What happened when Elon Musk could not send a car to his buyer on time?

October
4,2018

6 min read

Opinions expressed by Contractor the contributors are theirs.

The successful shipment of finished products to customers is often the Achilles heel of any B2B or B2C company. Whether you are building pipelines, operating a high-performance coffee brand, or manufacturing electric cars, freight management will never be the core skill of your business or anyone else's growing business.

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This is why neither the shareholders, nor the boards of directors, nor the analysts nor the consumers want to know that the destiny of your company depends on the logistics you need to make these deliveries.

Back to Sunday, September 16: Elon Musk, CEO of Tesla Motors, responded Twitter to a customer's complaint about the delay in delivery of her new vehicle. His company, he writes, was stuck in "the hell of delivery logistics".

This being Elon Musk, the quote of course, made the national news. Tesla, after all, is a leading technology company led by a gregaring leader in the field of musk, who regularly uses hyperbole and makes unusual statements in public forums.

However, in the context of the current logistics market, Musk's tweet was not far from the truth. The problems associated with the delivery of the finished cars that Tesla faces are part and parcel of a major problem that plagues companies today: finding drivers and equipment to transport goods.

At the macro level, the country's supply chains are experiencing a period of very high demand and low supply. As reported by the Trade Journal, Gartner analysts have recently predicted that capabilities would remain limited until 2018 and until 2019.

The problem is that the transport of finished vehicles is a specialized market, with a relatively small number of carriers that can transport these vehicles on the market and put them in the hands of customers. Indeed, it is difficult to find these specialized trucks, besides a limited number of drivers can take the wheel.

Drivers must be specially certified for this type of driving and have a DOT license. In the end, finding people who want to do this work is a problem that affects the entire industry. As has been widely reported, driver shortages have been a bigger problem than ever before, resulting in capacity building for everyone.

Related: 6 Ways to Grow Your Logistics Business as an Entrepreneur

And this buyer on Twitter expects Tesla? It is likely that it has first-hand knowledge of the persistent delays affecting the "Intermodal" logistics channel, which includes rail. As reported by the North American Intermodal Association, the peak season of rail freight traffic is currently at its peak. Yet it is not uncommon to see goods stuck in tri-trailer stations at this time of the year, as suppliers move goods to retailers who build inventory for the fourth quarter.

Specific to Musk and Tesla, this company has recently stepped up production of its highly anticipated Model 3, and thousands of customers are waiting for the delivery of cars booked months or even years ago. Increases in volume have a significant impact on a company's supply chain. And higher production means larger volumes and larger shipments to process, leaving managers in unfamiliar territory that they are not accustomed to managing.

What happened at Tesla – and at Walmart?

Just two months ago, Tesla announced that Musk's self-styled "production hell" had been placed in the rear-view mirror and that the company had finally achieved its much-desired goal of producing 5,000 cars per week.

However, this increase in production levels has only exacerbated post-production delivery problems. For fast-growing young companies such as Tesla, thinking and managing the supply chain is usually very low, if not last.

For B2C companies, in general, marketing and sales will be always First, because revenue growth is needed to create momentum, generate public interest and attract investors. Logistics is not usually a leading function in a business, and acquiring this expertise internally is considered an expense rather than a profitable investment.

For this reason, the issue of inbound and outbound shipping capabilities has affected many small and medium-sized enterprise (SME) manufacturers, particularly in the retail sector, where increasingly larger retailers like Walmart are imposing additional rules to their suppliers.

"On time, in full" (OTIF) is the latest regulation put in place by Walmart to require that freight, in the form of inventory deliveries, arrive during guaranteed delivery windows and that delivery encompasses all goods under contract. In the face of imminent penalties for incomplete deliveries and late deliveries, manufacturers are looking for ways to streamline and closely monitor their incoming and outgoing freight.

An increasingly common solution is to use a third-party logistics provider (3PL). A 3PL provides a variety of services that allow customers to obtain better service, punctual delivery, negotiated rates, customized reports and greater transparency for the supply chain.

The 3PL industry has grown rapidly, with some of the largest companies entering the stock market and M & A activity also significantly increasing. In addition to providing a unique solution to interact with the various modes of transportation required to deliver finished products, 3PLs can help overcome driver shortages, provide visibility into inventory levels, and provide strategic intelligence on indicators. business-critical key to business initiatives companies more agile and flexible in the face of changing market conditions.

The challenges of Musk are quite similar to those of any entrepreneur with excessive growth and unexpected customer demand. Here are some tips you can apply to your business to prepare for freight growth:

Understand the challenges of increasing volume.

Increases in volume have a significant impact on your company's supply chain. Higher production means larger volumes and larger processed shipments. You may end up in unfamiliar territory that you may not be used to dealing with.

Know the logistics or establish a partnership with a company.

Logistics is not usually a leading function in any company, and acquiring this expertise internally is considered an expense rather than an investment that generates significant performance.

Find a partner who can identify ways to streamline and closely monitor departing freight.

Since you are likely to face significant percentage penalties for incomplete and / or late deliveries, you should always look for ways to streamline and closely monitor your incoming and outgoing freight.

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Save time and money with a partner who interacts with all the necessary modes of transportation.

A 3PL can provide a variety of services that allow its customers to obtain better service, punctual delivery, negotiated rates, customized reports and better transparency of the supply chain.