TESLA, Inc.

GLOBAL SUPPLY CHAIN ANALYSIS

Student name-Chetan Rajesh Pawar
Student id-M00908757

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 Executive Summary
The current report highlights the global supply chain analysis of Tesla. From the reports, it
can be found that Tesla is an American automotive company operating in a global scenario
and deals with the production of electric vehicles, solar roof tiles, solar panels and many
other similar products. The company is observed to be having a competitive business
environment through the high innovation within its products and services followed by a
differentiation strategy within the market. Apart from that, the transnational strategy shapes
the international business strategy of the company further providing a strong supply chain
that is highly categorised by agile and lean supply chain strategy. In addition to this, the
reports also stated that the company is operating with 159 showrooms across different
locations in the UK, Germany, the US and others which are providing a high chance of
reaching targeted customers in the global scenario. Apart from that, transportation, inventory,
information and outsourcing are also managed effectively by the company which has been
detailed in the report below. Other instances of supply chain networks along with
recommendations for the company's future development have also been stated in this report.

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 Table of Contents
Introduction................................................................................................................................4

Competitive business strategy....................................................................................................4

International business strategy...................................................................................................5

Supply chain strategy.................................................................................................................7

5 Drivers of the supply chain.....................................................................................................9

Facility....................................................................................................................................9

Outsourcing..........................................................................................................................10

Inventory...............................................................................................................................10

Transport...............................................................................................................................10

Information network.............................................................................................................11

Supply chain network...............................................................................................................11

Conclusion and recommendations...........................................................................................12

Reference list............................................................................................................................13

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Introduction

Tesla is considered to be a multinational American Automotive company which is

headquartered in Austin Texas. The company deals with designing alongside manufacturing
electric vehicles, along with grid-scale, solar roof tiles, solar panels and battery energy
storage. Since 2003, the company has been operating successfully by establishing itself as the
leading producer of electric cars in the global scenario (Tesla, 2022). The company is aimed
at building a world that is powered by solar energy and runs on batteries. It is also aimed at
mitigating the negative impacts of carbon on the environment and enhancing the green
environment.
The current study will be highly focused on evaluating the global supply chain strategy of
Tesla and will also be providing recommendations accordingly. Concerning this, the study
will be evaluating the competitive business strategy of Tesla along with its international
business strategy and supply chain strategy. Apart from that, five drivers of the company
including facility, sourcing, inventory, transport, and information network will also be
accessed in this study. Lastly, the supply chain network of the company will also be analysed
for getting a clear picture of the global supply chain of Tesla.

Competitive business strategy of Tesla

Tesla in the current scenario seems to be highly competitive in the market based on its
products and services. Concerning this, the competitive strategy of Tesla highly aligns with
the differentiation strategy stated by Porter's generic competitive framework (Ronald, 2020).
According to Ellis (2020), the generic strategy of competition stated by Porter reflects the
areas of differentiation along with cost focus and cost leadership. In respect to this
framework, Tesla adopted the strategy of differentiation that enables the company to produce
different products as compared to its competitors within the market. This also helps to stand
out in the market and attract the attention of the customers. This strategy of the company
entails the development of unparalleled models of cars that tends to differentiate the company
from its competitors (Ronald, 2020).

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 Tesla

Figure 1: Porter’s generic competitive framework

(Source: Musyoka et al. 2022)
For instance, the Model S of Tesla consists of eco-friendly technology that seems to be
suitable for a market that is highly environmentally conscious (Tesla, 2022). In addition to
this, Tesla has also been observed to be building a reputation as a low-cost company with low
production costs. For instance, the company produced Model 3 for customers, which are
considered to be cheaper than other Tesla cars (Tesla, 2022). As a part of its differentiation
strategy, the company also uses R&D to enhance its performance within the market. As per
Musyoka et al. (2022), R&D helps in the proper designing of products that suit the needs of
the market while enhancing their quality. Other than that, the product diversification strategy
is also used by the company in this respect. This includes the implementation of storage
batteries such as Powerwall 2 for the purpose of households and many others for maintaining
a high scope of sustaining its business within the market (Tesla, 2022). Apart from that, a
fundamental pricing strategy is also used by the company in terms of discounts on new cars,
high resale value and others further making it more competitive in the market (Pricing
Insight, 2020). Henceforth, Tesla is having a proper competitive strategy in the market.

International business strategy

Firms having a high global presence need to adopt certain strategies for proper functioning in
the targeted market. As per Verbeke and Yuan (2021), local responsiveness and global
integration are the two main factors that need to be considered by a firm for the formulation
of a global or international business strategy. It mainly assists a firm to be competitive and

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maintains its proper operating notion. The figure presented below indicates four main
strategies that are being adopted by companies within the global scenario. According to
Pereira et al. (2022), global strategy, transnational strategy, international strategy and multi-
domestic strategy are the four commonly adopted strategies as per the framework of
international business. The operations of Tesla are characterised by the high quality of
innovative products that aim at getting high responses from the customers to sustain within
the market. Considering the figure below, Tesla is observed to be focusing on high global
integration and high local responsiveness and thus adopted the transnational strategy to
operate in a global scenario (Kamkoum, 2018). It is because, through the strategy of
localisation, the company tends to adjust customers demand by bringing changes within the
product and thus are meeting the local market needs.

Tesla

Figure 2: International Business Strategy

(Source: Rogmans and Abaza, 2019)
Tesla has been observed to be achieving low cost in terms of economies of sales, which in
turn differentiates its product around geographical markets. In respect to transnational
strategy, Tesla also uses the technique of direct selling which enables the company to gain
more customer satisfaction and enables it to match its production with the preferences of the
consumers (Rogmans and Abaza, 2019). Certified Pre-Owned (CPO) Program is also used by
the company as its international strategy. As per this program, the Model S of Tesla can be
returned to the company after 3 years with a reimbursement of 43% to 50% of the car's
original price (Kamkoum, 2018). Focus on high local responsiveness is also a crucial strategy

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by the company, which increases customer satisfaction. For instance, modifications have
been made by Tesla in its Model S car within the domain of China based on customer
feedback which in turn cost the company $2000 (Oberoi, 2020). Moreover, Tesla’s
international strategy also deals with active collaboration with foreign firms in terms of
research and development and operates within the market successfully (Kamkoum, 2018).
Henceforth, with high local responsiveness and global integration, Tesla shapes its
international business strategy.

Supply chain strategy

Supply chain capabilities are highly reflected when a company is having consistency between
the priorities of consumers and the manufacturing of products and services. From the studies
of Shabbir et al. (2019), it can be stated that products of Tesla are highly compatible with the
innovative needs within the market and the company is highly focused on local
responsiveness and global integration for sustaining its business. In respect to this, Tesla has
been practising two strategies related to supply chain management. The first supply chain
strategy that the company has been practising includes the agile supply chain strategy.
According to Merzlyakova and Goncharova (2020), an agile supply chain strategy is highly
responsive alongside flexible to the demands of customers, and it is also committed to the
mitigation of different issues faced by supply shortfall, capacity resources and many others.
Through this strategy, Tesla has been successful in responding to the diversified, predictable
and changing demands as can be observed from the instances of product modifications in
China by Tesla based on customer preferences (Oberoi, 2020).

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 Figure 3: Lean supply chain strategy of Tesla
(Source: Tesla, 2022)
The figure above also reflects that Tesla follows a lean supply chain strategy within this
business environment. According to Desfiandi et al. (2019), the lean supply chain strategy
mainly aims to supply goods and services to the customer with minimal waste and high
flexibility to adjust to unexpected delays within the process. As per the figure, Tesla deals
with the notion of 92% reuse of raw materials within the packs of batteries. The closed loop
recycling system that is being used by Tesla justifies its lean supply chain strategy and also
ensures a 100% supply of Tesla's batteries within the market on time (Tesla, 2022). As a
result of this, the company has been successful to implement the notion of high car saving as
the direct-to-consumer model of the business is enabled to save $2225 for a $26000 vehicle
which estimates at around 8.6% of savings per vehicle (QuickBooks, 2022).

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 Tesla

Figure 4: Strategic fit of Tesla

(Source: Desfiandi et al. 2019)
However, the report of the $2.32 billion net profit of the company by the end of 2021 reflects
that the company is having better supply chain as compared to its competitors within the
market (Markoff and Seifert, 2022). Nonetheless, the business strategy of Tesla implies
diversification and differentiation while the supply chain of the organisation aligns with lean
and agile strategy. In this respect, both the strategies of the company are highly committed to
meet the needs of the environment and the customers further achieving a strategic fit within
the business (Desfiandi et al. 2019). Considering the framework above, Tesla belongs to
responsive supply chain zone in consideration to its fast response of customers’ demands
within the market along with proper sustainability within business operations.

5 Drivers of the supply chain

Facility
The facilities of an organisation mainly include different physical locations that are being
used by a company for the manufacturing and storing of its products. In consideration of this,
Tesla seems to be operating in a global scenario with 159 showrooms within the strategic
locations of the US, the UK, Germany and others (Hindustan Times, 2022). In the current
scenario, it can be observed that Tesla is planning to build a production facility within the
domain of North America through the location options that will be announced by the
company later on. Apart from that, a new facility is being analysed by the company that is
aimed at ramping the production of the Gigafactory Texas to volume production. The report
states that ramping up production within the domain of Texas is considered to be challenging,
as the Model Y of Tesla seems to be equipped with 4680 cells and a pack of structural

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batteries (Hindustan Times, 2022). As a result, ramping up the production will also require
the updated architecture of structural batteries back within the domain of Tesla. This indicates
Tesla is highly involved in facility planning.
Sourcing / Procurement
Tesla has been highly famous for the production of innovative and well-designed electric
vehicles. In order to assemble its cars, the company sources different parts from a range of
Tesla suppliers. Some Tesla suppliers provide ordinary car parts while others provide electric
parts and the transition to EVs Tesla is moving at a rapid pace. Some of Tesla's suppliers
include BHP, Glencore, Rohm and Haas Company and many others (CSI, 2022). Apart from
that, Tesla's outsourcing services are highly trusted BIM service providers along with CAD
drafting companies that offer different solutions to the company across 25 + countries in the
global scenario. The company through this outsourcing reduces its cost by 50% while having
a 70% quicker turnaround and 90% satisfies clients in the global scenario (Tesla, 2022).
Procurement strategy of Tesla includes working with numerous suppliers for scaling its
products and services. The company also carefully selects its suppliers and sources its
product for meeting end user’s needs. Henceforth, the company has a proper system of
outsourcing.
Inventory
Tesla seems to be employing various styles in terms of inventory management. According to
Nasrollahi et al. (2021), proper inventory management helps a company to manage its
production and sales and also creates a high satisfaction level among customers. From the
reports of Tesla, it can be observed that the company implemented serialised techniques in
order to manage its inventory (OLEG, 2022). As a result of this technique, Tesla has been
effective in tracking its product along with its management with a serial number. On the other
hand, Yamin (2021) stated that first in first out (FIFO) is one of the most common and well-
known inventory management methods used by companies to ensure proper production and
services. Tesla also seems to be using the FIFO method, which helps the company to stay
updated as per consumers' preferences within the market. Henceforth, inventory is
appropriately managed within Tesla based on FIFO and serialised inventory management
methods.
Transport
Tesla’s supply chain transportation strategy commences by receiving various products parts
for assembly. Flights are used by the company along with trucks for carrying components
from the suppliers and distribute to different assembly parts around the world. Mostly, flatbed

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truck is used by Tesla for its transportation as it helps the company to deliver the products
safely to its customers and is also convenient for the company. In some cases, containers and
ships are also used by the company for transportation (Tesla, 2022).
Information network
Sharing of information assists in the promotion of greater coordination among different
stages of supply chain management. It also increases responsiveness and efficiencies within
the process that enables a company to manufacture products as per consumers' needs. Tesla in
the current scenario seems to be using speculative forecasting methodologies that help the
company to analyse the rate of demand within the market (Tesla, 2022). This technique is
also effective in measuring the awareness of products within the market along with market
testing. The studies of Karmaker et al. (2021) indicate that speculative forecasting
methodologies can also be used by Tesla for predicting its future demand. Henceforth, the
information-sharing system is highly active within the domain of Tesla, which can benefit the
company in its operating system.

Supply chain network

The unique business model followed by Tesla seems to be different from the traditional
approaches that are being highly used by other automakers in the production and
manufacturing of electric cars. Some automakers such as GM, Ford and others sell through
franchise dealerships while Tesla applies the notion of direct selling with the help of 159
showrooms within strategic locations in the UK, Germany, the US, and others (Tesla, 2022).
Tesla also seems to own a chain of distribution that helps in providing a superior experience
while acquiring competitive games within the market. Apart from 159 locations of sales, the
company is also observed to be developing a service plus retail plan that offers servicing of
cars through retail centres. Henceforth, the company is having several distribution centres
that assist the company in maintaining its supply chain network.

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 Figure 5: Global supply chain network of Tesla
(Source: Tesla, 2022)

Conclusion and recommendations

From the current study, it can be concluded that Tesla is having a competitive business
strategy with a focus on differentiation while the international business strategy of the
company is shaped by high global integration and high local responsiveness. Most
importantly, a transnational strategy is followed by the company in this scenario. Other than
that, the company is also observed to be following an agile and lean supply chain strategy
that is assisting the company to meet the five drivers of the supply chain as facility,
outsourcing, inventory management, and transportation and information network. The
company is also observed to be having 159 showrooms across different international
locations and it is also assisting the company to manage its network of supply chains.
Considering the current situation of Tesla, it can be recommended that a centralised
warehouse system can be implemented by Tesla for better functioning. It will help in the
proper management of inventory. Additionally, the company can facilitate instances of
customisation for meeting end users' needs and proper maintenance of supplier relationships
is also advisable in this scenario. It is because proper relationships with suppliers will provide
the chance of acquiring quality products that will help the company to produce quality
products within the market as well. Nonetheless, a proper inventory control plan within Tesla
will also be beneficial to manage its 159 showrooms and facilitate the notion of business
properly around the world. Henceforth, the implementation of certain strategic notions will
help Tesla to operate more successfully in the global scenario.

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