Tesla operations management

6/5/2018 Tesla Motors, Inc.’s Operations Management: 10 Decisions, Productivity - Panmore Institute

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A Tesla Model S 4WD at the IAA 2015 exhibition in Frankfurt, Germany. Tesla Motors, Inc. optimizes productivity through operations management suitable for the 10 strategic decision areas of the automotive business. (Photo: Public Domain)

Tesla Motors, Inc.’s operations management (OM) practices address the objectives in the 10 strategic decisions for optimal productivity in all areas of the automotive business. These 10 strategic decision areas require operations managers to maintain best practices to ensure streamlining, effectiveness and high productivity in the organization. Tesla’s global expansion plans depend on the success of these practices in optimizing productivity and overall

performance. Also, the company’s technological innovation goals support and depend on OM performance. As an increasingly popular manufacturer of electric vehicles, Tesla must keep improving these practices for operational competence against other automakers.

Tesla Motors, Inc. uses operations management (OM) best practices to maximize productivity while minimizing costs, based on the 10 strategic decision areas. This optimal operational condition contributes to Tesla’s ability to sell its products at reasonable prices, given current market forces and cost of materials.

Tesla Motors, Inc.’s Operations Management, 10 Decision Areas

BUSINESS, MANAGEMENT

Tesla Motors, Inc.’s Operations Management: 10 Decisions, Productivity UPDATED FEB 21, 2017 ANDREW THOMPSON

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6/5/2018 Tesla Motors, Inc.’s Operations Management: 10 Decisions, Productivity - Panmore Institute

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1. Design of Goods and Services. In this strategic decision area, operations managers focus on how the organization’s products influence costs, quality objectives and resources. Tesla addresses this concern through concurrent innovation. For example, to ensure productivity in manufacturing advanced electric vehicles, the company continuously innovates its supply chain systems. In addition, Tesla’s operations management maintains its focus on electric automobiles. Such focus optimizes organizational capacity for innovating automotive products.

2. Quality Management. Satisfying customers’ quality expectations is the main objective in this strategic decision area of operations management. Tesla addresses this objective through regular research on the automotive market. In addition, the company continues to enhance its products and processes to satisfy high standards for quality and productivity. For example, Tesla’s operations managers regularly conduct quality reviews of, and implement enhancements to manufacturing processes.

3. Process and Capacity Design. This operations management decision area focuses on business processes, along with related investments, standards, and resources. Tesla Motors, Inc. integrates automation for this concern. For example, the company has automated manufacturing processes combined with human intervention. This condition helps Tesla achieve high productivity through operational efficiency in the automotive business.

4. Location Strategy. Logistics and nearness to markets, resources and suppliers are considered in this strategic decision area of operations management. In terms of resources, Tesla’s operations managers utilize its global reach. For example, suppliers like Panasonic provide materials necessary for manufacturing electric automobiles. Tesla’s marketing mix also involves company-owned stores and galleries in malls and other key locations to maximize sales personnel productivity and access to the target market.

5. Layout Design and Strategy. In this strategic decision area, operations management is concerned with achieving optimal flow of resources and information. In Tesla’s case, layouts are designed to maximize capacity utilization of facilities, especially buildings used for manufacturing electric vehicles. Also, the company employs advanced computing and networking technologies for internal communications. These approaches increase productivity in Tesla’s operations.

6. Job Design and Human Resources. Adequacy of effective human resources is the objective in this strategic decision area of operations management. Tesla Motors, Inc. satisfies this objective through a competitive compensation strategy to attract effective and competent workers. This

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approach is especially important in the market, where many companies compete for high quality human resources. Also, Tesla’s operations management ensures effectiveness and high productivity of personnel through regular training, as well as leadership development programs. For example, leadership development is used to fulfill Tesla’s leadership needs to grow its automotive business.

7. Supply Chain Management. In this strategic decision area, operations managers focus on adequate supply and an effective and efficient supply chain. Tesla has a global supply chain aimed at supporting its manufacturing processes. For example, high productivity of the company’s manufacturing plants in the U.S. benefits from timely shipment of materials from overseas. As an automaker that focuses on manufacturing in the United States, Tesla’s operations management automates the supply chain, while constantly looking for strategic partners in the industry.

8. Inventory Management. Inventory decisions, costs and support for production are considered in this strategic decision area. At Tesla, inventory decisions are based on operations management principles that emphasize quality. For example, managers require that inventory holding does not affect the quality of materials used for the company’s electric vehicles. On the other hand, for high productivity and minimized inventory costs, Tesla’s operations management approach involves just-in- time inventory for some materials. For instance, some materials for automobile production are used as soon as they arrive at the company’s manufacturing facilities. This approach helps minimize Tesla’s inventory costs.

9. Scheduling. This strategic decision area focuses on short-term and intermediate schedules for resource utilization. Operations managers at Tesla Motors, Inc. address these concerns through market-based scheduling, combined with automated processes for maximum efficiency. In market- based scheduling, the company monitors actual market demand and uses the resulting data as basis for scheduling automobile production. On the other hand, Tesla’s operations management supports scheduling activities with automation to minimize errors and delays, thereby enhancing productivity.

10. Maintenance. Adequacy of resources and production capacity are the objectives in this strategic decision area of operations management. Tesla ensures resource adequacy through regular inventory monitoring that readily responds to shifts in market demand. The company addresses the objective of adequate production capacity through a small but significant degree of redundant processes and production resources. For example, Tesla maintains excess production capacity in some of its facilities. Such redundancy allows the company to rapidly increase its production in response to spikes in market demand for electric vehicles. These operations management approaches create resilience and responsiveness in Tesla’s productivity.

Tesla’s Measures of Productivity Tesla Motors, Inc. uses measures of productivity based on automobile production. The company also uses productivity criteria for its corporate office operations management. The following are some of these measures used to determine Tesla’s productivity:

1. Powertrain units per day (Auto production plant facility productivity) 2. Automobiles per day (Tesla production plant facility productivity) 3. Inquiries addressed per day (Customer service productivity)

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