Tesla’s Record Results Despite Supply Chain Disruption
Tesla has weathered its share of supply chain disruptions in a manner “unrivaled in the auto industry”. While other automobile manufacturers have reported a decrease in sales, Tesla has bettered it’s net earnings.
It had posted USD 1.14 billion in the second quarter of 2021. In the third quarter, Tesla posted a record quarterly net earnings of USD 1.62 billion and sales of 240,000 vehicles.
What Tesla Got Right But Others Did Not? Managing Multiple Supply Chain Disruptions
All automobile manufacturers were affected by global semiconductors shortages, which left procurement professionals in the automobile industry short on accessible stock and consumers with fewer options.
Many issues, including semiconductor shortages, port congestion, and rolling blackouts, have hampered automobile manufacturers’ ability to maintain plants functioning at full capacity. Even Tesla has conceded that global supply chain disruptions had made the achievement a little challenging.
However, Tesla got three things right that allowed it to navigate across troubled waters. These are supplier base management, collaboration with suppliers, and better forecasting and planning.
Supplier Base Management and Chip Substitution: Agility at Play
Elon Musk, CEO of Tesla, revealed that the company handled the worldwide chip shortage by upgrading its car software to handle alternate processors.
Due to a growing demand for new automobiles, the gap in supply upended the auto industry. It resulted in factory shutdowns, longer wait times, and higher pricing.
However, Tesla has over the years invested in its supplier base management program. It has built a diverse and inclusive supplier base enabling it to switch to different chips and develop the software in a few weeks.
Working with Vendors to Co-Create a Custom Product: Collaboration in Focus
Tesla was able to quickly put together a custom product. Tesla’s ability to identify the right supplier through a pre-defined approval system enabled it to co-create the customized product in a very short period of time.
It enabled the production, engineering, and supply chain teams to quickly move forward and build the product according to specifications that were pre-set. Tesla’s collaboration with suppliers enabled it to demonstrate agility at scale for its indirect procurement.
Early Visibility for Better Forecasting and Planning: Digital Supply Chain Transformation
Tesla was able to identify the challenges quite early on. Its digitally integrated supply chain with multiple suppliers, logistics services partners, and warehouses onboard worked as an early warning and control system.
Early visibility into the divergence of its supply chain KPIs from expected values allowed it to pierce the mist on the screen. It enabled the automobile manufacturer to forecast and plan better.
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