Rocky Newman, Miami University – Tesla and Henry Ford

Are there similarities between the modern Tesla and the beginnings of Henry Ford’s company?

Rocky Newman, professor of management at Miami University, compares these two innovate automakers.

Rocky Newman (Ph.D. The University of Iowa, MBA & BS-BA Bowling Green State University) has been a professor of supply chain and operations management at Miami University since 1987. Newman teaches in the areas of operations management, supply chain management, and manufacturing strategy.  His research interests include manufacturing strategy, organizational issues in supply chain management as well as supply chain management strategy. His work has been published in many journals including: International Journal of Production Research, The Journal of Production and Inventory Management, Journal of Purchasing and Supply Management, American Journal of Business, Journal of Occupational and Organizational Psychology, The Journal of Manufacturing Systems, The International Journal of Flexi­ble Manufacturing Systems, Mid American Journal of Business, The International Journal of Operations and Production Management, The International Journal of Production Econom­ics, The International Journal of Forecasting, Integrated Manufacturing Systems, The International Journal of Quality and Reliability Management, The Journal of Supply Chain Management, and others.

He is on the editorial board of several academic journals and has served as the editor in chief of the American Journal of Business.

He has authored several popular textbooks in the field of Supply Chain Management. He coordinates the Farmer School of Business’ highly ranked Supply Chain Management Program at Miami University.

He has served on the Midwest DSI board for many years in a variety of roles including president and program chair for the MWDSI annual conference in 2003 and 2009. He served on the board of directors for the Supply Chain Council (www.supply-chain.org) from 2008-2014. He is SCOR-S certified and has incorporated SCOR-S into his teaching with over 250 of his students certified through 2014. He has served on the APICS Board of Directors (2014) and now serves on the APICS Supply Chain Council Board of Directors

Tesla & Henry Ford

Is Tesla, by tightly integrating its supply chain, following the 100 year old strategy of another famous automaker?

Can Tesla revolutionize the world again by making an affordable electric car for the masses, much the way Henry Ford did with the Model T in 1908?

Ford took over his supply chain to make his own parts rather than buy from suppliers, giving him the scale and control needed to make better cars cheaper. 

Let’s roll the clock ahead 100 years. Like Ford, Elon Musk is building a huge new battery factory to gain control over this strategic component.  Musk will use them in an all-electric car priced for the masses – the upcoming Model 3. I ask, Will it history repeat itself?

At about $15,000, batteries are the single most expensive component in an electric car.

Industry experts believe the tipping price to be about $35,000 for an all-electric cars with a range of 300 miles on a single charge. It’s debatable if Tesla is there now BUT as Tesla makes more batteries, they gain opportunity to make batteries cheaper and better.

With Ford, technology limitations along the supply chain necessitated identical black Model T’s. That’s not an issue today.  Variety increases demand; that means more chances to make cheaper and better batteries.

Unlike Ford, Tesla can now focus on making “core” components like batteries in-house, leaving essential but non-core components like door handles or floor mats to a global supply chain.  Henry Ford had to control everything, because even a missing hubcap could stop the line.  Musk doesn’t have to sweat the small stuff.

OK, lessons learned; first focus on innovative products and core components then trust your supply chain for everything else. Second, avoid overdoing resources on noncore aspects. The payback’s just not there. Finally, keep new products consistent with your core competency.

Read More:
Elon Musk Could Be The Next Henry Ford (Time)

Elon Musk’s Brave New World: it worked for Henry Ford; why not Tesla? (The Conversation)