Test 2

Student Name: Astrid Torres Sejin Date: 7/12/2023

Student ID: C0908781 Program/Term/Group: Supply Chain

Management – Term 1

1. For Tesla, procurement is vitally important to the company's success, which is why
it works closely with its suppliers to ensure they provide quality parts at competitive prices. Tesla
also sources high-quality components from around the world, ensuring that each part meets its
strict quality standards.

The philosophy of Deming's theories that organizations that prioritize quality over cost
reduction would ultimately achieve success forms the basis of the success of Tesla's operations in
Giga Shanghai. Following Deming's principles, Tesla has managed to reduce production costs
without compromising the quality of its vehicles, contributing to its global success.

Giga Shanghai plays a crucial role in Tesla's long-term strategy, producing high-quality
electric cars while maintaining low production costs. Leveraging China's advanced industrial base,
Tesla benefits from intelligent robots, advanced machines and well-established supply chains.
Despite Tesla's relatively short tenure in the automotive industry, the company has addressed
early quality issues by continually improving production processes and training operators. Tom
Zhu, chief operating officer of Shanghai Gigafactory, played a pivotal role in streamlining Giga
Shanghai's operations, leading to a notable increase in production of the Model 3 and Model Y.
The Gigafactory, along with management principles quality, has allowed Tesla to reduce costs,
improve vehicle quality and navigate the complexities of the manufacturing landscape, showing its
commitment to innovation and efficiency.

2. At the core of Tesla's manufacturing process are quality control strategies led by the
company's management, which ensure that all vehicles are meticulously designed to meet
current and future market demands. This approach is supported by routine quality checks
over the years, with a focus on continuous improvement. After perfecting its carbon fiber
body, Tesla has directed its efforts toward optimizing its car batteries, seeking to increase
their efficiency.
 Customer satisfaction is a priority for Tesla, and the company has built close ties
with its customers through 24-hour support and feedback integration. Emphasizing that
service delivery is as crucial as the manufacturing process itself, Tesla strives to ensure
quality in all its activities, highlighting the importance of maintaining high standards in all
customer interactions.
3. Tesla's supply chain strategy is intrinsically linked to its commitment to
fostering a healthy and sustainable environment. The company places a strong emphasis
on minimizing environmental impact in all its operations, covering both production
processes and the supply chain. Tesla has implemented a comprehensive Environment,
Social and Governance (ESG) program, focusing on responsible sourcing, waste reduction
and the promotion of renewable energy sources. The company actively invests in
renewable energy, such as solar and wind, while incorporating recycled and biodegradable
materials in its manufacturing processes. By collaborating with suppliers, Tesla works to
ensure a collective effort in reducing emissions, waste and water consumption,
emphasizing the responsible use of natural resources.

Additionally, Tesla has taken specific steps to quantify and reduce its ecological
footprint, as reflected in water withdrawal intensity metrics in global vehicle
manufacturing. The company compares favorably to industry averages, demonstrating a
commitment to sustainable practices. Tesla extends its environmental initiatives to
packaging, actively using recycled and recyclable materials and eliminating single-use
plastics. The company encourages its suppliers to adopt similar sustainable packaging
practices. Beyond managing its own impact, Tesla advocates for a sustainable supply chain
through initiatives such as the Tesla Power Plan, aimed at reducing dependence on fossil
fuels and promoting renewable energy. The company collaborates with suppliers to
ensure responsible sourcing, support fair labor practices, and the use of ethical materials
throughout the supply chain.
The intensity of water withdrawal in the global automobile manufacturing
industry is displayed in the following table (m3/car).
 Vehicle
Cell Manufacturing
Manufacturing

Gigafactory Berlin 1.80 0.48

BMW 1.90 0.00

Tesla (2022) 2.57 0.00

Gigafactory Texas 2.78 0.84

Mercedes-Benz 2.91 0.00

Industry Avg 3.68 0.00

VW Group 3.75 0.00

Ford 3.80 0.00

Toyota 4.12 0.00

GM 4.54 0.00

4. In order to evaluate suppliers' performance in important environmental

and social impact parameters that are in line with the company's vision, Tesla introduced
its Supplier Audit program in 2018. Initially, the initiative focused on high-risk suppliers
and used the Validated Assessment initiative (VAP) of the Responsible Business Alliance to
conduct audits in a number of categories, including labor, health and safety,
environmental standards, ethics, and management systems. Closure audits are necessary
for priority issues, and the audits, carried out by authorized independent third parties,
were designed to find non-conformances. By the end of 2021, more than 4,000 employee
interviews had taken place, and 152 supplier locations—or 10% of the total amount spent
with Tesla's direct supply base—had completed audits.
In 2021, Tesla extended the scope of its audit program worldwide, updating
supplier selection criteria and adding a more comprehensive risk assessment
methodology. The audit scope emphasizes financial vulnerability and supplier location and
encompasses more than 50% of the global spend with the direct supply base. The enlarged
program requires corrective action plans for any detected faults, regardless of severity, in
an effort to favorably impact supplier behavior. Closure audits are required for the highest
priority non-conformances, guaranteeing that corrective actions are fully implemented.
Zero Tolerance Violations is a distinct category that deals with serious problems like child
or forced labor. If the issues are not resolved in a reasonable amount of time, the supplier
relationship may be terminated and immediate corrective action plans may be
implemented.
The following table covers the results of the first and closing audits carried out on
all suppliers, regardless of their level of difficulty. 100% of priority non-conformities have
been addressed and corrected by our suppliers as of July 2021; the remaining open
priority findings will be covered in future closure audits. In the first three years of the audit
program, more than 70% of this group could be covered due to the initial focus on high-
risk suppliers, which also helped choose which suppliers to prioritize in an extended
program.
 (TESLA, s.f.)

5. Global sourcing is a critical component of Tesla's strategy, addressing

supplier qualification and selection challenges while improving the company's ability to
manage supply risks, navigate currency fluctuations, and optimize delivery times. Tesla's
dependence on global suppliers allows access to a diverse group of potential partners
around the world, crucial to securing specialized components vital to electric vehicle
production. This approach allows Tesla to identify suppliers with the necessary experience,
encouraging innovation and maintaining high-quality standards. thereby mitigating supply
risks associated with geopolitical uncertainties, natural disasters, and political instability.

Additionally, Tesla's global approach requires effective management of various

business practices and regulations in different countries. Rigorous supplier qualification
processes are implemented to ensure compliance with Tesla's ethical and sustainability
standards, in line with the company's commitment to responsible sourcing. The strategy
also facilitates delivery time optimization, allowing Tesla to strategically select suppliers
based on proximity to production facilities and their ability to meet demand promptly.
Despite challenges such as supply chain complexity, the overall benefits of a global
sourcing strategy contribute significantly to Tesla's innovation and competitiveness in the
dynamic automotive industry.

6. With regard to Total Cost of Ownership (TCO), Tesla takes a thorough

methodology that accounts for the acquisition, usage, purchase price, and end-of-life
expenses. A large portion of TCO is the purchase price, which includes the basic cost and
any optional features. Taxes and registration fees are examples of acquisition costs that
 are taken into account. Regarding usage costs, Tesla includes estimates for maintenance
and repairs in addition to charging prices for electricity, home installation, and possible
use of the Supercharger network. The estimated resale value and environmental factors,
such as recycling or disposal costs, are factored into the end-of-life costs. This
comprehensive TCO analysis is in line with Tesla's dedication to sustainability and
openness, giving consumers a clear picture of the financial and environmental effects of
owning a car long after the original purchase price is paid.

(fourweekmba, s.f.)

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