Pan American Conference of Naval Engineering, Maritime Transport and Port Engineering

1

• Pan American Conference of Naval Engineering,
  Maritime Transport and Port Engineering
• WORLDWIDE SHIPBUILDING PRODUCTIVITY STATUS AND
  TRENDS
• Thomas Lamb
• Emeritus Research Scientist and Adjunct Professor
• Innovative Marine Product Development, LLC
• 425 742 2348
• nalamb_at_umich.edu

2

• SHIPBUILDING RESEARCH
• Different countries use different approaches.
• In Japan there is considerable cooperation
  between all shipyards to develop basic research
  and then groups of shipyards work together to
  implement it for example CIM.
• Korean shipbuilders are so large that they do not
  cooperate.
• European shipbuilders work together through joint
  EU funded programs.
• I will focus on shipbuilding productivity
  research.

3
STATUS OF SOME PERFORMANCE METRICS BY AREA/COUNTRY
Note The low of 25 for European shipyards is
due to cruise ships SC Inhouse Subcontracted
Labor
4

• PRODUCTIVITY
• It can be seen that shipbuilding productivity
  varies from company to company and country to
  country.
• Why is this and what are the factors that are
  impacting shipbuilding productivity?
• I will try to answer these questions.

5

• PRODUCTIVITY (Continued)
• What is PRODUCTIVITY?
• How is it measured?
• How can it be compared across industries and
  countries?
• If we can not answer any of these questions we
  cannot measure or compare our performance with
  others at a specific time or ourself over time.
• Therefore there has been research into
  productivity in most industries for many years

6

• PRODUCTIVITY (Continued)
• Productivity is the amount of output achieved for
  a given amount of input.
• The definition is easy, measuring it is not.
• Input could be materials, manpower and energy.
• Problem is that it is desirable to have a
  dimensionless measure.
• This can be achieved by converting all output and
  input to dollars.
• However, there are useful Productivity Metrics
  that are not dimensionless

7

• PRODUCTIVITY (Continued)
• The continuing challenge that most businesses
  face for the foreseeable future is improving
  productivity.
• It is a broad strategic issue. As such it must
  be of concern to government, management, and
  workers.
• However, it is managements responsibility to
  set and take the necessary action to accomplish
  productivity goals.
• In the 1940s and 1950s, the measurement of
  productivity focused on output, or the production
  of as much as possible for a given input.
• In the 1960s and 1970s, quantity was no longer as
  important as efficiency, or production at lowest
  cost.
• Today, productivity is effectiveness, which is a
  combination of right product, right time,
  quality, and efficiency.

8

• PRODUCTIVITY (Continued)
• Productivity focus is usually on direct labor,
  but management, engineering and indirect labor
  productivity has biggest leverage for
  improvement.
• Must develop ways of measuring management,
  engineering and indirect productivity.
• Labor productivity is a combination of labor
  performance, labor utilization, process
  efficiency, and planning effectiveness.
• Of the four, only the first one is directly
  controlled by the worker.
• The other three offer the greatest potential for
  productivity improvement and are solely dependent
  on management.

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• SHIPBUILDING PRODUCTIVITY
• Research has shown that the main reason for
  shipbuilding low productivity was inadequate work
  organization.
• Design for Production can help but if the work
  for the improved designs are not correctly
  organized the benefit will not be achieved.

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• SHIPBUILDING PRODUCTIVITY (Continued)
• Again research has shown that highly productive
  shipyards are characterized by Good work
  organization
• Clearly defined objectives and policy
• Short build cycles
• Overlapping and integration of structure
  construction and outfit installation
• An awareness and use by management of
  productivity measures
• Engineering documentation prepared to suit
  production

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• SHIPBUILDING PRODUCTIVITY (Continued)
• Good work organization is characterized by High
  utilization of area Clearly identified
  workstations Clearly identified interim
  products Packaged (Kitted) material Relevant
  and timely technical information Simply but
  effective planning systems Visual work station
  performance metrics at each station Worker
  self-measurement Good maintenance Good
  Housekeeping

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• PRODUCTIVITY MEASUREMENT
• A metric that could be called Overall
  Productivity is
• Annual Sales ()/Cost of Doing Business ()
• where cost of doing business includes labor,
  fringe benefits, overhead, material, utilities,
  facility and capital.
• Prefer to call this Business Transformation
  Efficiency
• Both of these measures can be obtained from a
  companys annual financial report
• However, as it includes many factors it is
  difficult to uses as a apple to apple comparison
  metric

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• PRODUCTIVITY MEASUREMENT (Continued)
• So a number of researchers have suggested that
  the best productivity measure is how much Value
  Added is produced for each dollar of input cost,
  as it focuses on cost directly controllable by
  the shipyard.
• The Value Added metric could be
• Annual Added Value in /
• Annual Cost to produce the Added Value
• (Annual Sales Annual Purchases)/
• (Number of Employees x Average hours worked
  annually x fully burdened labor rate in )

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• PRODUCTIVITY MEASUREMENT (Continued)
• However this type of information is NOT
  readily
• available to researchers, thus not a good
  metric.
• Also, however attractive Added Value/Man Hour
  appears, it has problems when comparing
  different
• countries with different consumer prices and
  labor costs.
• It is better to use a metric which has output
  and input measures that are internationally
  consistent.

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• PRODUCTIVITY METRICS
• Before performing any research into
  productivity it is necessary to develop an
  acceptable Productivity Metric.
• There is no universally accepted productivity
  metric.
• A metric should be based on a readily available
  parameter.
• Potential candidates for shipbuilding are Steel
  Weight, Lightship Weight, Displacement, and
  Gross Tonnage.
• The first four are all weights and would give
  similar results. The final candidate is a
  volume.
• Research and Experience has shown that weights
  are not a good parameter on which to base a
  productivity metric and volume fairs little
  better.

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USE OF DWT, GT AND CGT AS METRICS Country
No. of DWT GT
MH/DWT MH/GT MH/CGT Man Hours
Delivered Delivered

• Japan 114,000,000 19,000,000 14,000,000
  6.02 8.17 14.3
• Korea 91,000,000 21,000,000 14,000,000
  4.33 6.50 21.7
• Using 1994 Compensation Coefficients

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• PRODUCTIVITY METRICS (Continued)
• To over come this problem the concept of
  Compensated Gross Tonnage was developed. The
  compensation is to take into account ship
  type (complexity) and size.
• The concept has been developed by the
  Association of West European Shipbuilders and
  the Shipbuilders Association of Japan since
  1967 and was adopted by OECD in 1974 as a
  parameter on which to base national
  shipbuilding output comparisons.
• Compensation coefficients have been developed
  over many years through negotiation between
  major shipbuilding countries. They have been
  developed for most types of commercial ships
  BUT NOT FOR NAVAL SHIPS

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• GROSS TONNAGE (Cont.)
• The Gross Tonnage of a ship is a measure of its
  volume.
• Another name for the process is Admeasurement,
  which originated in England in the 16th century
  as a way to measure the earning capability of a
  ship, so to assign dock fees and taxes.
• It developed over the years into a very complex
  set of rules with exemptions and deductions, but
  not the same in every country.
• So the old measurement processes were replaced
  by an international measure in 1970 by IMO.

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• GROSS TONNAGE
• The International Gross Tonnage is given by
• GT K1 x V
• Where K1 is a coefficient and V is the molded
  volume of all enclosed spaces in the Hull and
  Superstructure

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• COMPENSATED GROSS TONNAGE
• The Compensated Gross Tonnage is given by
  multiplying the Gross Tonnage by a Compensation
  Coefficient.
• The Compensation Coefficient normalizes the
  Gross Tonnage to that of a 15,000 ton Deadweight
  General Cargo Ship
• Compensation Coefficients have been agreed by
  OECD and were presented in a table for different
  ship types and sizes
• New values and a new approach were published in
  2006 and cgt is now an equation Cgt A
  x GTB

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• COMPENSATED GROSS TONNAGE

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REDUCTION IN WORK EFFORT (SERIES EFFECT)
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• PRODUCTIVITY METRICS (Continued)
• The CGT has been used as the output measuremnt
  for a productivity metric in the form of
  Manhours/CGT (this is actually the
  inverse of Productivity)
  CGT/Man Year
• It was originally used for aggregate measures
  such as countries, but it has been refined to
  apply to individual shipbuilders.
• So it is recognized and accepted by many as a
  very important metric. However, its
  acceptance and use in some countries is very
  limited.
• This may be due in part to the fact that some
  of these countries build only naval ships and
  there are no universally accepted
  compensation coefficients for naval ships.

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• PRODUCTIVITY METRICS (Continued)
• How effective is the CGT approach as a
  productivity metric?
• If it was precise, for different ship types and
  sizes constructed in the same shipyard, the
  man hours per CGT would be the same.
• It can be seen from the next table that it is
  not precise, but it is a significant
  improvement over Steel Weight.
• It is acknowledged that compensation
  coefficients could be developed for steel
  weight, but this has not been done and any
  independently developed values would not have the
  international acceptance of the international
  shipbuilders such as is the case for CGT.
• Why use the Gross Tonnage? Because it is a
  readily available data point for every ship
  built in the world and with the International
  Tonnage convention it is standard in every
  country.

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COMPARISON OF PRODUCTIVITY METRICS
SHIP TYPE MH/ST. WT. MH/CGT

• VLCC 16 32
• SuezMax Tanker 19 22
• Product Tanker 27 20
• Chemical Tanker 46 36
• Bulk Carrier 19 20
• Container ship 4400TFEU 19 22
• Container ship 1800TFEU 28 22
• Reefer 43 34
• General Cargo 56 29
• Ferry 51 39
• Ocean Tug 105 31

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• PRODUCTIVITY VERSUS TECHNOLOGY
• Technology is only one part of the Productivity
  equation.
• Productivity is influenced by a combination of
  the following factors Competition
  Technology Facilities Planning
  Management capability Work organization
  Work practices Worker motivation
• Worker skills

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• PRODUCTIVITY VERSUS TECHNOLOGY (Cont.)
• In the 1978 Study Report it was stated
• Probably the single most important requisite to
  making major investments in facilities, is to
  have orders supporting economies of scale. High
  level technology calls for purpose designed
  jigs, fixtures and equipment, heavy lift
  capability, etc., which are not readily adaptable
  to small runs of different ship types, at least
  not efficiently. Thus if the market does not
  provide a basis for long range programming,
  individual shipyards must determine whether the
  highest level of technology is economical for
  them.
• THIS IS EQUALLY TRUE TODAY
• It is impossible to have the best world class
  productivity without adequate and sustained
  orders (annual throughput)

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• WHAT IS TECHNOLOGY
• Technology is the knowledge and processes used to
  provide products for human use.
• Technology is thinkware, software and hardware as
  well as their application processes.
• In shipbuilding it is the practices used to
  design and build ships and other marine products.
• Advanced technology shipbuilding is associated
  with production oriented design, block
  construction, very short berth erection times and
  ships that are virtually complete at launch.
• Advanced technology alone does not assure the
  production of internationally competitive ships.

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• TECHNOLOGY (BEST PRACTICE) LEVELS
• LEVEL PRACTICE
• 1 Traditional shipbuilding practice (Pre 1960) -
  move to completely welded ships, combination of
  blocks and assembly at erection, multiple
  berths, small cranes (lt50t) , most
  outfitting after launch, and manual
  operating systems
• 2 Improved Traditional shipbuilding practice
  (1960-65) modernized facilities, numerical
  controlled burning machine(s), fewer berths or a
  building dock used, larger cranes (gt50t lt250t),
  some pre-outfitting, computer based
  lofting, and some computer based operating
  systems

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• TECHNOLOGY (BEST PRACTICE) LEVELS (Cont.)
• LEVEL PRACTICE
• 3 First Modern shipbuilding practice
  (1962-65) new shipyard with large capacity
  cranes (gt350 t), single dock,
• covered steel fabrication through block
  construction shops, large degree of
  mechanization and extensive use of computers for
  design and planning
• 4 Second Modern shipbuilding practice
  (1975-85) - very large shipyards, very large
  building docks, covered building berths,
  continuous improvement, Grand Block
  construction, large lift capacity Goliath cranes
  (gt800 t), advanced zone outfitting with ship
  virtually complete at launch.

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• TECHNOLOGY (BEST PRACTICE) LEVELS (Cont.)
• LEVEL PRACTICE
• 5 Computer Based shipbuilding practice
  (1970-95) developed from level 4 through
  application of computers enabling integration of
  operating systems, effective use of CAD, CAPP
  and CA material planning, improved quality
  control through mastering dimensional and/or
  accuracy control and increased automation
  (robotic welding/ automated pipe shops).
• 6 2000 World Class shipbuilding practice
  (2000 present)
• refurbished or new shipyard (some completed
  covered) with material movement by conveyors
  minimizing crane lifts, large Grand Blocks and
  even ULTRA Blocks to 3000t, maximum use of
  robotics for welding and part assembly,
  innovative solutions to overcome challenges.

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• TECHNOLOGY BENCHMARK ELEMENTS
• A. Steelwork Production
• B. Outfit Production
• C. Other Pre-erection
• D. Ship Construction Outfit Installation
• E. Layout Environment
• F. Amenities
• G. Design, Drafting,Production Engineering
  Lofting
• H. Organization Operating Systems

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TECHNOLOGY BENCHMARK
Element Typical
Component Values
Europe Japan Korea China

• A. Steelwork Production 2.91 3.9
  3.4 2.8
• B. Outfit Production 3.30 4.2
  4.0 3.5
• C. Other Pre-Erection 3.83 4.3
  4.0 3.2
• D. Ship construction 3.18 4.5
  3.98 3.1
• E. Layout environment 2.94 4.0
  3.31 2.5
• G. Design, Drafting, etc. 3.45 5.0
  4.33 3.5
• H. Organization/ Operating 4.04 5.0
  4.67 2.5
• OVERALL LEVEL 3.40 4.43
  4.00 2.88

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• PRODUCTIVITY PREDICTIONS
• A shipbuilding productivity predictor based on
  readily available shipyard characteristics was
  developed and has been modified to suit new CCGT
  and the shipyards visited for this project as
  follows
• PD 150 BP -3.00 TE0.27 PR0.60 DP0.41 VI
  -0.66 ST -0.08
• This equation would predict the world class
  productivity that a shipyard should be able to
  attain based on its values for the parameters.
• It could also show how much improvement in its
  Best Practice Rating a shipyard would need to
  attain a specific productivity, keeping all the
  other parameters the same.

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PRODUCTIVITY PREDICTIONS (Continued) PD
Predicted Productivity CGT/MH BP The Best
Practices Rating of the shipyard TE The total
number of employees (TE) includes everyone
employed by the shipyard from President
to janitor and where in house subcontracted
labor is used it includes them also. PR
The Production Ratio is the ratio of total number
of employees (TE) divided by the number
of production workers (PE). VI Vertical
Integration is the ratio of value added by the
shipyard versus the total ship value
and is defined by the percentage of labor cost to
total cost. DP Dual Purpose Trigger 1 if a
shipyard is building commercial and naval
ships only, and the value is DP2 for a yard
producing commercial as well as naval
ships. ST Ships delivered/Ship types, is a
parameter that takes into account the
number of total ships built compared to number of
series ships built over a given time,
such as three years.
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PRODUCTIVITY PREDICTIONS (Continued)
37

• RECENT STUDY RESULTS

2006
38
DISECONOMIES OF SCALE
ECONOMY OF SCALE
DISECONOMY OF SCALE
39
(No Transcript)
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COPPE BENCHMARK MODEL TO EVAULATE A SHIPYARDS
PRODUCTIVITY
This recent research (2006) investigated what
characteristics could be used to evaluate a
shipyards productivity. It was performed by
COPPE for the Brazilian Minister of Technology
and TRANSPETRO. The method takes into account
shipyard indices that measure capacity,
technology level, shipbuilding environment,
production time, and quality, resulting in the
productivity measure CCGT/MH using the new CGT
compensation coefficients which take into account
series production.
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COPPE BENCHMARK MODEL TO EVAULATE A SHIPYARDS
PRODUCTIVITY (Continued)
Comparing the efficiency of shipyards is a
difficult task due to the complexity of different
shipbuilding approaches and organization models.
The fact that shipyards are subject to specific
environments also contributes to increase the
difficulty of efficiency comparisons. This
research objective was to develop a model to
benchmark shipyards relative productivity based
on Data Envelopment Analysis (DEA) technique. DEA
is a technique originally presented by Charnes
et. al. (1978) to evaluate the relative
efficiency of Decision-making Units (DMUs)
through the consideration of multiple inputs
(i.e. resources used) and multiple outputs (i.e.
products and/or performance obtained). The
technique is based on Linear Programming (LP)
where the efficiency is defined as the ratio of
the weighted sum of the m outputs to the weight
sum of the n inputs
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CONCEPTUAL BENCHMARK MODEL
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BENCHMARK MODEL STRUCTURE
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SHIPBUILDING INDUSTRIAL ENVIRONMENT INDEX (SIEI)
The methodology used to estimate the SIEI was
based on AHP technique as commented above. An
example of the pair wise comparison. For each
element of the AHP model a pair wise comparison
was applied.
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HIERARCHICAL STRUCTURE OF AHP MODEL
46
MODEL FINAL DATABASE
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CALCULATION OF PRODUCTIVITY FOR DIFFERENT SERIES
SHIPBUILDING
Note CCGT/MH values shown are 1000 x
CCGT/MH The production profile indicated as
1,2,3 means the first three vessel of a series of
similar ships and CCGT correction factor for this
situation is equivalent to 0,91. The production
profile 1,1,1 means that the shipyard is building
different ships, or on other words, that series
production is not being considered. For this
situation there is no corre ction to be made and
the CCGT factor equals 1. The production profile
11,12,13 means that the shipyard is building the
11th, 12th and 13th vessels of a series of
similar ships and the CCGT is equivalent to 0,64.
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PRODUCTIVITY REQUIRED TO MEET THE KOREAN
ISO-COST CURVE
Note CCGT/MH values shown are 1000 x CCGT/MH
49

• RECOMMENDED REFERENCES
• Productivity in Shipbuilding, Vaughan, R.,
  NECIES, 1983
• Improving Productivity in a Japanese Shipyard,
  Sekiya, O., NECIES 1990
• The Role of Industrial Engineering in Shipyard
  Production Services, Todd, F. B., WEGEMT 1980
  Managing Ship Production
• Flexible Production Indices, National
  Shipbuilding Research Program, U.S. Department of
  Transportation, April 1987
• "EEC Shipbuilding Industry Study on Costs and
  Prices," Arthur Anderson, November 1993
• "Report of a Study into the Competiveness of
  European Community Shipyards," KPMG Peat Marwick,
  October, 1992
• Productivity Measures as a Tool for Performance
  Improvement, Bruce, G. J., and Clark, J., RINA
  Spring Meeting 1992
• An Assessment of Brazilian Shipbuilding
  Competitive Potential, Pires, Jr., Dr. F. C. M.,
  Journal of Ship Production, May1999, 152

50

• RECOMMENDED REFERENCES (Continued)
• A Review of the use of Compensated Gross Tonnes
  for Shipbuilding Performance Measurement,
  Bruce, G. J., Journal of Ship Production, 222,
  May 2006
• Requirements and Assessments for Global
  Shipbuilding Competitiveness, Storch, R., Clark,
  J., and Lamb, T., 1995, NSRP
• A Productivity and Technology Metric for
  Shipbuilding, Lamb, T., 1998, SNAME Great Lakes
  Great Rivers Section Meeting, Cleveland, Ohio,
  January
• A Shipbuilding Productivity Predictor, Lamb, T,
  and Hellesoy, A., 2001, Ship Production
  Symposium, June 13 - 15, Ypsilanti, Michigan
• Methodology Used to Calculate Naval CGT
  Factors, Craggs, J., Bloor, D., Tanner, B., and
  Bullen, H., Ship Production Symposium, 2004
• Naval CGT Coefficients and Shipyard Learning,
  Craggs, J., Bloor, D., Tanner, B., and Bullen,
  H., Ship Production Symposium, 2005