Do you work for Tesla or something? Your reasoning is so corporate that I would think that you do. What kind of consumer buys something major as a car and accommodates production line and configuration turnover time while happily accepting the delays? Meanwhile seeing another customer who bought the car a week later get their car first??? From a consumer perspective, IT IS DISRESPECTFUL. And no, I'm not talking about cases where people did not complete their profile or financing. People who completed their profile and designated payment immediately were still shafted by Tesla with other customers who ordered weeks later get them first. The fact that Tesla is skipping people's orders just because they want to keep making the most common configuration (White/Black) for quick buck IS BEING DISRESPECTFUL.
[I know this is long, but I’m honestly interested in your answers to my questions.]
I’m glad you asked and that you feel this way because it gives you and I a chance to continue this conversation while we twiddle our thumbs waiting for our cars. Plus, it allows me to think this through and gives the true experts in the forum a chance to correct me.
No, I don’t work at Tesla but I have a smidgen of OR studies and enough mfg & engineering experience to think I know how a factory works. So let’s do a thought experiment and see what you would do. (Of course, my numbers are for illustration only, but the process is real.)
You purchase the Acme Car Company. I’ve been the Acme factory mgr for the past 10 years. My objective has been factory efficiency. Your objective is to respect your customers by scheduling orders in a strict FIFO sequence.
At the time of your purchase of the Acme Car Company:
-- We have one paint line in the factory (of course factories may have more but my point remains the same.)
-- We offer 5 colors.
-- The factory works five days a week, 11 hours per day.
-- We batch paint colors: On Mondays we paint white, Tuesdays blue, Wednesdays grey, etc.
-- We mfg 10 cars / day, 50 cars per week (i.e., one car per hour of mfg time.)
-- It takes one hour to reconfigure the paint line from one color to the next. That is done in the 11th hour of each day. From a cost acc’t perspective, the COGS of each car built that day is burdened with 1/10th of that downtime.
The day after you purchase the company you tell me to mfg the cars in the sequence in which customers ordered. You then ask me how many cars we will we build in a week. How many do you think? To give you an answer I ask you to predict the quantity of each color and the pattern in which the orders will arrive. I ask you how many times will I have to change paint colors in a day.
If you can answer those questions, I’ll tell you two things: 1) The number of cars we can build / week. 2) Whether or not you, I and the rest of the workers will be able to put food on our table within a month.
But wait, don’t answer yet.
We’ve got to layer on a little accounting and the fact that twenty other people funded your purchase of Acme Car Company. Those 20 are shareholders like you. It is now March 27, near the end of the fiscal quarter. Your shareholders are pressuring you for a return on their investment with a showing of Q/Q growth rate of 8%.
But, FASB regulations stipulate that Acme’s revrec occurs at customer delivery, not the factory exit.
-- Our car carrying trucks handle 10 cars at a time.
-- Delivery to NYC is 5 days from build date.
-- Delivery to SF is same day as build date.
All 10 of the SF customers ordered before the 10 NYC customers. If on March 27 you build the 10 SF customer cars and on March 28 you build the 10 NYC cars, the NYC customers will not take delivery before quarter end and your Q/Q growth will be an anemic 2%.
Now, what is YOUR decision? Do we fulfill your objective of respecting customers and build and deliver according to the sequence in which we receive customer orders? Or not?