In case our automotive and high tech industry focused readers were not aware, Tesla Motors made a very significant announcement this week regarding efforts to ramp-up manufacturing and supply chain volume expansion needs.

The innovative electric car manufacturer announced its intent to acquire Grohmann Engineering of Germany, a noted manufacturing automation design firm. A Tesla blog posting regarding this deal indicates that when this deal closes, the design firm will be renamed Tesla Grohmann Automation and will serve as the foundation of Tesla Advanced Automation Germany.  The automaker further indicated that it expects to add over 1000 advanced engineering and skilled technician jobs in Germany over the next two years.

In disclosing this deal, company founder and CEO Elon Musk declared to analysts; “This will really be our first acquisition of significance in our whole history.” Terms of this proposed acquisition have not been disclosed and the automaker indicates that it hopes to gain full regulatory approval by early 2017.

Grohmann is recognized for designing automated manufacturing plants in the semiconductor, electronics and automotive industries as well as the biotechnology and medical technology sectors, among others.

As we have highlighted for our Supply Chain Matters readers, Tesla’s ongoing challenge is the need for increasing annual production output to 500,000 cars per year by 2018. A posting appearing on TechCrunch indicates that both firms have been working in a partnership for the past few months and found that team cultures complemented each other, thus the decision to move forward in a formal relationship.

At its most recent annual meeting of shareholders earlier this year, CEO Musk declared that Tesla will “completely re-think the factory process.” He repeatedly raised the notions of “physics-first principles” and made the point that his team now realizes that where the greatest potential lies is in designing and building the factory. Advanced reservations with associated deposits for over 300,000 of the announced mass-market appeal Model 3 helped in the realization of such principles. He challenged Tesla engineering teams to the principles of “you build the machines that builds the machine.” In other words, the context is in thinking that the factory is the product, and that you design a factory with similar principles as in designing an advanced computer with many interlinking operating needs.

Adding a significant amount of additional manufacturing process design engineering resources in Germany has, by our lens, added significance that may well reveal itself over time.

By our lens, this week’s announced intent to acquire a noted external manufacturing process design firm is an acknowledgement from Tesla that it must seek external expertise, experience and outside process innovation thinking in achieving its production volume ramp-up goals by 2018. While Musk recently noted that he would move his office to directly on the company’s factory floor in Fremont California to better understand the exact needs for the production machine, the current aggressive goals for ramp-up had to compel this latest action to acquire external, proven experience. With a mere two-year planning and implementation window remaining, and with industry competitors now more keenly focused on Tesla, it was time to make a bold move.

Readers will recall when online retailer Amazon acquired warehouse automation and robotics firm Kiva Systems in 2012. The industry was initially puzzled with the move along with the hefty acquisition price, only to discover a few years later that Kiva technology now serves as a foundation for Amazon’s vast and quickly expanding global network of customer fulfillment and logistics centers.

Obviously, this is a significant announcement, one that merits industry attentiveness in the coming months.

Bob Ferrari

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