Turning Adversity Into An Advantage: Borusan Mannesmann U.S.

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This manufacturer is making a good thing out of a tough market.

Borusan Mannesmann U.S. knows a little something about steely determination. Shortly after the steel pipe and tube manufacturer opened its flagship plant in Houston, a vicious oil and gas industry downturn quickly gutted the potential that drew Borusan to the U.S. oil country tubular goods (OCTG) market. In January 2012, there were 2,008 working rigs in the market for OCTG casing and tubing pipes. That number steadily declined over the next three to four years, plummeting to 404 active rigs in the summer of 2016, the lowest count recorded in recent history.

Borusan manufactures specialty carbon steel tubing using the electric resistance welding (ERW) process, which uses a high frequency current to join two sides of a hot-rolled steel sheet into a tube, as opposed to the conventional solder and flux welding method known as SAW.

“Now imagine that the company that just invested over $150 million in a state-of-art facility and got its first production pipe made in December of 2014 has to now deal with a market that is shrinking, and competition just got tougher with players who already had operating facilities in the U.S.,” Dhaval Trivedi, the firm’s supply chain director, told BOSS.

With the market at 22 percent of the early 2014 demand, Borusan did the unimaginable—they doubled down.

Keeping the Steel Rolling

As the company’s worst case scenario unfolded, Trivedi was considering taking a role with the company. During an interview with a board member, he was assured that the firm was pledged to the new facility, the market, and its customers. That declaration helped him decide to join the firm.

“When you have management that has a strong will and commitment to make sure we navigate through the tough times, it makes your job enjoyable, but of course more challenging—challenging because now you are part of that team which is responsible for making sure of a safe landing,” he said.

As the person in charge of managing procurement and logistics, Trivedi was tasked with finding the right solutions to the organization’s supply chain issues. Driven by Six Sigma, Borusan applied statistical analysis to every one of the problems they were facing, from operational efficiency to maintenance and upkeep, improving production yields, acquiring cost-effective supplies, and aligning themselves with reliable suppliers.

“We would go through root-cause analysis, the fishbone diagrams, the pareto analysis and things like that to find every single opportunity that would make us more sustainable,” Trivedi revealed. “At this point, we are not talking about making money, we are just talking about minimizing loss.”

Throughout, the pipe mill kept running.

“When demand dried up, most of the players in the market had a huge pipe inventory on the ground that had no home,” he said.

Casing and tubing strings are an elemental part of well design, and Borusan manufactures specialty string designs that many surviving E&P companies would require to manage their projects despite market conditions.

“As our customers tried to find efficiencies in their operations to cope with reduced oil prices, we made ourselves available to cater to their needs,” Trivedi noted. “And I am glad that we did because that makes us an even stronger player and pipe supplier in the market.”

Driven by Determination

“With the economic downturn in our industry, it was of paramount importance that we had the competitive raw material supply and lowest possible logistics costs associated with that,” Trivedi stated.

Boldly, Borusan entered into long-term commitments with domestic steel producers as competitors were terminating theirs.

“We ventured into that commitment because we chose the right partners,” he said. “We knew that our commitments were the beginning of great partnerships where our steel suppliers would provide us the competitive steel in a timely manner so we didn’t have to worry about longer lead times.”

In addition to reworking logistics processes, the company invested in an RFID and QR code pipe tracking system, developed in-house with the support of their core IT group.

“This has made our inventory management system very robust as well as 99.9 percent accurate.”

The change slashed inventory time from months to days.

In addition to measuring other important KPIs for all aspects of the business, every day Borusan measures the “first-time prime” indicator, which shows that a pipe can be sold right off the line without the need for rework. Yield rates—how much steel is lost each time a prime pipe is made— are closely monitored.

“Over the last two years we have improved our yield performance by 8 percent, which is very remarkable for our industry.”

Delighting Customers Through the Downturn, and Beyond

When it comes to customer satisfaction, Borusan is at the top of its game as the first company in the global steel pipe sector to achieve the ISO 10002: 2004 Customer Complaints Management Certificate.

In 2017, American Metal Market named Borusan Mannesmann U.S. “Tube and Pipe Producer of the Year” for the second consecutive time. Trivedi pointed to two specific qualities that make the company’s products so desirable.

“Repeatability and Reliability. These two aspects are non-negotiable for Borusan as a company,” he stressed.

As expected, Borusan is in full compliance with the American Petroleum Institute (API) criteria for the pipe they manufacture, but by taking a statistical approach to the manufacturing process, they are able to narrow down the variations within those criteria to consistently produce high-quality pipe.

“We take our commitments very seriously, and our on-time delivery performance has been over 95 percent with the goal of 97 percent,” he added. “Being reliable and repetitive makes us most dependable, which is what our customers want.”

Last year, the company invested in expanding their pipe storage capability, and plan to make major investment this year to handle their growth.

“We are in the middle of finalizing the purchase of new equipment with a highly automated pipe handling system for our pipe threading operations. This investment will increase our sales by 30 percent and enable us to support more complex premium and semi-premium threads,” he reported.

Proof, once again, that tough times don’t last. Tough companies do.