August 19th, 2020 by Carolyn Fortuna
Business school gurus and corporate engineers continue to be in awe of the Tesla Gigafactory phenomenon. Tesla’s formidable manufacturing infrastructure and logistical configurations are continuously expanding in scale and improving in sophistication. The Tesla Gigafactory is renowned for advanced efficiency and effectiveness, reaching levels of production that few around the globe have been able to emulate.
The Gigafactory produces Model 3 and Model Y electric motors and battery packs, in addition to Tesla’s energy storage products, the Powerwall and Powerpack.
In the journal Sustainability, author Philip Cooke of the Western Norway University of Applied Sciences identifies the spatial structure of each of Tesla’s 4 existing or under-construction Gigafactories:
- Giga Nevada, at Sparks, near Reno, Nevada;
- Giga New York, the Solar City Gigafactory at Buffalo, New York state;
- Giga Shanghai, the 2019 Tesla plant at Shanghai, China; and,
- Giga Berlin, the new Europe Gigafactory, which is a manufacturing plant to be constructed in Grünheide, near Berlin, Germany.
Cooke argues that overarching Gigafactory logistics contribute to production and distribution efficiency and effectiveness and serve as a “primer for all future industry and services in seeking to minimize time-management issues” and reduction of wasteful energy usage. The paper examines the extent to which the Gigafactories’ logistical structures have become ubiquitous in manufacturing or continue to be mainly associated with Tesla.
“Gigafactory Logistics in Space and Time: Tesla’s Fourth Gigafactory and Its Rivals” starts out grounding our understanding of the Gigafactory phenomenon by looking at the Megafactory in The Netherlands as a microcosm of the Gigafactory’s simplicity, effectiveness, and minimization of effort.
In 2013, the all-electric car company opened its European assembly facility for Tesla Models S and X (SUV) EVs for European delivery in Tilburg, The Netherlands. The “Megafactory,” as the 3 assembly buildings are known, is located next to the advantageous infrastructure of the Wilhelmina canal linking intermodal container barges with the Port of Rotterdam, Europe’s largest seaport. The shells of Tesla cars arrive in containers that are separated from their powertrains and are moved methodically.
- The contents of each container are united on the assembly line.
- When the batteries and motors have been fitted, the “firmware” (industrial software controlling basic hardware connections) is uploaded for the digital network to seamlessly install.
- Then the car’s controlling software is installed, from the car’s Autopilot to its customized entertainment system.
- Next come testing of sensors, radar, cameras, wheel alignment, and pressurized water resistance.
- Subsequently, the car reaches the internal 750-m-long indoor test track which simulates actual road conditions.
- Finally, there’s a LED-lit tunnel for micro-inspection of quality of paint finish, wheel rims, and interior imperfections.
Yet Cooke highlights that Tilburg is a mere assembly facility, “a minnow, out of its depth comparatively.”
Three main features of the Gigafactory phenomenon, apart from their scale, that Cooke synthesizes are:
- The industry organisation of production, which thus far reverses much current conventional wisdom regarding production geography. Thus, Tesla’s automotive facility in Fremont, California, reconcentrates manufacturing on site as in-house Tesla componentry, especially heavy parts, or by requiring hitherto distant global suppliers to locate in proximity to the main manufacturing plant.
- As an electric vehicle (EV) producer, the contributions of Tesla’s production infrastructure and logistics infrastructure are important in meeting greenhouse gas mitigation and the reduction of global warming.
- The deployment of Big Data analytics, artificial intelligence (AI), and “predictive management” are important. This lies in Gigafactory logistics contributing to production and distribution efficiency and effectiveness as a primer for all future industry and services in seeking to minimize time-management issues.
Cooke notes that much academic literature on predictive management concentrates on EVs rather than their production. Tesla utilizes AI-driven machine learning solutions in the complex automotive production process. Thus:
“Model 3 production infrastructure now involves cars that can self-diagnose internal problems and order replacement parts, connecting supply chains, although it has more experience with predictive maintenance than management, as signified by its weaknesses regarding customer delivery.”
Additionally, as of 2017, approximately 60% of the world’s lithium-ion batteries were made in China, and the government policy there is to expand that share. Tesla’s regulatory and real-estate financing entry to the local market with its Shanghai Gigafactory speaks to Chinese ambition. Tesla also negotiated a battery supply contract with CATL, to join LG Chem and Panasonic to become a third main supplier to its Shanghai gigafactory.
Conclusions about the Gigafactory Phenomenon
Cooke acknowledges that Tesla’s rise to become a global leader correlates to the company’s place as the leading non-Chinese producer of both EVs and LIBs, and yet “is almost inexplicable.” He also allows that “advantages and aspects of Elon Musk’s rarefied entrepreneurial existence” must be incorporated into the equation.
- Musk is “prodigiously wealthy,” albeit self-made through computing, and he can sustain a burn rate in cash resources that others cannot.
- Musk’s cash is based on stock options. When market capitalization settled and remained at $100 billion for six months, his bonus reached $370 million and will eventually be $55 billion.
Cooke summarizes that Tesla management has proven economically and environmentally sound (“except in energy supply”), efficient and effective, with unusually high “green” production, design, and foresight. He calls upon the company to continue along the path to become a fully zero-carbon firm.
Inverse also provides a basic video about the Gigafactory phenomenon if you’re interested.
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