Image above: Tesla’s Lithium Battery Gigafactory
Critical External Factor Impact
Whatever you do in a service company or whatever you produce in a manufacturing company, sometimes everything comes down to one, critical thing.
It’s an input, whether people, object or data, and without which your business would come to a complete halt.
Sometimes you’ll know there’s going to be an issue with availability, and you can buy or hire early.
Other times it’s a surprise. And it becomes a CEO, not just a supply chain problem.
For an example of planning for your “everything-thing,” look at Tesla. As an electric car manufacturer, they knew there would be a need for increasing numbers of lithium batteries.
On the Tesla site they state “[t]o achieve its planned production rate of 500,000 cars per year by 2018, Tesla alone will require today’s entire worldwide supply of lithium-ion batteries.”
Tesla naturally can’t have every lithium battery made in the world. So with their requirement in mind, Tesla is building its lithium battery Gigafactory.
Regardless of one’s expectations of Tesla’s ability to reach the production rate they state within 2018, their look-ahead for such a strategic requirement is significant.
In a cascading effect, the lithium batteries require two rare(ish) components: lithium and cobalt.
Lithium is a mined light metal — but available in multiple locations. Tesla struck a deal recently with Kidman Resources, an Australian miner, and three years back with Pure Energy Materials in the U.S.
Cobalt however is more complex of a key ingredient with complex geopolitical issues attached. Most battery makers are working hard to find a chemical mid requiring less (or no) cobalt.
The goal is to ensure supply is available and scalable factoring in the disruption issues involved, so production doesn’t screech to a halt.
When it’s a surprise…
Let’s now look at an example when you’re caught off-guard by another company’s planning.
SoftSoap spent $millions to lock down virtually every pump bottle that could be used for liquid soap prior to its launch.
That way when they launched, competitors could not immediately launch a competitive product.
SoftSoap’s planning would be your unpleasant surprise.
Retooling a production facility for a different kind of packaging (and the myriad challenges that would cascade from that change) would be expensive.
To lead and succeed through this kind of storm, consider these example questions about your everything-thing:
- Can I modify and release a modified product that costs more?
- Is there another way to package that would make it better (premium) or bulk (cheaper)?
- Can I source them, or one similar, globally, and get them fast?
- Can I use a “Same great product, great new package!” marketing tool?
- Would it be cheaper to have someone else package it in a different container rather than me gearing up for a short term?
- If I’m not a competitor, can I negotiate to buy from the [in this example, soap] company, agreeing to not resell them to their potential competitors?
- Can I pressure the [bottle] company to produce more quickly, because of relationships minimize extra costs, and potentially commit to a larger run to get it done?
- Can I use unconventional sourcing, like eBay or Alibaba?
- Note: the SoftSoap example predates easy global e-commerce.
- Don’t panic. That is the facilitator of failure.
- Don’t be shy to discretely ask your network. Pay a finders fee to get your everything-thing.
- Don’t make a big public deal out of it. This doesn’t need to be a news story.
- Put the right people on it.
- Benefit from lessons learned, but without the Flame of Blame.
- Move on towards success.
This is just a sample of the issues involved and considerations for addressing them.
If you face a such a situation and would like to learn more about solutions, please contact us.