 (Mangan, 2016, p.4). The company's primary concern over the years has been optimizing the consumer involvement and availing to the market quality products that satisfy the needs of the consumer. Notably, the prosperity of the company is also as a result of the firm foundation laid at the time it started its operations. However, the production of new cars is making the supply chain managers unsettled.

Tesla is no doubt a good company in making electric cars look sexy. Moreover, it also has a good marketing team that has been able to persuade many consumers to invest in their cars (Hidrue et al., 2011, p. 687). It is also good at planning a good and promising future for its car productions which includes the future self-driving cars. However, that tremendous 200,000 car preorder promises a significant profit margin, and it is mind-blowing. Tesla would have to expect a miracle to attain that number and still keep production ongoing. To be frank, the company has the workforce, a factory, a good and envisioned leader, robotics that help in production and willing customers but they are not yet ready to assemble cars on a mass production routine. For unknown reasons, they are not able to bolt metal together like any other company that has been in the business for an extended period.

Additionally, with this new demand for new models, there is a new issue on the rise. The production team would need to work long hours and four times faster than the current speed. In this regard, there will be many mistakes made, and the consequences will also be more significant. Therefore, fast production would reduce the quality of production and this might drive away customers. For instance, there were complaints about the older versions of Model X's seat belt malfunctions and the car had to be recalled from all around the world. Moreover, this would imply that new cars require lithium-ion batteries and as the production gets bigger, the need for the battery increases relatively. The company has no problem with innovations but with producing the car at a scale that can fulfill the big markets desires.

Moreover, there has been a proposal in Washington D.C. The House of Representatives has a plan that could see the prices of new electric cars hike. By doing away with the federal task, the future cost of a car would rise by $7,500 by the start of January 2018. This is a big challenge to the production management because they are not sure anymore. They are in a dilemma. If they put an extra energy and work to produce the mind-blowing 200,000 preorder cars and the Congress decides the tax be wiped, the company might make millions of losses. In this case, Elon Musk would be forced to refund prepaid deposits made by customers who do not wish to add the extra $7,500. This is an impossible figure for a car buyer, and no one would be willing to add such amount of money for the new Model 3. Therefore, this a big issue that the management is facing.

Management Issues

The operations management and logistics also depend on the quality management of an organization. The customers always value quality and this influence the type of goods and services that the select in the market. Quality of the raw materials involved in the production process determines the final quality of the finished product. The relationships that exist between business and the consumers of their products normally depends on the quality of the products the company or business in question produces. Low-quality products fetch low prices in the markets, and this consequently affects the profits that result from such type of sales (Heizer, Render, & Munson, 2016, p.2). On the other hand, high-quality products fetch good prices in the market and this, in turn, boosts the earnings from such sales, and it develops the customers confidence. As a strategy to ensure high-quality products in the market, Tesla conducts regular research on the potential designs of automotive that meet the dynamic demands of the customers. Also, the high standards of production are maintained by the company to ensure that their products are of high quality. The chief managing officials also frequently conduct quality surveys and device mechanisms of incorporation of latest enhancements in the production process. The production of Tesla's new Model 3 has its quality issues.

Model 3 is supposed to be better and different from all the earlier models. The battery should last longer and again they should be faster. For this case, Tesla has considered partnering with SolarCity which will help them keep their goal alive and the car production rolling. However, the issue here would be merging a carmaker, an installer, and a solar-panel company. There is a reason why companies that make cars prefer to assemble cars and trucks. The reason is simple-it is difficult to even make vehicles alone. The deal with SolarCity is a good one, but the challenges that come with it are greater. This is having in mind that Tesla established an energy storage business roughly a year ago. This can only mean one thing if the business kicks well, they will have issues with their solar leaser partners.

Again, the companies merging would only mean that Elon Musk will be the required to oversee the three companies. This in return will reduce the focus of Tesla in the production of the Model 3 since Musk will be a de facto (Hoang, 2016, p. 69). This might also slow the launch of the new car since there will need to heavily invest in the SolarCity business. Car-making is a cash-intensive business. It is going to be expensive to launch the new Model 3 and having in mind that the profits are split between three companies, it is going to take time bef0re the company covers the cost of production. Research shows that the price might be carried into 2018.

Additionally, the stock is another issue barging Elon Musk. The share is expected to decline on the eve of a new year, and this will affect the delivery of the company's delivery of cars. Tesla will have to maintain its shares at the point that can allow a fallback say at $200. This would g...

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