This week business network CNBC reported what can only be described as very disappointing news regarding the ongoing production ramp-up of the Tesla Model 3 automobile.

Supply Chain Matters has provided running commentaries focused on Tesla’s Model 3 supply chain and manufacturing ramp-up. The reasons are many. The Model 3 represents a huge strategic effort for Tesla in its ability and creditability to mass produce an electric vehicle designed for a far broader group of customers. Upwards of 400,000 customer deposits have been made to secure a firm delivery commitment to experience the Model 3 driving and performance experience. Tesla Model 3 sedan

We would venture to state that when monitoring this blog’s readership statistics, our Tesla focused commentaries garner lots and lots of eyeballs. Next to Apple, Tesla’s supply chain is likely the most visible of all supply chains, not for consistent execution and capability, but rather the maturity in efforts to achieve overall execution to support Tesla’s presence as an industry disruptor, able to compete head-to-head with other volume automotive manufacturers. There is no escaping that Tesla’s long-term future hinges on manufacturing and supply chain success with the Model 3. A brilliantly designed product is of little value if customers can not experience nor tell their friends about that experience.

The CNBC report cites existing and former employees who share observations relative to current production challenges. Described was the need for employees at the battery manufacturing facility having to assemble battery cells by hand along with the corresponding need to borrow added employees from battery supplier Panasonic to help in that effort.

In our Tesla focused commentary published in November, we highlighted a letter to stockholders indicating that within the four modules that make-up the Model 3 battery pack, manufacturing systems suppliers performed the first two zones of a four-zone process. These two zones had to be subsequently redesigned by Tesla engineers who then had to revisit the robotic programming and automated assembly processes related to these modules. In its report, CNBC indicates that Tesla was not close in its ability to mass produce the batteries. A Tesla spokesperson noted to the business network that by definition, some elements of the production process will be more manual at this stage.

From our Supply Chain Matters lens, manual processes that are driving end-of-quarter vehicle completions are not a good sign at this stage of the ramp-up, given the overall goal of full automation of all manufacturing processes.

What we found even more troubling in the CNBC report is an account from an unnamed current Gigafactory engineer indicating that in December, workers were “slapping (battery) bandoliers together as fast as they possibly could, generating a lot of scrap in the process.” The report further cites former employees as indicating that many of the company’s quality control workers, recruited as temp-to-hire workers, were relatively inexperienced  and did not exactly know what they are looking for:

Two current engineers told CNBC that they are concerned some of the batteries shipped do not have the minimum gap required between lithium-ion cells.

The above is a warning sign that the pressures for achieving necessary vehicle output goals may be straining quality monitoring mechanisms. That is obviously not a good sign for any manufacturing process.  Tesla emphatically dismissed the CNBC account as “false claims” and vigorously defended the current quality assurance practices.

As opined in our blog commentary focused on Q4 performance, Tesla’s teams performed admirably in the latest quarter given the challenges at-hand. Aggressive goal setting is admirable when risks are assessed, managed, and planned for. Not so when the sheer efforts of people must make the difference in overcoming process and advanced technology aggressiveness. Not so, as well, when former and existing employees are compelled, by whatever motivation, to leak sensitive information to journalists.

Once again, the Model 3 has great promise and potential for its market segment, but Tesla now, more than ever, needs to devote lots of manufacturing management expertise on required operational and supply chain execution remedies. Creditability is waning and so is the patience of customers shareholders and perhaps, employees as-well. Burnout is an important consideration for the latter.

Here is a radical idea. Provide open, publicly available weekly updates, both to internal and external audiences, on Model 3 production ramp-up, without spin, but with passion and intent to address all the various challenges. Time for the PR teams to step-aside and let the folks on-the-ground communicate the recovery plan.

Supply chain and manufacturing operational teams often revert to the “war room” process in times of crisis or significant disruption. The war room is where all planning and execution information, good and not so good, is channeled for management attention and decision-making response. The new concept of war room is the deployment of supply chain control tower capabilities. For Tesla, it is time to make that war room or control tower visible.

With all due respect Mr. Musk, and with humbleness, empower your extended supply chain management teams to communicate and execute the path out of manufacturing hell.


Bob Ferrari

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