In the construction industry, operational efficiency has never been a popular word, as there is so much to be completed and most of the time no one knows what others are doing. However, with the advances in technology, the construction industry is also beginning to embrace efficiency to realize better results in their projects. After all, efficient projects are finished on schedule and bring in more profits as compared to those that are not run efficiently. One such company which are capitalizing on technology and a better operational approach is Tesla. Tesla is primarily an automaker and energy company, but the company also operates in the construction sector with its boring projects and the construction of its subsidiary units like the Gigafactory. The company was originally founded in 2003 by a group of engineers to build electric vehicles and to reduce the reliance of the world on non-renewable sources (Pow, 2019).
The company aims to create an entire sustainable energy ecosystem with the help of its subsidiaries like powerpack, Powerwall, solar roof and utilities to manage generation, consumption, and storage of renewable energy, its construction operations are also in line with the same vision of the company. For instance, the company is building its Gigafactory to manufacture batteries and to meet the volume of electric batteries required to fulfill the production goals of Tesla motors. The company’s boring venture is also part of its construction operations and aims to solve the problem of traffic by building a network of underground tunnels. Such unprecedented construction ventures require an efficient approach towards a business operation to ensure that the company can realize its goals that are often referred to as lofty (Liu & Meng, 2017).
This paper presents an application of appropriate operations management theories like six sigma and lean management in the context of Tesla and describes such approaches which can help the company to achieve continuous improvements for better operations efficiency. In addition to this, the paper also presents a critique and review of six sigma and lean principles on the principles of the operation of the company to improve their future effectiveness.
Furthermore, the paper analyses the effectiveness of a continuous improvement plan, in addressing the operational issues in Tesla and outlines how other theories and concepts such as lean management, Six Sigma, and others, could add value to a kaizen effort. Finally, the paper proposes a new project venture for the company and critically evaluates the application of the product life cycle through both theoretical and practical exploration of its effectiveness in the construction sector.
Optimizing business operation is one of the key goals of every high performing organization, however, efficiency is a constantly changing target and shifts according to business growth, market, and business strategies. Yet, this does not mean that organizations should neglect their responsibility towards improving their operations to facilitate better results. Two of the most commonly used operations management concepts are mentioned below.
Six sigma is a statistical-based, disciplined, continuous, and data-driven improvement methodology for removing defects in business services, processes, and products. This approach was developed by Bill Smith and the Motorola company in early 1980 according to the fundamentals of quality management which later became popular and got adopted by hundreds of companies across the world. In this approach, sigma represents the standard deviation with the population, which is a measure of the variation in the collected data set related to the process. In case a defect is described by specification limits that separate bad outcomes of the process from the good ones, then the six-sigma process has a process average which is six standards deviations from the specification limit which is the nearest one (Chugani, Kumar, Garza-Reyes, Rocho-Lona & Upadhaya, 2017). This facilitates enough buffer between the specification limits and the process of natural variation. Six sigma can also be regarded as a measure of process performance with six sigma being the goals according to the defects per million. After measuring the performance of the business process, the aim is to continuously improve the sigma level towards the 6 sigma. The best part of this approach is that even if the improvements made in the operations do reach level 6, improvements from 3 sigma to 5 sigma will still increase customer satisfaction and will reduce costs (Antony, Snee & Hoerl, 2017).
Lean management is another approach for continuous improvement in operational quality and efficiency. The underlying aim of this approach is to produce value for the end consumer through resource optimization and creating a steady flow of words according to customer demands. Lean management seeks to reduce the waste of money, effort, or time through the identification of each step in business operations and their cutting out or revising the steps that do not contribute towards value creation. This approach is based on manufacturing theories which include defining value from the customers’ standpoint, eliminating waste in business processes, and continuously improving all work purposes, people, and processes (Abdallah, Dahiyat & Matsui, 2019).
Lean management enables shred responsibility and leadership and acts as a guide to establish a solid and successful organization. Moreover, this approach is based on the Toyota production system, as Toyota put into practice five key principles of lean management to decrease the number of processes that were not contributing to organizational value. The five principles of lean management are; identification of value, mapping value stream, creating a continuous workflow, establishing a pull system, and facilitating continuous improvement (Bertagnolli, 2018).
Both of the above-mentioned approaches have tremendous potential for the construction industry. Tesla can incorporate the Six sigma approach in its business operations by navigating the “DMAIC” acronym which stands for defining, measuring, analyzing, implementing, and controlling. The company can use this approach and can implement the approach in its practices by following the five stages.
1. Defining the problem, it is trying to solve
In this step the company does not look at its business operations from its perspective, it needs to perceive performance issues from the perspective of customers to define a specific goal (Meng, 2019).
2. Measuring key aspects of the process
After defining the problem, leadership at Tesla can use target metrics to measure the progress towards the determined goal through the collection of germane data.
3. Analyzing the data and looking for a cause and effect relationship
In this step, the company looks for the root cause of defects it is seeking to eliminate according to the current business operations and the stated goal.
4. Improving the current process
After identification of performance issues, six sigma recommends data analysis for capitalizing on the gathered data and for the reconfiguration of the business operations. Tesla can also set up tests to determine whether the improvement is real (Thomas, Francis, Fisher & Byard, 2016).
5. Controlling the process going forward
After the improvement in business operations, monitoring systems can be implemented for the monitoring and evaluation of the improved process implement in the organization.
Similarly, the lean methodology can also be used to deliver a successful project in the most cost-effective and time-efficient manner. This approach emphasis enhancement of customer value by reducing waste in business operations. Even though the lean management approach was designed for manufacturing, it can be used in construction as the business priorities and goals of every company are more or less the same, which is to lower inventory issues, stay on schedule, improve operational efficiency and to reduce inaccuracies. Applying lean management in construction helps to mitigate the disruptions caused by external and internal factors, and can also help the crew to recognize improvement areas to see tangible results.
The process of implementing lean management in Tesla is as follows:
1. Identification of value form the viewpoint of the client
Tesla can get all the major stakeholders who are involved in the project, from architects to construction crew on the same page by creating a master schedule and by defining the value stream at the beginning of the project to leverage the lean approach (Thomas, Antony, Haven-Tang, Francis & Fisher, 2017).
2. Building a sense of trust and team
Moreover, by staying consistent with the help of communication and collaboration throughout the project can also help to embrace the ideology of continuous improvement by focusing on the project team.
3. Making continuous improvement in the benchmark
The organization can also give everyone the necessary technology and tools they require to realize peak performance and operational efficiency. A high stakes construction project puts significant stress on stakeholders and is it crucial to ensure that necessary resources are provided to restore focus and energy (Salah & Rahim, 2019).
4. Prioritizing waste elimination
Tesla should also organize periodic sessions to cater to the needs of projects at every given stage form overcoming communications to eliminating waste to ensure that unhealthy conflicts do not occur and adversely influence the quality of workmanship.
5. Constantly making adjustments and monitoring
This is the final step of lean management for Tesla as it requires the organization to check in with the goals and to make sure that the performance of business operations is not getting off track. Project coaches can also be used to address the performance issues immediately and to resolve issues concerning the project. This will also help to prevent the issues from becoming bigger problems in the future and allows true value to systematically flow in real-time (Cudney & Kestle, 2018).
To improve the operational performance at Tesla, it is important to assess the principles of the current operation of the company to determine performance gaps. The current operations management at Tesla can be examined based on the following decision areas.
Design of services and goods: This is a strategic decision area for the company and its operations manager focus on the way the operations of the organization influence its cost, resources, and quality objectives. The company addresses this concern with the help of constant innovation which involves concurrent modernization in its various subsidiaries such as solar panel, automotive, construction, and battery business.
Quality management: The company also facilitates customer satisfaction through timely quality checks. Tesla engages in quality improvement initiatives to enhance the performance of its processes and to cater to high standards for productivity and quality (Swarnakar, Tiwari & Singh, 2020).
Process and capacity design: This aspect of operations management decisions area concentrates on business processes, along with associated resources, standards, and investments.
Location strategy: In operations management, logistics, and nearness to suppliers and resources are considered as strategic decisions. In this respect, Tesla utilizes its global reach for procurement and uses key locations to maximize personal productivity.
Layout design and strategy: This area of operations management deals with realizing the optimal flow of information and resources. In the case of Tesla, the company layouts are designed to enhance the utilization of resources especially the buildings. In addition to this, the company also uses networking and computing technologies for internal communication, which in turn improves the performance of its operations.
Human resources and job design: The company satisfies the strategic decision area related to the adequacy of effective human resources through a competitive compensation strategy to attract competent and effective workers. Also, the company ensures high productivity and effectiveness of its human resources with the help of regular training and leadership development programs. However, the competitive compensation coupled with aggressive firings suggests that the company is not taking the full advantage of its human resource as its employees are not able to perform effectively due to autocratic leadership (Costa, Godinho Filho, Fredendall & Paredes, 2018).
Supply chain management: Under this strategic decision area, Tesla focuses on adequate supply and an efficient and effective supply chain. The company has a global supply chain to support its construction and manufacturing activities.
Inventory management: In terms of inventory decisions, support, and cost of production, Tesla bases its decisions on the operations management principles which emphasize quality. Tesla uses just in time inventory for some of its materials to minimize its inventory costs.
Scheduling: This operational management areas deal with short term and intermediate schedules, and Tesla addresses this with the help of market-based scheduling which is combined with automated processes for enhanced efficiency. Under this approach, the company uses market demand for scheduling purposes. Automation, on the other hand, helps the scheduling to minimize errors and thereby improving productivity.
Maintenance: Moreover, Teals also ensures the adequacy of resources and production capacity through regular monitoring of inventory (Patel & Desai, 2018).
In addition to the abovementioned strategies for operations management the company also uses productivity criteria for this corporate office operations management. These measures or criteria are used for the evaluation of strategic and performance effectiveness. Some of these measures are; powertrains units per day which measure the automotive production plant facility productivity, automobiles per day which measures the production plant productivity and inquiries addressed per day for customer service. The analysis of current practices at Tesla suggests that the company is not good at facilitating the flow of ideas due to autocratic leadership which is inhibiting its growth potential especially considering that establishing a culture where ideas can flow easily is vital for a company nowadays (Cherrafi, Elfezazi, Chairini, Mokhlis & Benhida, 2017).
The continuous improvement plan proposed known as Kaizen is a lean manufacturing tool that aims to improve productivity, workplace culture, quality, and safety in the organization. Kaizen events can lead a company to realize effective continuous improvement culture and by incorporating the DMAIC approach within the same, an organization can make breakthrough improvements in terms of present business operations. Kaizen focuses on applying small changes daily which ultimately results in significant improvement over time. The continuous cycle of Kaizen includes the below mentioned six phases (Kumar, Dhingra & Singh, 2018).
Identification of opportunity or problem
Analyses of the process
Developing an optimal solution
Implementing the stated solution
Analyzing the results after implementation of the solution and making adjustments accordingly
Standardization of the solution
This operations management approach begins with an issue or opportunity and enlists the cross-functional personnel to examine the root cause of it. Then a proposed solution is tested at a smaller scale and the team makes adjustments according to the feedback. Finally, the solution is standardized and the results are spread across the organization. Tesla can also use this approach to solve its business operations issues. As a lean business practice, Kaizen can be implemented in Tesla to improve the flow of ideas and better communication. Tesla can use the below-mentioned plan to improve its operations:
Getting employees involved: To improve its operations, Tesla needs to involve its workforce to facilitate the identification of issues and opportunities. This creates buy-in for change and to do so, Tesla can organize a specific group of individuals for information gathering and relaying information (Omotayo, Kulatunga & Bjeirmi, 2018).
Finding issues: Using feedback from employees is important for finding issues and probable opportunities. In the case of Tesla, the key issues are with the flow of information and the involvement of employees, which makes the feedback from employees an important part of its operational improvement plan.
Creating a solution: After getting everyone on board, the next step is to create a solution for the identified problem. Tesla should use encourage employees to offer solutions and then management can use the presented ideas to pick a winning solution (Ma, Lin & Lau, 2017).
Testing the solution: After choosing the desired solution, the company can run a pilot program or can undertake some to another small step to test out the proposed solution in a real-life scenario.
Analyzing the result: Moreover, the outcome of the pilot program should be tested to ascertain its impact on the organizational performance and the way it affects the issues it was designed to solve.
Standardization: After the analysis of the performance of the solution and the necessary changes in it, it should be adopted throughout the organization.
Repeat: Lastly, these steps should be repeated on an ongoing basis to test whether new and better solutions can be used to tackle the listed problems (Janjic, Todorovic & Jovanovic, 2020).
Some of the benefits of implementing a Kaizen plan are as follows:
1. Kaizen involves every employee: Under this approach involves every member of the organization which makes it helpful for employees, customers, and the management and the overall company as a whole. The approach applauds the efficiency and productivity of employees and enables employees to stay active towards realizing the wellbeing of the organization.
2. Eliminating waste: The approach also helps to eliminate waste which is especially important in today's highly competitive and dynamic business environment, especially in the construction industry. This helps to improve the competitiveness of the business and removes old business practices that do not contribute towards value generation (Hailu, Kedir, Bassa & Jilcha, 2017). Kaizen approach starts by wiping out waste and emphasizing factors that require attention. With the help of this, the company progresses faster while minimizing errors.
3. Improves efficiency: kaizen also helps to regulate organizational resources and optimally utilize them. Simply put, Kaizen develops capability which helps to improve the quality of products and services. This further improves the quality control and time management within the organization.
4. Assuring employee satisfaction: Participation of employees is vital for improving the business process. Kaizen approach aims at considering the suggestions of employees which in turn helps to improve the satisfaction of employees. By making them feel worthy, Kaizen provides a medium for them to pitch their ideas which leads to the active participation of organizational members (Kumar, Dhigra & Singh, 2018).
Moreover, the Kaizen approach can also be used by integrative it with Lean management and Six sigma. One of the core aspects of lean is continuous improvement and this is also one of the key principles of Kaizen. For instance, Toyota which is known for empowering employees and other ground-breaking ideas used the mixed approach to empower its organizational members. During a time when other assembly line workers were treated as automatons, Toyota empowered its employees with the ability to enhance the working environment (Garcia-Alcaraz, Oropesa-Vento & Maldonaldo-Marcias, 2017).
It is necessary to mention the fact that Kaizen is not exactly a directive to employees from management. Rather than this, kaizen focuses on consistently and proactively managing the operations while creating an environment in which organizational members feel empowered and safe to offer solutions and to bring up their issues. Kaizen can also be incorporated with six sigma to support continuous improvement. While six sigma can be used by the company to make breakthrough improvements, cost savings from six sigma projects sometimes fail to reflect in the bottom line (Alosani, 2020).
This is mainly due to the absence of small improvements, along with maintenance which includes establishing standard procedures for operations to ensure everybody follows them. However, if companies can resolve this issue by using a combined approach. For instance, while six sigma can be used for strict adherence to the business process, local resources can be used to make business operations better with the help of Kaizen (Mahmood, Mashahdi & Ashari, 2017).
Considering the business orientation of Tesla, it is proposed that the company should work on aero skateboard project. The company can use the product life cycle (PLC) management for the new venture as its appropriate for new ventures. The product life cycle is the analysis of the entire life span of a product. The PLC is divided into 5 key stages, namely, development, introduction, growth, maturity, and decline. The development stage is the stage in which the new product is generated, and the company pays costs related to manufacturing, research, and acquisition. In the introduction stage, the product is launched in the market and customers get familiar with it. The sales, profits, and demand of the product accelerate in the growth stage, while in the maturity stage the sales of the product maximize and prices are competitive in this stage. Finally, in the decline stage, the demand shrinks and starts declining. Also, the company will require a project manager to provide the necessary direction to ensure that every stage of the project. They are also important for ensuring effective communication among various stakeholders.
Optimizing business operation is one of the key goals of every high performing organization, however, efficiency is a constantly changing target and shifts according to business growth, market, and business strategies. Yet, this does not mean that organizations should neglect their responsibility towards improving their operations to facilitate better results. Six sigma is a statistical-based, disciplined, continuous, and data-driven improvement methodology for removing defects in business services, processes, and products. Lean management is another approach for continuous improvement in operational quality and efficiency.
Both of the above-mentioned approaches have tremendous potential for the construction industry. The continuous improvement plan proposed known as Kaizen is a lean manufacturing tool that aims to improve productivity, workplace culture, quality, and safety in the organization. Kaizen events can lead a company to realize effective continuous improvement culture and by incorporating the DMAIC approach within the same, an organization can make breakthrough improvements in terms of present business operations. Considering the business orientation of Tesla, it is proposed that the company should work on aero skateboard project. The company can use the product life cycle (PLC) management for the new venture as its appropriate for new ventures.
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