what are the current problems faced by tesla related to production and supply chian

Since our last update on Tesla Motors production and supply chain management ramp-upwardly challenges, new tell-all reports and a report of a building criminal probe related to Model iii product ramp-up statements caste a much more concentrated eye on the electric auto maker's operations.

Over the past several months, Supply Concatenation Matters has featured a number of blog commentaries focusing on Tesla'south production and supply chain ramp-up challenges. Our principle viewpoint was that the electrical automaker was defective in seasoned operational experience, process discipline and adequate controls to be able to maintain its volume production milestones in a consequent and controlled manner.

Our last commentary earlier this month focused on the electrical auto maker's Q3 operational functioning which was somewhat good, and not so good.  From our lens, it called into question whether new management can once and for all overcome such challenges and let Tesla to consistently encounter its production targets without a lot of band-aids.

In a mere few weeks since that commentary, quite a lot has occurred.

On the positive side, the visitor reported what was termed as better than expected quarterly acquirement and turn a profit performance for the contempo Q3 quarter. Revenues nearly doubled to $6.82 billion while earnings were recorded every bit $311.5 1000000, reversing a loss upwards of $619 1000000 in the twelvemonth-earlier menstruation. The numbers caused investors great joy prompting an immediate jump in the company's stock. CEO Elon Musk indicated to equity analysts that Q3 financial performance was an important step towards turning the corner to sustainable profitability.

On the flip side, new developments include a new study of a deepening criminal probe as to whether the company has misstated its prior Model 3 production performance, forth with a number of tell-all and vehicle quality reports focusing on what really may have occurred in production and supply concatenation ramp-upwards.

Deepening Criminal Probe Reported

The Wall Street Journal, citing knowledgeable  sources,  reported this weekend that the Federal Bureau of Investigation (FBI) is examining as to whether Tesla misstated information about production performance of the Model 3 sedan, which is key to Tesla's goal of greenbacks-positive performance.

According to the report, FBI agents accept been in contact with former Tesla employees asking for testimony in a criminal example. Tesla reportedly disclosed on September 18 that the company had received a asking from the U.South. Justice Section regarding the investigation and for public documents related specifically to the Model 3 early production ramp-upward and is cooperating in this probe. A Tesla public argument indicated the company has been "transparent near how difficult" Model three production ramp-upwardly would be and that "it took us vi months longer than we expected to see our five,000 unit per calendar week guidance."

Citing sources, the WSJ indicates that the FBI is comparing the company's statements about production capability during 2017 and whether the company knowingly knew it would be impossible to meet such goals.

The written report indicates that this action is dissever from the Securities and Commutation Committee's (SEC) civil settlement with the company over Musk'southward early Baronial Twitter posting indicating that Tesla had secured funding allowing the visitor to be taken private. The SEC settlement called for the company to pay $40 meg in fines and for Musk to give-upwardly his Chairman'due south responsibilities to some other senior executive.

In the history of this web log, this is probable the first time that we can call up of a criminal investigation involving the potential misstating of production capability as criminally material to a company's statements. That should capture the attending of senior supply chain executives and their respective operational teams.

New Reports

A recent published Bloomberg study highlights a noted brusk-seller of Tesla stock indicating that the machine-maker faces risks to its supply chain because some suppliers are non getting paid, and farther indicating "a massive supply chain disruption." The particular curt seller would non exist specific as to supplier names or supply concatenation leadership turnover.  The study indicates that most likely, the supplier concern relates to an Baronial written report by the WSJ reflecting on an Original Equipment Suppliers Association survey of executives believing that Tesla posed a fiscal risk to sure suppliers. Such reports reflect on the uniqueness of the current Tesla investor customs, curt sellers and longer-term investors each seeking to influence stock toll direction, each with a dissimilar frame of reference.

Other recent reports point to some frustrated customers experiencing delays in expected deliveries of new vehicles or initial quality issues with their vehicles. Consumer Reports magazine this week lowered its reliability rankings on three specific Tesla vehicles, including the Model three, which had its ranking reduced to an "average' ranking. The mag farther withdrew its prior "recommended" ranking of the Model S for the 2d time in 4 years, over owner reported problems.

From our lens, the nearly revealing study came from Business Network CNBC in its report: Elon Musk'south extreme micromanagement has wasted time and money at Tesla .

The study cites upwards of 35 current and former employees describing a culture that depicts Musk's management style as a relentless micro-director who insisted on total automation of admittedly all product activities. One time more, the study describes what we would term as a "non invented here" culture that rejected whatsoever industry-wide known methods and practices in volume manufacturing processes and initially insisting on large and expensive production automation methods without allowing adequate time for airplane pilot testing.

One section titled "The Elon way, not the Toyota way," reflects current and former employees indicating that Tesla rejects process approaches taken by Toyota, GM or Volkswagen forth with the shunning of outside expertise in industry all-time practices. Mutual industry terms related to procedure methods were literally banned in favor of Tesla process terminology colloquial. In 1 cited episode, workers are noted equally secretly resorting to implementing industry Kanban only-in-fourth dimension inventory replenishment practices away from the centre of Musk and production senior management in order to be able to see higher volume production needs.

In the expanse of business concern process systems support, the report indicates that Musk decreed that Tesla build its own customized software shunning bachelor off-the-shelf systems. That could have been tolerable with the existence of responsive software support systems, but the study points to employee comments of systems not providing timely data relative to schedules, costs and operation. I source indicated to CNBC that he believed he was within budget merely to discover $i million in added invoiced charges to his team's projects from unknown categories. Other employees noted challenges in in tracking information related to people, expenses and component parts.

Musk himself is reported as specifically visiting a Gigafactory battery product line and later on discussing existing process glitches with workers, deciding on the spot to remove "parts, production steps and specs" that he deemed "unnecessary". That well may be a CEO prerogative, and indeed production line workers indicated he helped them overcome that bottleneck. Yet, the issue was felt with missing parts on final inspection of assembled Model 3 vehicles, including in a specific example, of some fasteners that connect the battery to the body of the vehicle, that were reportedly not performance tested until months later.

The report does signal that Musk and Tesla have gradually begun to learn from prior mistakes. It validates that during the summertime, an additional associates line built under a tent allows workers to build Model 3's with niggling automation and quotes a global ergonomics programme managing director equally indicating that the structure is working so well that Tesla volition go along using information technology for the foreseeable time to come.

Motion Forward Situation

Observers are quoted every bit indicating that Musk's management prowess is in his ability to accept failure and move on rapidly, which is viewed every bit a positive.

Equally we and other have continually noted, there is no questioning of Musk's brilliance and intellect. But, his inventiveness skills are not beingness channeled where they should be, in conceiving new products and businesses.

Continuing questions remain as to why mean solar day-to-mean solar day operational management has not been turned over to a seasoned manufacture principal operations officer. The CNBC tell-all provides some answers, namely that Tesla'southward processes are painted in the notions of favoring Tesla's own invented concepts and ignoring notions of industry best practices and years of learning in maintaining high volume production at targeted output, quality and cost benchmarks. Tesla'south processes therefore remain as discovery focused equally contrasted with tested manufacture practices. Thus, whatsoever COO recruited from the auto sector is probable to face up internal cultural challenges in driving needed alter unless given leeway to do what is required. In contrast, existing internal stakeholders concur to behavior of challenging industry norms and charting new pathways in process design. Time is running short on resolving a direction that tin attain what needs to be achieved in book output and in meeting quality and margin expectations.

One time again, from our Supply Chain Matters viewpoint, Tesla's production ramp-upwards, customer delivery and service challenges will continue until scalable, consistent processes are evident. Nosotros are not likely to endorse a notion of mission achieved until such tests are demonstrated.

The reality is that new competitors who accept demonstrated scalable and consistent product processes have definitive plans to bring new electric models to the market in the not too distant future. That will alter the dynamic likewise as the reality for more seasoned operations management supported by far more responsive information technology and decision-making support.

Bob Ferrari

© Copyright 2018. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.

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