Introduction
VBF Tubing is the largest steel producer in the Netherlands. VBF produces welded steel tubing plants in three of its plants. These tubes find application in various fields ranging from structural components to gas, steam & liquid transmission. The major concern for VBF is their low inventory ($ 4.5 million) turning rate.
Process
i. Raw material preparation: Flat rolled steel is used as raw material, which is wound into rolls, unwounded, and then the start of one coil is welded against the end of previous coil. Continuous steel strip is then fed to tube forming & welding operation. ii. Tube formation: Two basis sizes called as ‘Mother Tubes’of 4 & 3 inch diameter. 4 inches in diameter accounted for 90% production. 3 inch mother tube produced over a 5 day period, only 3 times a year because it required a major changeover. iii. Stretch-reduction: Vast majority of 4 inch tubes are stretched & reduced in SRM machine into smaller dia. (0.5-2.5 inch). There is a production loss of 10 days when 4 inches are being cut. Production rates are minimum for smaller dials. iv. Finishing operations: Cost of storage of semi-finished tube is $400/ton. Various operations performed in finishing include zinc plating, threading tube ends, and adding caps before shipping to the customer.
Problem Statement
i. The inventory turnover is very low in spite of increasing demand. Excess holding of 3000 tonnes of finished goods indicates major problems in the sales operations. ii. 15 days (5 days thrice a year) for production of 3” mother tubes and 10 days for the cutting of 4” tubes (without stretching) allows only 211 days per year for the production of the major products (0.5 inch to 2.5 inches diameter tubes). iii. Production of smaller diameter tubes is slow due to extra forces involved in extreme size reductions. iv. High Inventory of semi finished goods (3600