Editorβs note: This article originally appeared in Wired. Prior to joining the Eclipse team, Greg was Teslaβs VP of Production where he led growth from low volume Roadster production to the fully integrated manufacturing of the Model S andΒ X.
While working at Tesla, I always enjoyed talking to people after they finished a factory tour. As much as they raved about the amazing automation, gigantic presses, and hundreds of robots, the reality was they only saw half of the actual manufacturing that was taking place in the building. Unknown to most visitors, the factoryβs βsecretβ second floor built many of Teslaβs battery, power electronics, and drive-train systems. It was home to some of the most advanced manufacturing and automation systems in the company. Some of the robots moved at such high speeds that their arms needed to be built from carbon fiber instead ofΒ steel. Though it was obvious why we were building the systems at the heart of our product, such as the battery and motors, many people had difficulty understanding why we manufactured high-voltage cables, displays, fuses, and other smaller systems. Had we spent too much time inhaling the βwe know betterβ fumes of Silicon Valley? Why take on the madness of not only starting a new car company but also making it more vertically integrated than any car company since the heyday of the Ford Rouge plant in the lateΒ 1920s? The answer is simple: Our goal wasnβt to build the best electric vehicle. It was to build the best premium car in the world that just happened to be an EV. This meant integrating technologies that were not readily available. It also meant pushing the boundaries of what was considered βnormalβ for the design and manufacturing of a car. Furthermore, we needed to do this on an accelerated timeline that most automotive suppliers could not fathom. So, in many cases, this meant building components ourselves. Building your own core components has obvious benefits, but there are some other advantages that you might not immediately recognize. Speed is the first advantage. Launching a new product presents a team with thousands of small decisions. If you choose to outsource a component, you often need to send people to live in the factory for a prolonged period of time. This means accepting that itβs going to be harder to make choices and to influence outcomes. First, youβre operating within someone elseβs environment. Second, you have far less of the product design team available for on-the-spot consultation and decision-making. Nothing beats the ability to have the full engineering team walk into the manufacturing area every day, talk to the people building the products, and gain insights on how to improve. Factory information has a very short half life. Despite what many contract manufacturers promise, the reality of outsourced manufacturing is that you are getting on an airplane to solve problems you could otherwise solve by walking across your building. The second reason building your own products makes sense is that it enables you to drive faster cycles of learning and improvement. The idea of bundling improvements and building them into the next platform every three to four years (the typical development cycle for the car industry) made absolutely no sense to us at Tesla. Rolling many improvements into a package often means that some items get delayed waiting on some other item thatβs essential to their production, which results in a lower cumulative improvement rate. Our approach at Tesla was to adopt improvements as soon as they were ready. This meant we were implementing up to 50 changes per week. We often joked that if you wanted to know the βmodel yearβ of your Tesla, you needed to look at the individual carβs VIN number. Despite mastering real-time changes to products, this approach created minor inefficiencies in our manufacturing system. Yet what was more important: extracting a couple percentage points of manufacturing efficiency, or building a product that was rapidly improving and pulling farther ahead of the competition? Nothing beats the speed and ability to change like having your own manufacturing operation. Finally, when you build something yourself, you develop a far deeper understanding of your product and how to improve itβββand the pain of doing it yourself gets transmuted into gold. A great example is the innovation that allowed Tesla to make possible. One of the constraints in increasing the power output of the battery in the early Model S was the safety fuse and switch system that was integrated into the pack. A fuse? How hard could it be to find a fuse that enables the increased current levels needed for this performance? It turns out that it is really hard to build a fuse that allows a massive amount of current to flow during normal operation while also protecting the car in milliseconds if thereβs an abnormal spike in current flow. Building fuses in-house helped us solve this problem. The coupling of deep product knowledge with a fundamental understanding of the underlying physics allowed us to do what most people thought was impossible. As a result, Tesla drivers everywhere are grinning slyly as they shock their passengers with the thrill of a 0-to-60 sprint in under 2.8 seconds. Is building your own product always the right answer? Certainly not. If youβre building a product that leverages commodity items and will not change significantly, then it doesnβt make sense to build yourself. Yet if youβre building a product that contains unique intellectual property or has a high change velocity, it can be the bestΒ choice. A layered capacity strategy is often the right approach. Start by building the product with your own small manufacturing operation, ideally in the same building as your engineers, designers, and product teams. Use this pilot line to learn quickly, iterate, and develop an understanding of what it takes to build your product. As you then scale beyond this initial capacity, layer on outside contract manufacturing capacity. This strategy has several advantages. First, you gain the knowledge to keep the contract manufacturers honest. Need to make a small change to the product? Test it on your internal pilot line and then deploy it to your contract manufacturer. This short-circuits arguments over how much additional labor is needed because you already have direct experience with the incremental costs. Second, this initial line becomes your platform for developing the next-generation product and building samples. With a layered capacity approach, you enjoy the benefits of fast cycles of learning while also leveraging the more efficient supply chain of larger contract manufacturers. Why am I so passionate about this? Early in my career, I was a participant in the offshoring of US manufacturing. We built factories that were pushing the state of the art in several areas of technologyβββyet all of it was outside of the US. Because of this trend, American industry lost some of the fundamental knowledge that comes from building your own products. For too long now, a fear of has gripped enterprises and entrepreneurs. To solve many important problems, you need to touch the physical world. Disease, energy, infrastructure, mobility, and other complex challenges require multidisciplinary solutions that include hardware. We need bold founders to tackle these important problems. The time has come for us to build things againβββand recapture the knowledge and competitive advantage it creates for our businesses and communities. Disease, energy, infrastructure, mobility, and other complex challenges require multidisciplinary solutions that include hardware. We need bold founders to tackle these important problems. The time has come for us to build things againβββand recapture the knowledge and competitive advantage it creates for our businesses and communities. βββββο»Ώβο»Ώββββββο»Ώο»Ώβο»Ώβββββββββο»Ώββββββο»Ώββββββο»Ώβββββββο»Ώβο»Ώββββββο»Ώββββββο»Ώβββο»Ώββββο»Ώβββββββο»Ώο»Ώββββββο»Ώββββββββββο»Ώβββββββββββββββο»Ώββββββββο»Ώο»Ώβο»Ώβο»Ώβο»Ώβββο»Ώββββββββββββο»Ώο»Ώββο»Ώο»Ώββββββο»Ώββο»Ώββββββββο»Ώββο»Ώββββο»Ώο»Ώβββββββββββββο»Ώββββο»Ώο»Ώββο»Ώβββο»Ώο»Ώβββββββββο»Ώο»Ώββο»Ώβββο»Ώβββββββο»Ώβο»Ώββββββο»Ώββο»Ώβββββββο»Ώββββββββο»Ώο»Ώββο»Ώββο»Ώβο»Ώβββββββββο»Ώο»Ώβββο»Ώββββββο»Ώβο»Ώβο»Ώβο»Ώββο»Ώββο»Ώβββο»Ώβββο»Ώβββο»Ώβο»Ώβο»Ώβββο»Ώβββο»Ώβββββββο»Ώο»Ώβββββββο»Ώβββο»Ώο»Ώβββο»Ώβο»Ώβο»Ώβο»Ώβββββββο»Ώβββββββο»Ώο»Ώββββο»Ώββο»Ώο»Ώββο»Ώββο»Ώββββββββο»Ώββο»Ώβββββββο»Ώββββββββο»Ώο»Ώβββο»Ώβββββο»Ώβββββββο»Ώβο»Ώβββββββββο»Ώβο»Ώβββββββββο»Ώβββο»Ώβββο»Ώβββο»Ώβββο»Ώβββο»Ώβββββββββο»Ώβο»Ώβο»Ώβββο»Ώβο»Ώβββο»Ώβββο»Ώβο»Ώβο»Ώβββββββο»Ώβββο»Ώβββββββο»Ώββββββββο»Ώββββο»Ώββββββββββο»Ώββββββο»Ώββββββββο»Ώββββββο»Ώββββββββο»Ώο»Ώβββο»Ώβββββο»Ώβββββββο»Ώβο»Ώβββββββββο»Ώβο»Ώβββββββββο»Ώβββο»Ώβββββββββββο»Ώβββο»Ώβο»Ώβο»Ώβββββββο»Ώβββο»Ώβββο»Ώβββο»Ώβββββββο»Ώβο»Ώβββββο»Ώβββο»Ώβββββββο»Ώββββββββο»Ώββο»Ώβββββββο»Ώβββο»Ώβββο»Ώο»Ώο»Ώβββββββββο»Ώβο»Ώβββββββββο»Ώββββο»Ώββο»Ώο»Ώββββββο»Ώβββββββο»Ώβο»Ώβο»Ώβββο»Ώββββββββββββο»Ώο»Ώβββββββββββββο»Ώο»Ώβββο»Ώββββββο»Ώβο»Ώβο»Ώβο»Ώββο»Ώββο»Ώβββο»Ώβββο»Ώβββββββο»Ώβββο»Ώβββο»Ώβββββββο»Ώο»Ώβββββββο»Ώβββο»Ώο»Ώβββο»Ώβββββο»Ώβββββββο»Ώβββββββο»Ώο»Ώββββο»Ώββο»Ώο»Ώββο»Ώββο»Ώββββββββο»Ώββο»Ώβββββββο»Ώββββββββο»Ώο»Ώβββο»Ώβββββο»Ώβββββββο»Ώβο»Ώβββββββββο»Ώβο»Ώβββββββββο»Ώβββο»Ώβββο»Ώβββο»Ώβββο»Ώβββο»Ώβββββββββο»Ώβο»Ώβο»Ώβββο»Ώβο»Ώβββο»Ώβββο»Ώβο»Ώβο»Ώβββββββο»Ώβββο»Ώβββββββο»Ώββββββββο»Ώββββο»Ώββββββββββο»Ώββββββο»Ώββββββββο»Ώββββββο»Ώββββββββο»Ώο»Ώβββο»Ώβββββο»Ώβββββββο»Ώβο»Ώβββββββββο»Ώβο»Ώβββββββββο»Ώβββο»Ώβββββββββββο»Ώβββο»Ώβο»Ώβο»Ώβββββββο»Ώβββο»Ώβββο»Ώβββο»Ώβββββββο»Ώβο»Ώβββββο»Ώβββο»Ώβββββββο»Ώββββββββο»Ώββο»Ώβββββββο»Ώβββο»Ώβββββββο»Ώο»ΏβAmerican industry lost some of the fundamental knowledge that comes from building your own products. 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