Supplier Relationship Management: Apple & Samsung's OLED Partnership

Affiliation: University of Mumbai
Date: 19th October 2024

Executive Summary
This case study explores Tesla's global sourcing of raw materials such as lithium and cobalt for its electric vehicles (EVs) and the complexities of managing a global logistics network. It examines how Tesla sources these essential materials from various countries, the logistical challenges of assembling vehicles in multiple regions, and the lessons learned from Tesla's innovative approaches to managing global supply chains efficiently.

Introduction
Problem Statement
Tesla's ambitious goal of transitioning the world to sustainable energy is highly dependent on securing reliable sources of raw materials, such as lithium and cobalt, for its batteries. These materials are sourced from diverse regions across the globe, creating a highly complex logistics network that Tesla must efficiently manage to maintain production levels and meet consumer demand.

Objectives

· To understand Tesla's global sourcing strategies for key materials.

· To analyze the challenges faced by Tesla's logistics network.

· To evaluate the effectiveness of Tesla’s global supply chain management.

Methodology
This case study is based on secondary research involving data collection from financial reports, industry studies, and news articles. Key statistics on Tesla’s production capabilities, sourcing locations, and logistics frameworks were gathered. In addition, case comparisons with other leading automakers' supply chain strategies were analyzed to draw conclusions on Tesla's approach.

Case Analysis
Key Facts

· Raw Material Sourcing: Tesla sources lithium from Australia, Argentina, and Bolivia, while cobalt is predominantly sourced from the Democratic Republic of Congo (DRC).

· Global Logistics: Tesla operates gigafactories in Nevada, Texas, Shanghai, and Berlin, each of which requires carefully timed deliveries of materials to avoid production halts.

Problem
Tesla's reliance on global suppliers for raw materials, particularly in politically unstable regions, poses a significant risk of supply chain disruptions. Additionally, the company must navigate the logistical challenge of transporting these materials across continents while managing costs and environmental impact.

Alternative Solutions Considered

1. Vertical Integration: Tesla could invest in mining operations to reduce reliance on external suppliers.

2. Sourcing Diversification: Tesla could increase the number of countries from which it sources materials to mitigate geopolitical risks.

3. Use of Alternative Materials: Tesla could explore the use of alternative materials to reduce its dependency on scarce resources like cobalt.

Chosen Solution
Tesla has opted for sourcing diversification as its primary strategy. By securing supply agreements with multiple countries, Tesla has reduced its risk of material shortages while maintaining competitive prices. Additionally, the company is researching battery technology that requires less cobalt to reduce future dependency.

Findings and Discussion
Tesla's diversified sourcing strategy has proven effective in managing the risks associated with supply chain disruptions. However, the ongoing challenges in the DRC, where cobalt is mined, remain a potential weak link. By investing in research into cobalt-free batteries, Tesla is positioning itself to overcome this challenge in the long term.

In terms of logistics, Tesla has demonstrated impressive agility by opening new gigafactories closer to key markets, thereby reducing transportation costs and improving production lead times. This global distribution of production facilities represents a significant step forward in optimizing Tesla’s supply chain.

Relevant theories such as global supply chain management and logistics network design support Tesla’s approach to managing both sourcing and distribution on a global scale.

Conclusion
Tesla’s global sourcing and logistics network is a vital component of its competitive advantage in the EV market. The company’s ability to manage risks through diversification and investment in alternative technologies highlights the importance of adaptability in a global supply chain. Future research should explore how vertical integration or breakthroughs in battery technology could further enhance Tesla’s supply chain resilience.

References

· Tesla Annual Report,

· IndustryWeek, “The Complexity of Tesla’s Supply Chain,

· Financial Times, “Tesla’s Battery Supply Chain and the Race for Lithium,