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"Just in time" inventory

"Just in time" inventory

I dont know if anyone knows if anyone knows whether Tesla gets inventory on the "just in time" basis.
This term refers to car mfacturers getting deliveries "on the day" for the build.
I think a search will find Toyota for example work within minutes.
This has enormous savings attached but also a lot of risk.
I imagine Tesla has already bought some parts for YOUR car, it is already in gestation so to speak. Like rivets. Imagine if they ran out of rivets (again).
Or 2nd row folding seats that work.

Does anyone know how Tesla gets their inventory?
Has YOUR car already been conceived?

I was at a Camry factory which was producing in house 90 bumpers a day for 89 vehicles being produced. They were being injected and ejected within minutes of assembly on to a car.

andy.connor.e | June 14, 2017

Its unwise to think that Tesla will begin production of a vehicle that they do not have the parts for.

Ross1 | June 14, 2017

exactly

jordanrichard | June 14, 2017

I know that from a financial efficiency standpoint, "just in time" is great, but has a major drawback considering that the parts to make the car come form all over the globe. Even the Asian car companies had to cut back production at their US factories a long while back because of the strike at ports in CA. If they had a stock pile of parts, a supply disruption would not have been an issue. Tesla already knows that they have upwards of 500,000 Model 3 orders to fill. So what harm is it to stock pile the parts to make those cars?

Iwantmy3 | June 14, 2017

The benefits of JIT are two-fold.
1) JIT cuts the cost of inventory. For a company like Tesla where access to capital and cash is critical, reducing the amount of expensive inventory is critical. By 2018, they are expecting to be building 10,000 cars a week. Stockpiling the parts needed for this many cars could cost ~$200,000,000 (assuming ~48% of car price with typical car price of $42000) This would be for just one week of inventory.
2) Inventory space. The plant that the "3" is being built in is already being pushed to its limit for space. Purchasing inventory means storing inventory. It also requires a complex system of storing, maintaining, and retrieving inventory efficiently. The reason car manufacturers use JIT to within a matter of minutes is to eliminate the need to store these parts in house. Instead, they essentially store them on the trucks bring the parts in and unload them when they are needed.

I would guess that they will maintain an inventory of critical but cheap parts (like rivets) in order to not get shut down over trivial components. However, I would be surprised if they aren't using JIT for their production in general.

carlk | June 14, 2017

Just in time is the old stuff. You're still relying on the supply chain no matter what. Tesla's plan is to do much better than that. That is vertical integration which was started by Henry Ford with his River Rouge plant. It's only better now because of automation and robotics. Raw materials come in one end and finished product the other without much need of human intervention. The Gigafactory gave us the first glimpse of that already. Making an automobile is more complicated of course but that's what is in Elon's plan. Power to the first principle of engineering.

ReD eXiLe ms us | June 14, 2017

Ross1: If you had watched any of the documentaries available on YouTube that cover Tesla's Fremont CA facility, then you would already know they operate in a Just-In-Time fashion. Dude. Why are you here?

andy.connor.e | June 14, 2017

Im interested to know where Iwantmy3 got his numbers from. $0.2 billion to store parts? Are you talking about material costs or costs to store? Because if Tesla is constructing their own building, and there is empty space, doesnt seem to me that utilizing empty space with vehicle parts would cost you money. But thats where i come in and say i wonder where you're getting your numbers from.

Iwantmy3 | June 14, 2017

My assumptions were stated.
1 week worth of parts (10000 cars worth)
estimated cost of the parts $20000/car
$200,000,000

If they built a building to store the parts, that would be extra (after all, they built just to store parts)
The costs of organizing, storing, and retrieving the parts would be extra.
The true cost could be twice my numbers.

Iwantmy3 | June 14, 2017

Granted this is a one time cost to build up the inventory. However, it is tied up capital that is better used elsewhere.

Coastal Cruiser. | June 14, 2017

carlk + 1

As usual, we're mostly blind playing these speculation games. In terms of tying up capitol, a major factor is the net terms Tesla has arranged with the supply chain. Does anyone here believe it to be the standard NET30?

And don't forget about all that warehouse space recently leased. They're not gonna be storing harmonicas there.

Ross1 | June 14, 2017

Elon mentioned storing hamsters

Ross1 | June 14, 2017

ReD : you sound like bb0tin

ReD eXiLe ms us | June 14, 2017

Ross1: C'mon, MAN! There's no need to be... ~*insulting*~. Geez.

Coastal_Cruiser: I think it may have been announced something like a year or so ago, that Tesla would enjoy either a NET90 or NET120 arrangement with their Suppliers for Model ☰. Of course, I could be remembering incorrectly...

"Yeah. In fact – yeah, in fact – thanks for making that point, Jason. I think it's worth emphasizing that for Model 3. The Model 3 system is designed – the whole manufacturing supply chain system is designed so that the faster Model 3 production grows the faster Tesla's cash balance grows. So the terms that we're getting from suppliers are significantly better, almost 60 days as compared to about 40 days to 45 days for S and X." -- Elon Musk, Q3 2016 Conference Call

Coastal Cruiser. | June 14, 2017

Red +1 That's definitely EM speaking. ;>

Ross1 (who I assume is the forum member formerly known as 'Ross'): I hope you didn't just inadvertently spill the beans as to the next generation battery-less motor.

Ross1 | June 14, 2017

Yes, Ross1 is the one formerly known as Ross.
I changed the name because Chrome no longer accepts my new topics (but Firefox does).
I am Ross1 on TMC so I thought I would leave it so

Efontana | June 14, 2017

Here is what is normally done:

1. Parts are classified as expensive and big, big, expensive and small, or small and inexpensive. Small inexpensive parts are handled with a Kanban system that prompts inventory in a way coordinated with run rate and replenishment time. A two bucket system with the number of parts in each bucket corresponding to number used in the replenishment time for the part, is an easy way to think about it. Small expensive parts might get delivered more frequently to keep inventory costs down.
2. Big parts will be fabricated on site from inexpensive raw material if you can run the presses enough to pay for them. You select a tool with a run rate that matches your use rate (for a lower cost) if you can, because high rate machines force inventory management decisions about lot sizes.
3. Big expensive parts might come from a nearby owned facility like the Gigafactory.
4. Suppliers carry the cost of buffer stock, maybe on consignment in your warehouses at your facility to avoid transportation risks.
5. All inventory is First in First out (FIFO) as once the process is running you drop inspection (because the process will not produce "bad parts") but there is some risk the inventory is bad. Inventory has risk of being useless. Less inventory less risk. Inspection is expensive and not value add.

This is pretty standard stuff. Main point being: there is onsite buffer carried by the suppliers until used.

brando | May 3, 2018

@ross1

Do you remember that I, in some distant past, revealed your true family history - including leaving the Empire and wonderings down under?

Made me laugh and wish I could read again. Do you know where that post might be??

Any way, long time since I have visited here. TMC my new hang out. For now anyway.

Hope all is well Ross