C. PROJECT SECTION II – Developing Solution

C. PROJECT SECTION II – Developing Solution

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1. Tesla should wait to release their cars until they have adequate inventory of the vehicle they are selling. This will allow them to better develop the crux of their business so that they do not run into product cannibalism. Each Tesla is unique in its own way, however, by releasing different models in such a close time frame, they run the risk of one product not receiving as much publicity and attention that they intended and the attention is shifted and not properly distributed. 

2. We propose that Tesla should invest in a better production process, more employees and expand to more places and bigger factories to build their cars so they can increase their production rate. This change would definitely make them more successful because they can produce more cars and more people will buy them because there won’t be as much of a discrepancy between their account receivable and the fulfilled transaction when they can record the revenue. 

3. Do business with another country to reduce production and finished part costs such as a country in Africa or the Middle East. This solution is rather problematic in and of itself because the easiest means of outsourcing production is China! However, the U.S is immensely strained by this political and economic tariff in that there is a barrier between business from these two entities. So this makes this solution unattainable in that this tariff will not be lifted in the near future due to the strong stance President Trump took to benefit the U.S in foreign trade relations. 

The second solution is the best one because this solution will amend the long and short term problems in order to create a permanent solution. The solution is for Tesla to invest in their production process, more employees and expand to more places and bigger factories to build their cars. 

All of this needs to happen so that they can successfully meet consumer needs and wants in a timely manner. In not achieving equilibrium in supply and demand they fall short on the curve hence they are not productively and allocative efficient. By building more factories and improving their production process they will be able to output more cars in a more efficient and cost effective manner. 

This change would definitely make them more successful because they will be able to produce more cars and more people will buy them because they won’t have to wait as long as people do now for new Tesla. Yes , it will be very expensive for them to invest in bigger production spaces and more employees as well as factories, but in the long run it will pay off making them more successful.

Tesla’s current solution for this problem is to optimize the production process and better coordinate supply and demand. This is clearly not working for the company because there have been no good results that have been coming from their current work. The solution we selected is much better because it means the company as a whole will change. As demand keeps getting greater for Tesla, they need to make changes internally within their company, which involves creating more factories and expanding their production process in order to fulfill customer demands. 

This visual depicts the production rate for 3 independent cars on 12 respective quarters. It indicates that in their earliest stage in 2015, they produced a fraction of the cars they do in 2018 and 2019. This significant jump from Q1 2018 to was a result of significant steps to modify their production process and the addition of new cars to their repertoire. 

By producing more cars to meet the increasing consumer demand, they are taking steps in the right direction to remedy their problem. However, we suggested they revamp and expand their production space and process in order to become efficient. Currently, they are unable to meet demand with even the CyberTruck which stirred up consumer concern and bad media attention, however, if they want to fix their process, we believe that our suggestion would be most effective. 

The company as a whole needs to decide in what location or country they would best endeavor to expand their factories and production process. We highlighted above that they can rule out China due to the trade impediments that prevent them from negotiations. If they believe that they do not outsource their production, they are gravely mistaken because the cost of doing business in the United States is too high to maintain maximum profitability. We believe that they need to invest in a better production process as well as to hire more employees in order for their rate of production to increase, their days in inventory ratio to decrease and their inventory turnover ratio to increase respectively. 

Transaction processing systems- Tesla’s major problem is that they are unable to record revenue until the product is delivered. Hence they have a significant amount of accounts receivable that they cannot recognize as revenue until they have fulfilled to deliver the car to the customer. They do not need to restructure their TPS rather they need to reshape their business model so that they can recognize revenue earlier and they do not seem like a poor company statistically. They need to lower their days in inventory and increase their inventory turnover rate or their products will slowly cannibalize each other and ultimately cyphen revenue they should be recording. 
Decision support systems- Tesla as a whole needs to decide that they would benefit from expanding their business and production to bigger facilities that are equipped to produce more cars than they have been able to in the past. The decision to expand their production process needs to be made holistically so that each respective department in the company can weigh in on the pros and cons of this vital step in the progression of their company.