Tesla Plans on Reviving an Out of Style Business Practice
Tesla and SolarCity are combining their forces in hopes of reviving a business practice that has gone out of style. How are they going to do that?
Tesla CEO, Elon Musk, plans on going back to what is known as vertical integration, even though many modern production businesses have been decidedly refusing to even think about this long forgotten business practice. Nevertheless, Elon Musk is not deterred by this fact and has decided to try his hand at combining a car company with a solar company.
Tesla’s most recent blog post explained their decision:
“Tesla and SolarCity have a tremendous opportunity to create a vertically integrated sustainable energy company offering end-to-end clean energy products.
Leveraging the core competencies of each company, consumers can look forward to deploying and consuming energy in an efficient and sustainable way, with SolarCity’s existing solar power systems and ultimately with a solar roof, a Powerwall 2 that maximizes the benefits of the combined system, and a Model S, Model X or Model 3, all while lowering costs and minimizing dependence on fossil fuels and the utility grid.”
Tesla is well acquainted with vertical integration, but the collaboration between Elon Musk’s team and their supply chain has been wobbly, fact revealed by the problems they had with the design and production of the Model X SUV.
For the past 30 years, “lean” or “just in time” production has been the go to for all major players in the automobile industry. This process has lowered inventory cost and made it possible for manufacturers to adjust to any market shifts.
Musk is nothing like other manufacturers, and in not catering to this trend, he has become one of the main advocates for vertical integration.
If you look back at the history of manufacturing, you might think this may not be a stellar idea, but then again Elon Musk has oftentimes defied the norm and it paid off. He has some serious plans to reinvent vertical integration and his innovative way of thinking might just bring this technique back in the game.