Tesla supply chain case study

Running head: SUPPLY CHAIN MANAGEMENT: TESLA MODEL 3 CASE STUDY Supply Chain Management: The case of Tesla Model 3 Student’s Name Institutional Affiliation 1 SUPPLY CHAIN MANAGEMENT: TESLA MODEL 3 CASE STUDY 2 Supply Chain Management: Tesla Model 3 Case Study Supply chain management is the proper command of relationships between firms and entities that share information, material, and services over a system of interlinked stages (Wu, 2020). According to Christopher (2016), the purpose of supply chain management is to create an environment that optimizes the benefits that can accrue every party in the chain. Supply Chain Management operates efficiently where every party benefits from the system without impeding on the welfare of the other parties (Christopher, 2016). The Tesla Model 3 production incorporates several parties, such as marketing, production, and suppliers (Wu & Yang, 2017). The supply chain management policy adopted by Tesla accrues considerable benefits for the company, such as possibilities of expansion, but also exposes the production links to significant weaknesses and risks. Tesla adopts vertical integration into its moderately successful supply chain, propelling its production of model 3 to position eight among car manufacturers, barely a year after launching it (Wu & Yang, 2017). This sudden boom, however, imposed significant challenges on supply management, with Tesla's head, Elon Musk, admitting that the production of the car required more than 10000 components. Therefore, production was expectedly going to be marred by challenges (Wu & Yang, 2017). Since Tesla’s share price rose at almost 50% in 2017, the firm was determined to resolve the challenges and risks in its supply chain to avoid significant hits on the share price. The boom in the share price was mostly the result of anticipation of the Tesla Model 3 (Wu & Yang, 2017). Based on demand forecasting, investors expected high profits from the affordable models of Tesla (Wu & Yang, 2017). Therefore, Tesla had a goal of achieving mutually enforced, and efficient coordination among the organization's related parties to production. SUPPLY CHAIN MANAGEMENT: TESLA MODEL 3 CASE STUDY Among the strengths of adopting vertical integration of supply chain management to deal with the inherent or specific flaws in the flaw of the material was the early realization of possible risks. The company anticipated the problems associated with its extensive portfolio of suppliers since production required a large number of components as well as issues that would arise from demand variability as they made strides towards the upstream stages of production. The problems were addressed, among other solutions, by the offering of an 8-year junk bond in 2017, which secured a portion of their cash flow against sudden shocks (Wu & Yang, 2017). The marketing end of Tesla's supply chain also utilized the electric car's advantages to create a competitive advantage for Tesla Model 3, such as advertising the vehicles' operational ability and clean energy use (Wu & Yang, 2017).