What Tesla Can Teach Us About Procurement Best Practices

What Tesla Can Teach Us About Procurement Best Practices

If it’s not electric cars it’s rocket ships. When it comes to big business with big excitement, you don’t have to look much further than US mega-brand and cheerleader of innovation – Tesla.

Tesla is not your typical company. There aren’t many ‘typical’ companies celebrating the recent successful launch of the world’s most powerful rocket. At the heart of this web of innovation sits Elon Musk, the iconic founder and Emperor of Ambition driving forward Tesla.

In truth, the word ambition barely begins to describe Musk. He’s a carnival of delight that’s constantly pushing for the new frontier, whether that’s gambling on the world’s largest battery storage, setting out plans to tunnel highways beneath Los Angeles, or aspiring to colonise Mars.

Yet for all the headline-grabbing stories of electric cars and rocket ships, at its heart Tesla is a corporation just as reliant on supply chains and efficient procurement as any other. Understanding that journey can teach us some important lessons about procurement best practices.

The trials and tribulations of the Tesla Model 3

The Tesla Model 3 surely takes its place amongst the world’s most anticipated vehicles. The launch announcement in March 2016 presented plans for the cheapest Tesla to ever hit the market, aiming to provide a relatively affordable electric car to the masses.

Like the majority of Tesla’s technology-driven products, at the heart of delivery rests a reliance on a lithium-ion battery. Tesla is the world’s largest consumer of these batteries, which our modern world utilises in everything from electric cars to laptops. That means ensuring reliable supply is key to the company’s success, and the particular success of the Tesla Model 3. Enter Elon Musk’s radical imagination, and the realisation of his Gigafactory.

Innovating an integrated supply chain

The Gigafactory is an integrated supply chain under one ginormous roof. The factory footprint sits at a monstrous 5.5 million square feet, making it potentially the largest building in the world. That tremendous space provides a state-of-the-art facility which offers a unique opportunity for Tesla, enticing key suppliers in its vital battery supply chain to take up residence.

The goal of the Gigafactory is not only to provide ample supply of lithium-ion batteries, but to ensure that supply is linked to Tesla at a time when global demand for these batteries demonstrates significant supply chain challenges. It is perhaps the world’s most ambitious monument to the importance of business-critical procurement.

Trusted suppliers really do matter

What the Gigafactory highlights is a multi-billion dollar testimony to the fact that no matter how advanced or exciting your product is, you still need the parts to make it. When it comes to building cars, you’re talking an estimated 3,000 individual parts which could go wrong. Unfortunately for Tesla, just one key part being delayed can have a huge impact.

Tesla had aimed to be producing 5,000 Model 3s by the start of 2018. That’s already been pushed back, causing a significant fall in the company’s share price. What’s the problem? Supply chain woes. A key element of the supply chain failed when a sub-contractor ‘dropped the ball’ on delivery of elements of the high-tech assembly line. Tesla ended up having to rewrite a whole chain of software and rebuild complicated mechanical elements. That intervention came too late to meet deadlines.

Innovation and efficiency are key

The challenges Tesla has faced clearly show the importance of a reliable supply chain. Yet you can almost feel sorry for the difficulties the company has had to tackle. On the face of it the Gigafactory is a hugely ambitious move that highlights how reliability and efficiency go hand-in-hand to enable sustainable procurement.

Tesla is no stranger to ambitious projects for efficiency. Just take a look at Musk’s intergalactic ambitions. At its heart their entire SpaceX project is one driven to deliver more efficient procurement to the stars by lowering costs and reducing losses on orbital travel.

Whether you’re operating the world’s largest factory or blasting off to outer space, the reality is that efficient, effective procurement is a vital step on your journey. Tesla might have hit some bumps in the road, but the company still offers a fascinating exploration of how innovation forms a vital part of procurement best practice. You don’t need a spaceship to see the value in that.

 

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