Tesla: Creating a revolution in the luxury car industry

If you are somewhat familiar even a little bit about stocks and have an interest in investing, you probably have heard about the recent boom of Tesla Motors (NASDAQ: TSLA) stock. Recently, the stock went as high as $110 a share; this was a 103% increase over a one month period and a 247% increase over a 3 month period.Source: AutoBlog

So you may be thinking, what caused this sudden increase and growth? Tesla stock first jumped 31% on May 8th when it announced its First Quarter sales to be $562 Million and recorded  first quarterly profit in its 10-year history of $15 million.  In a letter to shareholders, CEO Elon Musk mentioned that Tesla delivered 4,900 electric vehicles as well as other important figures. One of them being that their gross margin doubled from 2012 to 17 percent. This was made possible due to better use of raw materials, smarter inventory management, and a reduction in the hours required to build each car by 40 percent over the quarter.

In the first quarter of the year, Tesla delivered more than 4,750 Model S vehicles in the US which when compared to the more traditional luxury car brands such as BMW 7-series and Mercedes S Class, is much higher. BMW sold 2,338 7-Series models in the first quarter while Mercedes sold 3,077 S-Class models. The demand for their most popular model, Model S, is projected to be around 20,000 units per year in North America and in Europe, the current order rate is 200 per week. In order to meet these demands, they have added some changes to their manufacturing process which should drive margins higher.

Some of these changes include:

(1) a reduction in temp workers since the beginning of the      year

(2) increased efficiencies and reduced scrappage both at supplier and in-house production sites

(3) a streamlining of operations leading to a further reduction in full time employee man-hours from 60-70hrs/week previously to 40-50 hrs/week currently

(4) a significant improvement in logistics costs.


Currently their body assembly and finished assembly are still running on a 2 shift basis so the main goal of the production team right now is to get production levels of 20,000 on a single shift across most processes.

With the Tesla Model S being a luxury car and priced at $62,400, I feel that its affordable and much better then other cars. Do you see Tesla continuing to be as successful as they are now and do you think their stock price will continue to go up as it is now? As I mentioned earlier, they out sold Mercedes and BMW luxury models, do you think that will continue to happen in the future as well? What would you rather have, Tesla or other traditional luxury car models?






“What about this? Experts 2 cents”

Companies are competing significantly more on supply chain management. There are many technologies that aid COOs and managers to gain a competitive edge to make their business more efficient, cost-conscious, and enhancing strategic operations. Modern businesses must transform the way suppliers, manufacturers, distributors, and customers interact globally. The developments of technology compensate for these challenges to help maximize operational efficiency to satisfy consumer expectations in immediate (‘want it now’) delivery. Before this course, I did not realize the big picture and that company’s survival depends significantly on supply chains. I thought competition was primarily based on their strategy (low-cost, response, differentiation) and how desirable their products are in the market.


In class, we learned how different supply chain decisions impact strategy—such as low-cost, response, and differentiation. It is imperative for companies to adjust their approach on how they mitigate risk and react to disruptions of the factors in Process, Controls, and Environment appropriately. With technology and analytic tools, managers have the capability to plan, monitor, and forecast more concisely than ever before.


There was a featured panel discussion of supply chain Industry Experts that shared their opinion on the ‘Trends and Insights’ in SupplyChainDigest website article. The VP of Marketing at Logility, Karin Bursa, mentioned that companies want to improve their forecast accuracy. She said analysts discussed how a “5% improvement in forecast accuracy can drive double digit improvements in service levels virtually for free.”


Building value throughout the supply chain is vital to sustain successful relationships between suppliers, manufacturers, and consumers. Companies are now adopting a more complex and detailed supply chain by creating “multiple virtual supply chains to develop tailored end-to-end processes to support distinctly different segments of the business.”


This reminds me of when we discussed how supply chain decisions impact strategy. If the two concepts compliment each other, it can avoid setbacks and expedite the process activities to maximize strategic operations. The four basic process strategies we covered were process focus, repetitive focus, product focus, and mass customization. The type of product, volume produced, and variety of products must be taken into consideration when deciding which process to implement and how it will affect the strategic operations of the company.


Process and supply chain activities affect the main strategies, low-cost, response, and differentiation. For example, operating a differentiation strategy, process characteristics are modular—process that lend themselves to mass customization. Or operating a low-cost strategy, the process characteristics will be to maintain high average utilization. It is evident from our class discussions that the interaction between supply chain management and strategy can determine how competitive a company is in the market.


Where Products Go To Die

In a country where 90% of our consumer products become waste in about 6 months, sustainability is becoming a more pressing issue for companies operations.  A great example of a company that implements sustainable operations is Method a company that makes house-hold cleaning supplies, most popularly carried by Target. Method attempts to implement sustainability in their products, their process and their company itself. Their most important achievement in operations sustainability is being Cradle to Cradle certified.

Cradle to Cradle is the concept that a company can re-design products and change their manufacturing process in order to maximize positive impacts environmentally, economically and socially, where a company is less dependent on raw materials and energy and the supply chain is naturally more eco-efficient.  Most manufacturing processes are linear and considered Cradle to Grave, which is when a company uses raw materials to create a product, the consumer purchases the products and then eventually puts it in the trash where it is taken to a landfill or incineration. Cradle to Cradle attempts to create a cycle where a company pools materials to be re-used and products are returned from consumers and recycled back into products.

Method displays on their website their Cradle to Cradle certification and explains how they are certified in product design, product manufacturing and social responsibility. Method’s product design is evaluated by their ingredients which are comprehensively assessed for safety and environmental health and their packaging design and materials are evaluated for safety, effects on the environment and recyclability.  Method’s manufacturing processes are evaluated regarding their use of water and energy and their material recovery. Method’s social responsibility is evaluated through governance, ethics and transparency.

These are many ways companies can be more sustainable and the Cradle to Cradle certification is a great way to remain consistently sustainable. It also helps prove to consumers that your company is actually sustainable, rather than using the “going green” trend as a marketing ploy, which many companies have done.

Although Cradle to Cradle may be ideal for sustainable operations, it can also be very expensive, from redesigning products to tracking manufacturing in more granular ways. It almost attempts to challenge and change business models and the way products are produced. The only way to fight these challenges and expenses is to incorporate these practices from the beginning into the first business model. Which is why we should always challenge flaws in current business models and ask ourselves how we can create evolutionary business models.