How Tesla Made Money? A Best-In-Class Benchmark?

Have you heard about the new AI humanoid robot launched by Elon Musk?

Good because we are not going to talk about that, although it is a breakthrough invention.

But I’m going to talk more about Tesla.

Especially on Tesla’s vertical integration approach.

At first, Tesla might seem like just another car company (although EV is quite different).

But there's a lot more going on—especially when it comes to their supply chain and manufacturing.

What I have seen in highly engineered manufacturing environments, i.e., Medtech, Defense & Aerospace, Industrial Machinery, is organizations that struggle to deliver their programs on time.

There are many reasons for that.

The tip of the iceberg is usually quality issues, capacity bottlenecks, or underperforming suppliers.

But when you dig deeper, it sometimes starts from Sales who overcommitted to the customers on a delivery date,

With absolutely no visibility on the manufacturing capacity.

In some cases, the product design is either new or very complex or both.

The handoff with industrialization has not been done properly.

The BOM is incomplete.

Suppliers' lead times are incorrect.

Material planners are lost (and use Excel spreadsheets as their north pole…).

Critical suppliers are not ready.

The forecast they received (if they ever received any) is incorrect.

Shall I continue? You know the story.

The bottom line here is that there are way too many handoffs,

And those handoffs are poorly executed.

When everything is fine, it’s hard.

So, imagine when there’s a customer’s design change…

It becomes a nightmare.

It's important for engineering, industrialization, suppliers, customers, and production to work well together.

Many companies struggle with this, leading to program delays and quality problems.

Tesla, however, has a smart way to handle it through vertical integration.

Tesla controls much of their supply chain and production.

But hold on a sec

By vertical integration, I mean full integration

Internal and External (Suppliers, Customers)

This means they don't face the usual problems when different parts of the process don't connect well.

Most large industrial organizations are primarily systems integrators or assemblers, so they usually have limited control over their supply base performance.

They can make changes smoothly and quickly, avoiding the issues that other companies face when they can't manage changes well.?

Tesla, on the other hand, can make changes easily because they oversee everything from design to delivery.

Even their ERP system has been developed internally. No SAP, no ORACLE.

Tesla's approach also improves communication and consistency throughout their company.

This keeps production running smoothly and ensures problems are addressed quickly.

By managing their supply chain, Tesla can focus on delivering to customers without the usual disruptions from relying on many outside suppliers.

In short, Tesla's vertical integration helps them maintain high quality and efficiency, making them a leader in the car industry.

This strategy not only solves the handoffs problem but also boosts their innovation and reliability.

Of course, it's not always easy.

There are plenty of challenges, and things can get tough.

So which team are you? Team MAKE or Team BUY?

In any case, it still requires a high level of integration to make it work.

Stay tuned!

The #1 Secret of the Week: My selection of 8 MUST Read Books for COOs, VPs of Operations and VPs Supply Chain

Ok I may be biased but here is my selection of books and here is why:

1- LEADERSHIP IN TURBULENT TIMES BY DORIS KEARNS GOODWIN The book offers insights into the ways effective leaders can adapt, persevere, and exercise resilience in the face of adversity

2- DARE TO LEAD BY BRENé BROWN The book shares everything about taking off the armor and showing up as leaders in a skills-based and actionable playbook

3- DIFFICULT DECISIONS BY ERIC PLINER The book delivers a set of practical tools for readers to make sense of complex, subjective decisions quickly and with integrity

4- NO RULES RULES BY REED HASTINGS The book reveals the unorthodox culture behind one of the world’s most innovative, imaginative, and successful companies

5- THE CULTURE MAP BY ERIN MEYER The book provides a field-tested model for decoding how cultural differences impact international business, with practical advice

6- WORKING BACKWARDS BY COLIN BRYAR AND BILL CARR The book reveals and codifies the principles and practices that drive the success of one of the most extraordinary companies the world has ever known

7- FROM SOURCE TO SOLD BY RADU PALAMARIU AND KNUT ALICKE The book features some of the most successful global operations and supply chain business leaders

8- [NEW] THE TURNAROUND BLUEPRINT BY FREDERIC GOMER The book features practical and actionable advice to recover from any supply chain & manufacturing crisis and build resilience.

Yes, that’s my new book, tell me what you think, here is the link on Amazon: https://www.amazon.com/dp/981941136X?ref_=pe_93986420_774957520

The survey of the week: Is Work-Life Balance a Myth?

Especially when working in Operations...

I am probably the last person to ask this question. ; )

I am usually in three different time zones per month,

support several clients at the same time,

Am on a journey to grow a business,

Have a family to raise,

And am trying to manage my diet while traveling

(Not always easy with social dinners, breakfast meetings, and local delicacies).

And I am "puzzled" by the Millennials...

Their approach to work-life balance and sense of purpose.

I can't deny it's important,

But is it realistic?

The responses: 50 /50

What do you think?

Our next events:

My S&OP roadshow is still on: Singapore, Dubai, Riyadh,? Paris, Zurich, Houston etc…check out the new dates and locations. Book your complimentary seats, click here!

Each session is limited to 12 participants.

Watch the announcement

The infographic of the week: How Tesla Made Money

Talking about Telsa, curious about the cost breakdown of the Tesla Model 3?

Note: the % are rounded, so the total may hit 101% ; )

Here it is:

Interview of the week: The Brutal Truth About Leadership

That's probably one of the best interviews I had since a while... With Emmanuel Rondele, VP Urology and Critical Care, BD.

We talked about: ?

?? Leadership truths

?? Leading in a ultra masculine world

?? Managing a family and an intense career

?? Developing "A" players in a global environment

?? Being a work in progress And many more topics !

Watch the interview here: full interview.

Conclusion:

So, what's the big takeaway here? Well, it’s up to you to make the most of this newsletter, we covered various topics and it's a pretty long newsletter !?

Share this newsletter within your network if you find it insightful.