PipeQueen Ltd was founded by Mary and Saba 10 years ago. The company specialises in manufacturing PVC

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PipeQueen Ltd was founded by Mary and Saba 10 years ago. The company specialises in manufacturing PVC pipes. Over the years, PipeQueen Ltd has expanded from one production line with only one working shift each day to three production lines operating two shifts each day. The customer base has also expanded from a few small construction companies to several medium and large size construction companies. Although PipeQueen Ltd also supplies PVC pipes to some hardware shops in the city the majority of the sales come from the corporate construction customers. The manufacturing plant of PipeQueen Ltd operates, on average, 330 days while the showrooms are open 300 days in a year.

Product Background

PVC pipes are commonly used for manufacturing sewage pipes, water mains and irrigation. Possessing very long-lasting properties, PVC pipes are easy to install, lightweight, strong, durable and easily recyclable, making them cost-efficient and sustainable. The smooth surface of PVC pipes also encourages faster water flow due to lower amounts of friction than piping made from other materials such as cast iron or concrete. PVC pipes can also be manufactured to varying lengths, wall thicknesses and diameters, according to some industry standards. PipeQueen Ltd is producing PVC pipes with SIRIM certification (Manufacturing occurs in Malaysia) (Malaysian Quality Standards Certification. For more information on SIRIM, please refer https://www.sirim-qas.com.my/our-services/product-certification/product-certification- scheme/).

Despite having a similar manufacturing procedure to most plastic piping, PVC pipes have intrinsic characteristics that pose additional challenges to pipe manufacturers both in terms of production, as well as positioning their products on the market. Due to the nature of PVC plastic, PVC extruders are subjected to high amounts of friction (please see ‘Production Process’ below for a better understanding). This, sometimes, leads to customer complaints and rejection of pipes with friction if not properly inspected at the finishing stage. So, temperature control and having the right mixture of resin and filler is very important. Since the implementation of Total Quality Management system 5 years ago, PipeQueen Ltd has managed to reduce the percentage of product defects. The success of obtaining SIRM certification 2 years ago is strong evidence of the quality that PipeQueen Ltd can provide to its customers.

Production Process

PVC pipes are manufactured by extrusion of raw material PVC, and generally follow the same steps of typical pipe extrusion operations:

Feeding of raw material powder called resin and filler into the PVC twin screw extruder;
Melting and heating in multiple extruder zones;
Extruding through a die to shape into a pipe;
Cooling of the shaped pipe (by spraying water on the pipe); and
Cutting of PVC pipes to the desired length.
The raw materials for producing PVC pipes are resin and filler (mainly calcium carbonate, or commonly known as stones!). The standard mix is 1 kilogram (kg) of resin with 1 kilogram of filler. (For a better picture on how PVC pipes are made, you may look up on YouTube. For example, https://www.youtube.com/watch?v=ds0GRSgb5Gk).
The production processes are mostly automated, with workers feeding the raw materials at the beginning of the process, monitoring the temperature in the process and checking the final product for any obvious defects before packing and despatching to customers. All workers are trained and are capable of doing all these tasks competently.
Raw Material Inventory - Resin
The main material for the manufacturing of PVC pipes is a powdery material called PVC resin. It comes in bags of 25 kg each. The maximum daily consumption of resin is 288 bags. However, this is depending on the sizes of the pipes produced. The machines in the production lines will not be able to run at full capacity if they are producing 2” pipes due to possible over-heating. The process loss is between 1% - 2%, depending on the sizes of the pipes produced. Bigger size of pipes has a higher chance of losses due to the higher chance of friction. There are three local suppliers of PVC resin. The lead time is between 2 to 3 days.
Better quality of resin can be imported from neighbouring countries. Such kind of resin can make better quality of PVC pipes where there will be less friction. However, the lead time will be increased to 5 days. In addition, the exchange rate of Ringgit (RM) against the currencies of the neighbouring countries is very volatile. PipeQueen Ltd keeps an average of 1,000 bags of resin in the store.

Market conditions

Currently there is a large PVC pipe manufacturer, Tio Rinto Ltd , who is owned by a large group of companies with main businesses in the construction industry in the state. In addition to Tio Rinto Ltd , there are five other PVC pipe manufacturers that are of similar size to ABC Ltd. The demand for PVC pipes is beyond the capacity of these manufacturers. Some customers occasionally face shortage of PVC pipes, causing them to switch suppliers. Tio Rinto Ltd mainly supplies its pipes to its group of companies, leaving the rest of the market to the other PVC pipe manufacturers. Figure 1 below shows the distribution of the market shares of these PVC pipe manufacturers.

Market Share of the PVC Pipe Manufacturers

Market Share of the PVC Pipe Manufacturers 30% . Tio Rinto Ltd PipeQueen Ltd 55% Others 15%

Differentiating from Competitors

Since PVC piping is one of the most used types of piping, there is a lot of competition between manufacturers. It is therefore of paramount importance for PVC pipe producers, such as PipeQueen Ltd, to differentiate themselves from their competitors, both in terms of delivering consistent product quality, as well as offering a wide range of products at competitive prices. Such differentiation can only be achieved through the use of world class manufacturing equipment, that maximizes productivity while minimizing costs and has the capacity to produce a wide variety of PVC pipe sizes.

Providing A Comprehensive Product Range

PVC pipes come in various sizes and diameters, and for each size exists a variety of pipe fittings. Therefore, it is highly desirable for PVC pipe manufacturers to present the market with a

comprehensive range of products. At the moment, only Tio Rinto Ltd has sophisticated manufacturing facilities that manufactures both PVC pipes as well as a wide range of pipe fittings.

PipeQueen Ltd has invested about RM1,000,000 for each production line two years ago. If the company wants to increase its range of products to include pipe fittings, it will require a major restructuring in one of its three production lines, with an investment of about RM800,000. With the current pandemic situation, although banks are offering very low interest rate to finance the new machines, the disruption in the logistic systems might pose challenges in getting the new machines needed to Kuching. In addition, the expected negative economic growth in the country might hamper the growth in the construction industry where all PipeQueen Ltd’s customers are operating in.

Required:

(a) Using Porter’s Five Forces and the information provided in the case, analyse the industry that PipeQueen Ltd is operating in.

(b) Analyse PipeQueen Ltd’s inventory system in managing the resin inventory and discuss how the use of relevant modern manufacturing systems can help better manage the inventory system
3. Discuss how the implementation of TQM system in PipeQueen Ltd helped the company to stay competitive in the market.