G.H. Raisoni College of Engineering & Management, Pune

G.H.
RAISONI COLLEGE OF
ENGINEERING & MANAGEMENT,
PUNE
Department Of 3rd Year Mechanical Engineering
TAE – 1
Topic: Tesla Motors Company’s Adoption of Six Sigma
Name: Revanth Challa

Roll No: TMEA01
Division: A
Subject: Metrology and Quality Control
Introduction:
The inception of the automotive industry is rooted back to the formation of Ford
Motor company by Henry Ford, in which the manufacturing units consist of moving
assembly line and interchangeability of equipment’s, brought a concept of mass
production procedures. The basic design of the car at that time till date has not been
much changed as the cars still have two pair of wheels at front and back with similar
type of chassis. However, the competitive advantage of Ford motors had not much
lived long and soon took over by the General Motors despite being the founder of
commercialized cars. Alfred P. Sloan, who was the founder of General Motors
brought a new concept of decentralized structure of organization and advanced
management concepts which offered customers with ease to select their desired car
type and design from vast product portfolio (Hollweg & Pill, 2001). From the
introduction of commercialized cars till date, the technology used in the cars have
given edge to the companies who can provide better solutions and efficient systems
that can provide fuel efficiency and better performance. In modern world, it has
become difficult to survive for those companies who still practicing traditional
management tactics and not commencing technological advancements in their
designs and manufacturing. Acquiring advanced technology has now become a
necessity rather than luxury in modern world. The automotive giants are now
working in change management concept to introduce better solutions that are
different and efficient from their competitors. Hence implementing system capable
of fulfilling the requirements of the market with respect to advance technology
requires effective and efficient management. These changes in the system are like
changing the overall operations of the company regarding its marketing, services,
productions and sales (Dessler & Phillips, 2007). The change management concept
consists of modification in the actions of the company as well as technologies and
methods to obtain the desired goal of the company just as changing the business
environment of the company from inside and outside in order to attain high
profitability. These changes are associated with the adaptation change, control
change and effecting change. In this report, we will examine the business model of
Tesla Motors, the journey of the company in terms of introducing novel concept in
traditional automotive industry and the change management concept.
Background of Tesla Motors: Tesla Motors is the company that is pioneer in
designing, manufacturing and selling battery electric vehicles (BEV) along with
other equipment’s related to BEVs such as battery chargers and powertrain
technology. Tesla Motors came into being existence in San Carla, California, 2003,
by the founding members Marc Tar penning and Martin Eberhard. Soon the
company was purchased by Elon Musk by investing $7.6 million with only one aim
to manufacture totally battery based electric car that can generate 0% toxic emission
and perform efficiently with minimum energy consumption, that is why Tesla
Motors is totally different from traditional car manufacturing companies as its cars
have state-of-the-art highly integrated technology with eco-sustainability.
Overview of the Six Sigma Way:
As previously mentioned, Six Sigma is used to improve performance in a company.
The concept is also ideal for the development of suitable business strategies for
companies aiming to improve consumer loyalty. Companies make use of this
concept to improve, among others, the quality of their products. In this regard, Six
Sigma can be used to improve the production processes of a company. Consumers
are willing to pay for high-quality products. As such, the performance of the
company improves. The improvement of a company’s performance is an
opportunity to increase its competitive positioning. Truscott (2003) points out that
most consumers prefer a brand with high perceived value. To this end, Six Sigma
allows a company to improve these perceptions. The statistical aspect of the model
is realized in the improvement of the quality level to a maximum of 3.4 defects per
million.
Analysing Tesla Motors: Tesla Motors was founded in 2003. The objective of the
founders was to produce fuel-efficient vehicles for the discerning consumer. The
company produces vehicles based on the rising demand for alternative sources of
fuel. However, the firm’s sales records reveal that it has been making losses
consecutively from 2003 to 2013. The company is facing several problems in
addition to its poor performance in the fourth quarter (Ratner, 2015). Some of the
company’s problems include poor performance of the batteries produced and
logistical challenges. Consumers are dissatisfied with the low quality of these
products.
The drop in market share price implies that Tesla Motors needs to improve one of
its operational procedures to boost the confidence of the market. The major
challenges lie in the company’s production and supply chain departments. Ratner
(2015) points out that Tesla Motors has a small target market. Consequently, the
production of vehicles with poor quality parts has a negative impact on consumer
perceptions. As a manager at Tesla Motors, I will use the Six Sigma concept to
improve the situation.
The automotive industry is very competitive. Issues touching on production have to
be properly addressed to ensure that consumer perceptions towards a brand remain
high. As such, Tesla Motors should improve the quality of its production processes
to minimize the incidences of battery failure. Improved performance increases the
brand’s ‘perception of value’ among consumers.
Six Sigma Way and its Adoption in Tesla Motors: A critical analysis of Tesla
Motors reveals a scenario where consumer perceptions of the brand are extremely
low (Ratner, 2015). With regards to this, the Six Sigma concept will be used to
develop an ideal plan to address this problem that is affecting performance at Tesla
Motors. The plan is based on the theory of constraints. It will bring together the
theoretical framework and the Six Sigma concept.
The Plan: The following is an action plan illustrating the actual procedures to be
employed at Tesla Motors based on the Six Sigma principles:
Six Sigma is a process. The procedure outlined in the figure above is derived from
the theory of. constraints. Truscott (2003) points out that the theory helps an
organization to adopt Six Sigma by following the steps below. Implementation of
the theory and the plan should take into consideration consumer preferences. The
steps below will be followed by Tesla Motors in the implementation of the strategy:
• We are identifying constraints.
• They are exploiting constraints.
• Subordinating process.
• You are elevating constraint.
• You are repeating the cycle.
Identification of constraints: The production aspect of Tesla Motors contributes
towards brand perception among consumers. Six Sigma identifies weaknesses based
on the type of waste associated with the production process (Truscott, 2003). In this
regard, the following is a list of the production weaknesses at Tesla Motors:
• Research and development.
• Overproduction.
• Transportation.
• Correction
The production of faulty batteries is a result of a failure by the research and
development department. Based on the theory of constraints, the research and
development weakness emerge when companies tend to waste time on ambitious
projects. The overproduction cited is a result of Tesla Motors’ assembling of more
vehicles than consumer’s demand. Transportation and correction are all elements of
the supply chain. The slump in vehicle delivery is a result of the company’s
inadequate flow (Truscott, 2003). Customers complain when deliveries are delayed.
Improvement of constraints: Most consumers opt for vehicles produced with
minimum waste. Adoption of the Six Sigma approach will help me in minimizing
this waste. Consequently, the performance of the company will improve (Pande et
al., 2000). The theory of constraints supports the idea of innovation that puts
emphasis on quality of production as opposed to the development of new products.
In this regard, Tesla Motors’ research and development department should
emphasize the improvement of the fuel efficiency of the vehicles as opposed to the
development of new models (Truscott, 2003).
Delivery of vehicles to consumers is another major setback to Tesla Motors’
realization of profits. In this regard, I will recommend outsourcing the processes of
its logistics department to minimize the time wasted due to weather challenges.
According to Truscott (2003), Six Sigma alleviates transportation challenges by
identifying process flows and providing an efficient site layout with corresponding
lead-times.
Application of control measures: The improvement phase requires control
measures to guarantee the success of the development plan. The constraint theory
points out that Poka-Yoke is one of the tools of Six Sigma that can be used in the
identification of the activities that bring about wastage. Consequently, I will make
use of this tool in the proposed plan. The approach will help the company to save on
financial resources and improve consumer perceptions of its products. A similar
approach was applied to General Electric. It resulted in a $2 billion rise in profits.
Such a move will enable Tesla Motors to increase its market performance by
reducing wastage in production (Ratner, 2015).
Conclusion:
Six Sigma is one of the approaches used by modern organizations to enhance
performance and consumer perceptions in the global market. The strategy is used to
identify and improve the attitudes that clients have towards a given brand. Some of
the issues that negatively impact consumer perceptions include wastage, bottlenecks
in the distribution network, and faulty products. Currently, Tesla Motors is facing a
number of problems that negatively impact its financial performance. Such
problems include the production of faulty vehicles and erosion of market share and
stock price. In this paper, I developed a plan to highlight the use of Six Sigma
concepts to solve these problems. The plan was based on the assumptions made in
the constraint’s theory. If Tesla Motors follows the recommended strategy, its
performance in the market is likely to increase.

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Name: Revanth Challa

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