Why the focus on volume density in manufacturing?

ldemeester_98068094

Mr. Musk speaks often of increasing the volume density in Tesla manufacturing facilities to improve production. The Gigafactory presentation and video shows CAD drawings that indeed show very dense placement of equipment.

I understand why this improves output per square foot of building and land area but I never thought that the cost of land and buildings were a large component of manufacturing cost so I don't expect this to have a big impact on cost.

Would it also impact labor cost, material costs, or equipment costs in a positive way? I don't yet see how.

The opposite might even be true. Potentially more densely placed equipment could complicate access for maintenance, and might create interactions between equipment through heat, vibrations, and particle contamination that might complicate quality assurance and control. This could reduce labor productivity as well as reduce yields and thus overall productivity.

Am I missing something?

Unknown

From an operations management standpoint, most, if not all, the concerns you mention can be resolved in layout design. In a traditional plant, a tremendous amount of floorspace is dedicated to people movement, including moving supplies and product. Once the people, supplies and product movement is built into equipment layout and material handling becomes multi-dimensional (left, right, overhead, etc.) What was otherwise non revenue (moving, waiting, walking) producing space becomes revenue space. In summary, regardless of how big a land space you have, the smaller the revenue space is, the more effective it is. From a design standpoint, it's not that hard to do as long as you can start with a blank space. I hope this helps (By way of credentials, I teach OM and Global SC at the graduate level in a major university.)

bb0tin

Elon also talks about the rate of output. The two are related. The closer serial manufacturing steps are to each other the faster the overall production can run, since it takes a long time to shift a part from one place to the next. There will be many steps where moving the part takes far longer than making the part. You can see this in videos of Tesla stamping machines for instance.

codyb12889_98066266

I think bb0tin hit it right on with the time it takes for an item to move step to step.

Along with that you run into costs for extra machinery and maintenance on the components that are used for moving the product between stations.

Bighorn

Exactly, they should use the "assembly line" concept! CC this to Elon post haste.

Seriously, I think they've learned that they can be more productive than previously thought through any number of innovations. I believe they said at the GF opening that they'd already tripled their initial estimates on battery production output per unit area. Clearly, there is an optimal use of space with diminishing and then negative returns as crowding occurs. I think that is pretty self-evident.

bb0tin

@Bighorn
You said "Exactly, they should use the "assembly line" concept! CC this to Elon post haste."
The gigafactory is not an assembly line, and that is one of it's advantages.
It is a 3D system, not a 2D system.

You said "Clearly, there is an optimal use of space with diminishing and then negative returns as crowding occurs. I think that is pretty self-evident."
Yup.
Clearly, there is an optimal use of speed with diminishing and then negative returns as overshooting occurs. I think that is pretty self-evident.

JeffreyR

Also, think about the fact that if you did not triple the production at GF-01, then you would need to build GF-02 that much sooner. Sure GF-01 now has a bunch more CapEx at the site, but existing logistics of moving materials to and from the site can be leveraged. I doubt the road or railway was planned to be at full capacity, so there is room for adding more to existing pathways. You've also tripled the economies of scale for purchasing and shipping raw materials to GF-01 site.

@Jcollins wrote, "...[R]egardless of how big a land space you have, the smaller the revenue space is, the more effective it is."

That confuses me a bit. Does this also get at what you were trying to relate?

Regardless of how much total space you have, the smaller the non-revenue space is, the more effective use of the entire space is. Or you want have the ratio of non-revenue space to revenue space as small as possible. As an extremely non-realistic example, 5% non-revenue to 95% revenue would be much better than 50/50.

Unknown

JefferyR and I are essentially saying the same thing. I'm describing the amount of space used to generate X dollars of revenue. If you're generating Y dollars in X space, the more X spaces producing Y dollars the better off you are. Once you spread out to a space size of X+1 and still produce Y revenue, the worse off you are.

dansplans_98058934

Tesla has no experience as a high volume auto manufacturer. The density and potential increases in output through improved utilization are engineering answers to real world problems.

Generally, automotive plants max out around 360,000 units per year. There have been peak examples of around 400,000. The plant Tesla now occupies has hit that number.

Due to a simpler overall design, Tesla may in fact be able to exceed the previous norms. However, as everyone who follows Tesla is aware, saying and doing are rarely in sync.

dansplans_98058934

The key factor is the level of humans vs automation achieved. The more humans needed, the more spread out a working plant will be, largely due to safety factors. Zero humans would allow for many automated functions to run faster or without interruption.

Coastal Cruiser.

OP, I had the same question after watching the presentation. A few good answers in the replies.



<em>Note to self: Don't visit the Gigafactory same day Jar Jar Binks is touring the facility.</em>

bb0tin

@CoastalCruiser
Who is Jar Jar Binks?
Is it a reference to a Star Wars movie?

Unknown

I remember Elon mentioned it in his master plan part duex presentation. It's just a simple physics that output is proportional to density and speed. He's going to increase both several folds to get the order of magnitude increase of output he thinks he can achieve.

Unknown

To give an example of density and speed JB has mentioned in another occasion battery cells come out the production line faster than bullets out of a machine gun. This certainly can only be achieved by automation and robotics.

brando_93523669

Savings by process. Consider batteries and battery packs.
density (oceans apart vs a few feet)
(trucks and ships vs robots and conveyor belts)

1- produce battery cell

2- package cell into card board box, stack on pallets, onto trucks, then to ships, voyage to US, unload ship, truck to customs (paperwork spot inspections), onto trucks taken out of harbor area, onto long distance trucks to Fremont, unload pallets, unpack card board boxes, check packing slips, enter data to inventory system.

3- Onto plastic tray and off to battery pack assembly.

GigaFactory allows you to eliminate step # 2.
===========

Did you see the closed loop of putting Lithium onto aluminum foil?
solvent dissolves Lithium to make slurry for coating foil
solvent recovered and air reused in closed loop system
so we save 80% on heater electricity usage (and no air pollution)

This is how Tesla will get 30% savings on battery costs before any chemistry improvements.

dansplans_98058934

@brando

Eliminating #2 is a huge oversimplification.

It is replaced by importing all of the components and dealing with multiple streams of raw material inventory, rather than simple battery cells. Numerous steps are involved with many layers and intricacies as well as quality control steps at various stages. While much can be automated, there will no doubt be areas with a large amount of human involvement. Not quite as simple as the new patent thread....
1. Raw materials in.
2. A bunch of stuff happens.
3. Finished product rolls of the line..........

bb0tin

@dansplans
All the steps to actually make a battery have to be performed either way.
By putting it all in one place you have eliminated a lot of freight cost as well as work in progress costs.
By putting the production machinery together in one place in a 3D layout, rather than a dispersed 2D layout, you have massively reduced the movement time between each step.
It is as simple as that in concept.

dansplans_98058934

Freight cost does not disappear. It must be paid for raw materials or finished goods. It depends on relative travel distances for everything, and there is no certainty of freight savings of any significance.

At Panasonic, it was all put together in Japan. Now it will be all put together in Nevada. Raw materials shipping costs will rise dramatically, while finished goods shipping cost will be all but eliminated. It will be quite some time before accountants can tell us if this is a zero sum game, or there has been an increased or decreased cost of doing business.

One major problem with the 2D/3D plant analogy. It certainly is applicable for some segments, but is quite problematic for the whole. JIT production systems are constrained by the lowest common denominator. That is whatever the bottleneck is in the system, that will be the overall rate that you can achieve. When production comes to a standstill the losses begin to mount at a rate as high as $25,000 per minute. Hopefully, all the raw materials show up on time and at the required volumes.....constantly.

Consider your router as an example. When someone connects using at G or God forbid a B rated speed, the entire system operates at the lower speed. It doesn't matter that you have the shiniest, newest AC capability and a 5 Gigabyte interface available.

I expect to be told I'm full of it, and you are welcome to your opinion. Please note that I have been involved in manufacturing for 30+ years, including automotive. I am currently sitting at a desk, in an office, housed inside a 5 million square foot manufacturing facility. The real world is quite a bit different than how the engineers draw it up.

bb0tin

@dansplans
You said "and there is no certainty of freight savings of any significance"
Elon has described how current battery pack manufacture results in material been shipped around the world. Shipping is a large cost in direct cost and work in progress cost. The cost to ship cargo is high. Just to have a single container physically discharged from a ship costs several hundred dollars. All these costs are eliminated with having the gigafactory.

You said "Raw materials shipping costs will rise dramatically,"
Why? Where do the raw materials all come from? Why is it cheaper to ship them to Japan rather than ship them to Nevada?

You said "JIT production systems are constrained by the lowest common denominator. That is whatever the bottleneck is in the system, that will be the overall rate that you can achieve."
The gigafactory will have been carefully planned so that each production step matches the other production steps. If there is a bottle neck then more machinery will have been added to rectify it and balance the entire system. The gigafactory is not a monolithic machine. It is broken into many smaller production lines. If one machine breaks down, the other production lines carry on unaffected. The whole factory does not stop.

You said "Please note that I have been involved in manufacturing for 30+ years, including automotive."
Elon has been making a point of saying how they are changing existing manufacturing because it is so inefficient. If you look at the machinery at the opening, you can see that there are lots of small machines, not a few large machines. There will be lots of cell and pack production running in parallel and independent of each other. You can also see this by the incremental expansion of the gigafactory. It is only 14% of it's final size. That means that the current production system can be duplicated at least 7 times before completion.

dansplans_98058934

A great deal of the materials currently originate in China. Commodities items now ship from the nearest supply countries to Japan, so there is no guarantee that the total mileage of all these items will be less to get them all to Nevada. Since all the cell manufacturing is actually being done by Panasonic under contract, you have no idea if the raw materials will simply be diverted to Nevada. Panasonic could well be tied to long term supply agreements which make the landed costs of some items go up, not down.

IF the cells and packs have been shipping all over the place, for whatever reason, then there would definitely be some savings to be had in that particular area.

I understand the machine that makes the machine etc. However this is the real world and a great deal of this doubling and tripling of manufacturing capabilities is years away. This will not happen from day one of Model 3 assembly.

Fervent belief in EM and Tesla does not automatically mean that cell costs will immediately drop 30% and that Tesla can begin producing 500,000 cars in 2 years.

"A journey of 1000 miles begins with a single step."

bb0tin

It looks like the main materials can be fully sourced from Canada and the US, rather than China.
file:///C:/Users/bb0ti/Downloads/WMP_2010_2014.pdf

Nevada and Arizona are the largest mining states in the US
https://www.nevadamining.org/issues_policy/pdfs/NMA-01mineral-v8.pdf

bb0tin

The gigfactory is already going to be 3X the production than was originally planned to be i.e. 150GWh rather than 50GWh and will be completed in 2018

dansplans_98058934

2018. Now THAT is funny. They are 2 years behind already. It's taken 2 years to build 1/6 or 1/9 or whatever they are currently at. The gigafactory produces 0GWh currently. Everything else TBD.

Western US has a lot of mining, and hopefully Panasonic can avail themselves of some of it to save shipping costs. Currently they source all their cobalt, graphite, and lithium from China.

dansplans_98058934

Tesla's lithium purchase agreements are nothing more than PR. (before you say it)

bb0tin

@dansplans
You said "They are 2 years behind already"
They are ahead of schedule.
What are you basing your statement on?

Tesla is going to source all their minerals from North America?
Please don't say that you don't believe them.
http://insideevs.com/tesla-use-north-american-resources-planned-gigafactory/

dansplans_98058934

Tesla can state whatever they like about sourcing, but they aren't producing any lithium cells. Panasonic is Tesla's current sole supplier and for the foreseeable future.