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Tesla Battles Back to Redefine Its Industry Supply Chain

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Tesla S, close-up on the rear (Photo Credit: Wikipedia)

If you don't know about electric car maker Tesla and its visionary owner Elon Musk, it's not for his lack of trying. Musk is currently doing battle with lawmakers around the country to get Tesla's game-changing industry supply chain to compete with existing vehicle dealerships.

Nowhere has this proved more difficult than right here in New Jersey, which recently banned Tesla direct sales from showrooms in the state, only to offer a temporary reprieve as state lawmakers allow time to comply with existing dealership laws.

Similar restrictions on the innovative automaker are being fought around the country. For now the product is available only to high-end buyers, with prices at $70,000 and up given the limited production and Tesla's fledgling status as a startup. The company is little more than ten years old but has done enough in its short life to have the entire auto industry galvanizing to compete on the eco-friendly playing field that looms large in its future.

Slow and steady progress is being made by traditional car makers, offering hybrid vehicles and squeezing greater MPG out of even their most gas-guzzling models. Tesla's take on the industry threatens to upend their current business model much more quickly, though, and redefining the supply chain is a big part of that.


Tesla Redefines the Automotive Supply Chain

Starting at the end, the purchase process for a Tesla is considerably different to that of a standard vehicle.

The manufacturer and franchised dealership model has been in effect for decades, with laws growing around it to entrench the system that many have come to dislike. While the stereotype of a sleazy car dealer negotiating for every dollar is overblown, it does have roots in truth that can make the whole vehicle buying process

Tesla envisages a model where car showrooms exist primarily to show off the product and its abilities, driving purchases direct from the company, especially via online channels. This touches upon the "killing ecommerce" idea that we covered last week, aligning the entire transaction so that each part of the order process is supported by what's best and easiest for the customer. By removing the middle man, i.e. the dealer, the company theoretically makes car sales more transparent and efficient. As its electric vehicles require significantly less maintenance (servicing being where the dealers make most of their money on traditional vehicles), the entire order fulfillment process can become a significantly simpler affair.

Further back down the supply chain, Tesla hopes to improve its production capacity by manufacturing its lithium-ion batteries here in the U.S. Several states are competing for Tesla's plant contract - ironically including some, like Texas, which continue to put up opposition to the sales end of the company's strategy.

Again, the power of the existing business model is being balanced against the promise of a future one.

A Long Drive Ahead

Tesla Motors Elon Musk (Photo credit: tedeytan)

The road ahead is likely to be a winding one for Tesla, with a number of obstacles before it can create the production capacity and sales model that Elon Musk envisages.

The wider lesson for logistics professionals is that industries evolve and supply chains must evolve alongside - or, preferably, ahead of - them.

Is there a better way to satisfy the demand of your customers? Are there elements of your industry supply chain that simply no longer make sense?

If so, try to think in terms of new solutions to the problem, rather than propping up inefficient older systems!