2—
State of Technology Application in U.S. Shipbuilding

Introduction

This chapter discusses four major areas of shipbuilding technologies (which sometimes overlap): business-process technologies, system technologies, shipyard production-process technologies, and technologies for new materials and products. These categories are useful for considering investments in technology, but in operation they interact and overlap. "Technology" is discussed in its full sense, that is, as a practical application of knowledge (or capability thus provided) or a manner of accomplishing a task, especially using technical processes, methods, or knowledge. The concept of technology is interpreted in the larger sense because, as the discussion in this chapter indicates, the biggest challenges to a genuinely competitive U.S. industry are often matters of "soft technology," such as better marketing and cost-estimating techniques, as well as "hard technology," such as new hull designs. Most of the information in this chapter was obtained by the committee through the technology workshop and individual presentations made to the committee, as well as from the committee members' personal experience.

Business-Process Technologies

Marketing

Beginning in the 1980s with the elimination of construction differential subsidies, U.S. shipbuilders focused increasingly on high-technology Navy ships. Fewer than 20 commercial ships have been ordered from U.S. yards since 1982,



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--> 2— State of Technology Application in U.S. Shipbuilding Introduction This chapter discusses four major areas of shipbuilding technologies (which sometimes overlap): business-process technologies, system technologies, shipyard production-process technologies, and technologies for new materials and products. These categories are useful for considering investments in technology, but in operation they interact and overlap. "Technology" is discussed in its full sense, that is, as a practical application of knowledge (or capability thus provided) or a manner of accomplishing a task, especially using technical processes, methods, or knowledge. The concept of technology is interpreted in the larger sense because, as the discussion in this chapter indicates, the biggest challenges to a genuinely competitive U.S. industry are often matters of "soft technology," such as better marketing and cost-estimating techniques, as well as "hard technology," such as new hull designs. Most of the information in this chapter was obtained by the committee through the technology workshop and individual presentations made to the committee, as well as from the committee members' personal experience. Business-Process Technologies Marketing Beginning in the 1980s with the elimination of construction differential subsidies, U.S. shipbuilders focused increasingly on high-technology Navy ships. Fewer than 20 commercial ships have been ordered from U.S. yards since 1982,

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--> and all of these have been for the Jones Act trade. The recent announcement by MARAD and Newport News Shipbuilding about contracts financed under MARAD Title XI loan guarantees to build several tankers for a foreign owner is the first contract to build a foreign-flag ship in a U.S. shipyard since the 1950s. There have been several other promising announcements for foreign-flag commercial ships, but no other contracts from U.S. owners have been announced to date. Because they are only now beginning to market commercial products overseas, U.S. shipbuilders are seriously deficient in commercial marketing expertise relative to their competitors, who have been successfully doing so for many years. In a recent major gaming exercise, representatives of U.S. shipbuilders, not surprisingly, showed very poor marketing skills compared to representatives of foreign shipbuilders (CNA, 1994). Marketing in the shipbuilding industry, as in many other industries, is considered here to consist of the following stages: (1) segment definition and analysis, (2) product planning (for segments), (3) pricing, bidding, and estimating, (4) the sales function, (5) individual customer analysis, and (6) after-sales support. Government relations and environmental considerations are also significant marketing factors in the shipbuilding industry. The consensus of the committee is that the U.S. shipbuilding industry is quite weak in a number of specific marketing areas. These areas include the fundamental understanding of the commercial market and its segments, the mix of buying factors most critical to each segment, and customer preferences and business economics (e.g., such buying factors as the relative importance of price versus financing and product quality versus time to delivery). The industry is similarly weak in responding quickly to the customer during preliminary design, knowing what parts are available, having a well developed ability to offer standardized options, and achieving adequate control over the time required to build. There are several extensive, reliable, regularly updated databases on shipbuilding and ship operation available by means of real-time, online, user-friendly systems. For about $50,000 annually, shipbuilders can subscribe to three or four systems that are marketed internationally. Raw data, such as individual ship charter terms, vessel prices, cargo flows, schedules, tariffs, and so forth are collected by these firms and "repackaged" in fee-for-service databases. For instance, cargo flow information is usually purchased from various governments, the OECD, and other international organizations and repackaged for resale; price and vessel-movement information are developed from insurance and charter brokers. A quarterly compendium of historical data, including a set of forecasts for cargo movements and ship construction, is available. Independent consulting firms worldwide also offer tailored assessments for maritime firms, including analyses focusing on particular market segments or geographic regions. Given these deficiencies in U.S. shipbuilding industry practice, what role could the U.S. government play to support the industry's development of commercial marketing? Marketing data are hard for government to gather because,

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--> when useful, these data favor one company over another. Government must try to avoid favoritism in any actions in support of an industry. The role of government in developing commercial maritime marketing technologies has been limited to basic data collection such as that associated with customs, census, and vessel registration activities. There is no generally available government source at this time that provides price, vessel-movement, insurance, and other commercially important information. In fact, governments, including the U.S. government, rely on commercial sources for understanding maritime issues and would be hard pressed to match the quality and quantity of marketing information and data already available on the commercial market. While data and information marketing technologies are, therefore, important for the rejuvenation of U.S. shipbuilding, there is little that government can do in this area that is not already being taken care of by the private sector. Moreover, shipbuilders must have people in their marketing departments who are skilled at asking the right questions of the commercial databases and at analyzing the data to suit particular market inquiries and yard projects. The integrated marketing approach used effectively by foreign shipbuilders is one in which a builder's business processes and technology use are closely coordinated to achieve an overall competitive advantage. Experts in commercial practice suggested that U.S. shipbuilders should follow similar steps, which are already well known to U.S. shipbuilders, although they are far behind in implementing them. First, evaluate the needs and requirements of the ocean shipping industry for new or converted ships, matching the builder's facilities, capabilities, and financial resources with those segments of the market that make the most sense, that is, those segments that promise the greatest opportunities for growth and for the yard to compete effectively. Shipbuilders should collect and interpret intelligence on trade routes and commodities from commercial and government services; from the builders' marketing and salespeople; and, especially, from shipowners in the targeted trades. The right approach requires more than talking to owners during periodic sales calls; it also requires conducting market research before owners are in the marketplace seeking proposals to meet their needs. Second, identify specific needs and customers based on the results of the initial evaluation and develop initial conceptual designs. Design studies reflecting research and knowledge of the shipowner's particular trade provide support to sales personnel, especially when a shipbuilder is attempting to penetrate new markets. These studies give the shipbuilder's representatives an entree to the shipowner. In ensuing discussions, the shipbuilder learns more about the needs and insights of participants in the market segments of interest. Resulting ideas are then developed further by the shipbuilder's engineering personnel, who work closely in support of the overall marketing effort. Based on interactions with owners, shipbuilders are also able to refine their targeted markets and conceptual designs.

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--> From the earliest stages, conceptual, preliminary, or contract designs should incorporate production and procurement considerations based on shipyard standards. Later proposals will reflect the quantifiable cost and delivery benefits gained from using these standards. Steps 1 and 2 form an iterative process, with the feedback from each stage creating new tasks for the other. Data and information collection, formulation of strategies and plans, and interaction with customers and suppliers take place simultaneously and interdependently. U.S. builders of large, oceangoing ships are at a disadvantage because of the separation of naval architecture from shipyard operations and the resulting knowledge barrier. The same barrier between design and production became evident in many U.S. manufacturing industries in the early 1980s. Third, in later stages of the process, develop a detailed plan to market to an identified short list of potential clients, with the understanding, approval, and support of all key management elements in the company. Fourth, implement this company plan including, as needed, additional R&D, product development (engineering and design), market testing (obtaining more information from targeted clients), or product-design changes to suit and sell the client (close the shipbuilding contract deal). Some further observations can be made about successful commercial marketing in today's international environment. The various stages described above require a capable, if small, precontract design and engineering group. Expertise in conceptual, preliminary, or contract designs is not found currently in a number of American yards. The engineering and technical skills to support marketing must be established in-house for U.S. shipbuilders to succeed competitively. Shipbuilders will probably also need to establish field offices or have some of their marketers travel extensively to gather client information at the source. Equally important, shipbuilders will need to come to know clients and their culture. Appropriate leadership will also be required to make the right decisions about marketing intelligence, product-development investment, financing assistance, segment and client targeting, and so forth, as individual contract values can exceed $0.5 billion. Because the approach detailed above is aimed at a targeted market, the designs developed are suitable frequently for several owners in that market. Thus, chances are increased for series production of similar vessels, with an inherent potential for reducing costs. Standardized designs can still provide variations in capacity (e.g., by varying length at the parallel mid-body portion of the hull), power options, deckhouse arrangements, tank coatings, and so forth, to satisfy owners' preferences. By providing for these options during design development, the cost and production advantages of standardization can be retained. In practice, owners have found ships built to a suitable shipyard design incorporating custom features are more economical and preferable to ships constructed to owner-developed

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--> customized designs, if the selling price reflects the substantial savings in cost and operating expenses inherent in that approach. (Standardization and its advantages are discussed at greater length below.) A shipbuilder's skill in this approach can lead to unilateral or participant-restricted negotiations avoiding the less preferable option of participation in worldwide bidding. Most major buyers prefer to deal with shipbuilders they have confidence in based on previous satisfactory relationships. Marketing can be and has been assisted by the U.S. government, including increased emphasis by the Department of Commerce at U.S. embassies. The Maritime Administration is developing shipbuilding market data and analytical capability for use in policy-making. This data will also be used in consulting with shipbuilders, especially the smaller yards, which cannot afford a full market research capability. Through the use of electronic bulletin boards, common data sets are being developed so that shipbuilders can base their analyses on the same data sets to the greatest degree possible. Industry, in general, cannot rely on government for much market research because the most beneficial information is developed in house, directly through competition and in coordination with other yard functions. Because of their long absence from the world commercial shipbuilding scene, U.S. shipbuilders have not had the opportunity to develop either long-standing relationships or favorable reputations with prospective international commercial customers. An international ship broker reported to the committee that the image of large U.S. shipbuilders has also been tarnished by reports of difficulties with the U.S. Navy, their principal customer in recent years. An international view is that U.S. shipbuilders are difficult to deal with, rely on lawyers and the threat of litigation to settle disputes, are unreliable in keeping delivery commitments, and attempt to remedy frequent cost overruns by seeking costly contract changes. Both U.S. shipbuilders and others familiar with the circumstances maintain that many of these problems result from the way the U.S. Navy negotiates and administers its contracts—the number of inspectors and auditors from the local U.S. Navy Supervisor of Shipbuilding can number in the hundreds for each ship under construction. Even if true, these explanations may not diminish unfavorable perceptions of the U.S. yards in the eyes of prospective international customers. Short of a wholesale overhaul of U.S. military procurement, the U.S. government cannot remedy this problem directly. However, government may be able to help shipbuilders gain an initial footing to prove themselves. Government does have a unique position with regard to international customers for U.S. vessels in that it may tie the purchase of U.S.-built ships to other international transactions, including commercial and military aid. Government can also intercede through diplomatic channels or use intelligence assets to assist U.S. shipbuilders. However, there is considerable danger of being accused of industrial espionage or "strong-arm tactics" that interfere with national prerogatives. Use

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--> of U.S. government-sponsored foreign military sales also provides an outlet to international markets, but these contracts do not assist in the marketing of commercial ships. Bidding and Estimating The real costs of a U.S.-shipyard product are very difficult to evaluate using current information management systems; yet, evaluating real costs is essential for commercial practice, beginning with estimating and bidding. Current systems were designed to meet Navy specifications and regulations. In addition, they were designed to support an outdated approach to ship construction in which ships were designed and constructed system by system. U.S. shipbuilders find it difficult to estimate the costs of new ships for these reasons. Activity based costing (ABC) is one potentially sound approach to cost estimation in a commercial setting. ABC allocates both direct and indirect costs according to an estimate of the resources actually expended by business units or product divisions in a corporation. The chief advantage of ABC is that it allocates so-called overhead costs according to actual utilization rather than according to direct labor hours or aggregate production costs. In ABC, production activities are allocated overhead and other costs according to actual consumption of corporate resources, such as sales, marketing, administration, and other activities, rather than by averaging across all activities. 1 Good commercial cost systems identify all the real inputs to a product; the value of system calculations depends significantly on the architecture of process simulation (a technology addressed further below). Because of shipbuilders' current use of the government "bid package approach," wherein a generic product specification is developed that can be manufactured by many suppliers, for example, specific component information is lacking that could make any one supplier's product most suitable. This information is critical for commercial bidding and estimating. Estimating and bidding should represent the wisdom of the right interdisciplinary shipbuilding team. At one successful foreign shipbuilder, relevant technical, financial, and organizational expertise are directly involved in the bidding 1   The following definition and rationale is offered by Michael O'Guin (The Complete Guide to Activity Based Costing, Prentice Hall, New Jersey, 1991, p. 31), "ABC assigns costs to products or customers based on the resources they consume. The system identifies the costs of activities such as setting up a machine, receiving raw material, and scheduling a job. ABC then traces these activities to a particular product or customer that triggers the activity. Accordingly, the product's costs embody all the costs of these activities. Overhead costs are traced to a particular product rather than spread arbitrarily across all products. In turn, management can learn to control the occurrence of activities, and therefore, learn to control costs."

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--> process, with the head of the yard and high-level representatives from finance and engineering participating in the cost-estimation process for new ships. More generally, for successful commercial practice, U.S. shipbuilders must have engineers who better understand costs and financial experts who better understand engineering. Product Differentiation U.S. shipbuilders also lack good parametric design capability. Automated basic design systems that yield ship weight and cost estimates along with other information are available. Based on specification of such parameters as (for a cruise ship) number of passengers, berthing and dining area per person, and ratio of crew members to passengers, a system design for the ship can be obtained independent of hull type. Weight and cost estimates can be derived from this system design. Automated design can be used to produce the greatest number of alternative designs, together with their total economy calculations, for the commercial customer's consideration. The following measures have been reported to be critical for automated design systems: Develop a small but extremely competent commercial ship design and engineering staff that is not burdened by military projects and the associated paperwork. Eliminate procedures in the commercial technical group that are required for compliance with Federal Acquisition Regulations (FAR) and other military contract requirements. Select up-to-date ship design and engineering software to run on personal computers that are interfaced to UNIX workstations for greater computer power when needed. Ship design computations should be performed using a common database that is carried forward into production. Develop a detailed dual-cost computerized database system that can load historical Ship Work Breakdown System data and is product/unit-oriented to reflect how ships are now built in the yard. These systems should be cross-correlated, and the entire system should be set up to estimate the cost of large blocks for outsourcing. Use these detailed databases to develop quick, order-of-magnitude estimates on a parametric basis. Establish detailed (micro) cost-evaluation procedures, using industrial engineering/process standards techniques, to assist the ship design group in measuring the improved producibility of their designs. These cost-evaluation procedures should be related to empirical cost data.

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--> Sourcing Effect of Navy Procurement Practices For more than a generation of professional shipbuilders, the U.S. shipbuilding industry has been obliged by its primary customer, the U.S. government, to develop, design, market, and build ships following a comprehensive set of detailed ship acquisition rules and procedures. In recent years, these rules have been somewhat consolidated. Most of them have been documented and codified under FARs. A prime purpose of these regulations is to control a huge procurement system (the U.S. government) and prevent buying decisions based on personal judgment, technical bias, or personal gain. Because military ships (including U.S. Coast Guard, Army, and Navy ships) are generally large and immensely complex, applying FARs, together with the vast array of other federal regulations, creates inherently inefficient design, engineering, and procurement procedures for both government and industry suppliers (the shipyards). Business methods developed to meet government procurement requirements are now entrenched in U.S. yards, especially those of private-sector warship builders and, to a lesser extent, U.S. Navy auxiliary ship constructors. Some of these shipbuilders are changing their methods so that they, like those few U.S. shipbuilders that have operated largely in a commercial shipbuilding market with a minimum of government involvement, will soon be able to operate in the international market. The problems noted also have affected U.S. ship design firms, which have worked for many years under long-term, level-of-effort contracts from government agencies. European observers have reported a ''productivity difference factor" of about three; that is, for a given commercial ship, a U.S. design firm uses about three times as many labor hours as a non-U.S. firm. In addition, producing a commercial design for the Navy requires about three times the labor hours of a design for an equivalent commercial ship because of the Navy's design rules and review processes. If U.S. shipbuilders are to compete internationally in commercial markets, they will clearly need to maintain closer ongoing relationships with worldwide vendors of major components in advance of procurements. They will also need to practice better just-in-time purchasing of materials and emphasize performance (rather than design) specifications in purchasing. Procurement Practices The alternative models of procurement listed below represent progressively closer supplier relationship: traditional contracting for components through requests for bids; long-term sourcing relationships with networks of suppliers; and

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--> material control (with yard personnel working directly with suppliers to ensure the use of new technology, quality, and timeliness). The procurement practices of U.S. shipbuilders are far less advanced than those of foreign competitors for commercial work. U.S. shipbuilders have tended to follow the first of the three models, generally placing detailed design specifications out for bid rather than trying to satisfy needs by less-tailored means, such as relying on vendor catalogs and using performance specifications based on a vendor's known capabilities. (Problems in using design, instead of performance, specifications are discussed below, under the section on standardization. See also the related discussion in Storch et al., 1994.) One U.S. shipbuilder's representative reports, for example, that one of their most significant problems is the time required to get material because of the delay in getting vendor-furnished design information or (for government work) getting multiple quotes and justifying the choice of vendor. A significant amount of material now used by U.S. yards is, in fact, of foreign origin; but, although foreign acquisitions are common, continuing relationships with suppliers are not. This leads to critical time lost in procurement, especially when seen from the vantage point of commercial operations. Foreign shipbuilders depend, instead, on small groups of suppliers with whom they have closer, longer-term relationships—relationships that often reflect other features of the "material control" model, such as a yard working with suppliers to ensure the use of new technology. Foreign shipbuilders also emphasize just-in-time approaches to material management, beginning with identification and purchasing, through warehousing, marshaling, handling, and assembling (Storch et al., 1994). Because U.S. shipbuilders fail to emphasize just-in-time material purchasing and management, significant extra waste, rework, and monitoring result. Capital is tied up unnecessarily in stored goods and storage area. The current method of procurement is encouraged by U.S. Navy procurement practices, which provide progress payments based on completion of milestones. U.S. shipbuilders should develop more of a just-in-time approach to material purchasing and management to reduce inventories and associated storage problems. U.S. shipbuilders will have to obtain many of their innovative components and materials from foreign sources. For example, various steel shapes used by foreign shipbuilders for improved productivity and reduced structural weight are not available from U.S. suppliers. This is also true for other important materials and components, most notably large castings and slow-speed diesel engines. Where there are U.S. suppliers for shipbuilding components and materials, virtually all produce for the U.S. Navy, according to government regulations and specifications. There are vast differences in manufacturing practices between producing for the Navy and for the commercial world, and generally U.S. firms are not price competitive when supplying commercial components.

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--> Until domestic suppliers offer such commercial items for sale, U.S. shipbuilders must rely on foreign suppliers. However, U.S. builders are at a significant price disadvantage because they have not maintained working relationships with foreign suppliers. Even after U.S. builders turn to foreign vendors they will probably remain at a disadvantage in terms of delivery schedules, owing to their small, initial levels of demand and the newness of their vendor relationships. There are great sources of supply outside the United States that provide less expensive, high-quality materials that are available for immediate delivery. Offshore designers are often more familiar with the materials and production processes used overseas. Storch et al. (1994) recommend that U.S. shipbuilders develop a database of worldwide suppliers, along with some means of recording supplier performance. Shipbuilders must work with vendors before projects to begin to understand what material is available worldwide and to develop specifications for components. Like their foreign competitors, U.S. shipbuilders will need more multilingual managers and engineers. (Worldwide source catalogues are not readily available in the United States for major or minor components, such as pumps, motors, and winches.) U.S. shipbuilders must use all appropriate means to build sourcing capability to compete in international markets. For example, purchasing offices should be set up abroad and shared by several U.S. shipbuilders. Marketing Niche Strategy Earlier it was noted that U.S. shipbuilders must target niche markets because the yards will find it difficult to compete in high-volume production markets where foreign competitors are well entrenched. U.S. shipbuilders must apply their use of technology in business relationships as well. They must select shipbuilding market niches in which they can be competitive, adapt the technologies required to develop competitive products, apply the product technologies required to differentiate their products (ship designs) from competitors' products, develop the process technologies required to design and build these products competitively, and last but not least, develop strategies for the procurement of everything the yard cannot make efficiently. The last point is key to becoming competitive. If the right market niches are chosen and competitive products are developed, then maximizing total throughput for a given facility and labor force is critical to making money. High throughput in manufacturing is achieved by engineering products for efficient subcontracting of significant portions. In other words, maximize outsourcing to maximize total production throughput and revenues from a hard-core shipyard asset base and labor force. This approach keeps the work force at a smaller, more stable, more manageable size, with resulting higher employee motivation and productivity. This approach is far different from that of today's larger, government-oriented shipbuilders. In that approach, progress payments encourage large

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--> in-process inventories, and little need is seen for greater subcontracting or related new technology beyond that which is developed under government-sponsored research. U.S. shipbuilders frequently need to build up quickly to peak capacity for specific contracts, but they tend to do this by rehiring laid-off workers. In addition to developing technology to better outsource, such as better large-unit assembly/block planning and better accuracy control and quality assurance procedures applicable to subcontractors, U.S. shipbuilders need to develop appropriate business relationships with suppliers. These relationships should not be based on the traditional lowest-acceptable-bid response; suppliers should be considered as partners in shipbuilding. This requires developing the business, technical, and marketing skills and facilities for outsourcing work to subcontractors, and having representatives, including members of the engineering staff, available to the outsourcing contractors developing the design and specifications of products. Setting up and nurturing a network of supporting outsource contractors or teaming relationships with competing shipbuilders to construct large parts of a ship is something U.S. shipbuilders are beginning to consider. Several of the current MARITECH projects feature partnering in the development of new ship designs and methods for producing ships. Even more basic than implementing a good outsourcing plan is establishing good business relations with international marine systems and equipment suppliers. U.S. shipbuilders must implement new technology developments, especially those developed abroad, and incorporate them into their designs, using the engineering expertise of the system supplier wherever possible. The builders should work the technology of the supplier base, rather than issuing shipyard-developed system specifications, and then try to obtain the best supplier base prices. Human Resources As indicated in the discussion of marketing above, the engineering manpower and skills needed for successful integrated marketing and design are not currently found in a number of U.S. yards. In the recent past, designs have usually been developed by government agencies (most often the Navy) or naval-architecture design agents who are not associated with shipbuilders. However, in-house skills to support the marketing functions described must be developed or strengthened. Engineering staffing must satisfy the needs for design personnel availability in support of marketing. The question often raised is whether the high quality of Navy standards and workmanship may be an impediment to U.S. shipbuilders' commercial work. However, committee experience would suggest that this is not an issue. Even though the presence of Navy inspectors is more pervasive in a shipyard than is the presence of inspectors from classification societies, the latter enforce their standards as well as, if not better than, Navy inspectors. In fact, the U.S. Navy uses

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--> good system engineering effort based on a good database of existing ship designs. It is not a single "new, better idea" that is patentable. Even "new, better ideas" for ship features are hard to patent enforceably in the global shipbuilding market—innovative ship designs are easily observed and copied. To establish and protect a position, a shipbuilder needs to make continuing improvements to any new ship concept and keep prices competitive. Some innovators believe that because of stronger U.S. laws, it is important to build in the United States to protect both patent and intellectual property rights. Innovative shipbuilders face a challenge when trying to sell new products to very conservative shipowners, who will seldom pay more even for proven improvements and high performance. A variety of general factors may influence a shipowner's reluctance to adopt new products, including the inherent risks of new technology. Some owners do not want their fleets of ships to differ significantly from competing fleets. Also, some large shipowners may have an aversion to new designs because they reduce the number of common features in their fleets and introduce an element of risk in an established trade. At the same time, speed to market and uniqueness of products can be decisive in securing a competitive foothold. In short, selling new technology is challenging at best in this market of very expensive products. Several questions need to be considered. Beyond the important area of automated ship design, which product technologies are likely to have the greatest impact on the competitiveness of the U.S. shipbuilding industry? How might these technologies be successfully developed and applied (including with respect to costs)? These questions will have different answers for different shipbuilders. A wide variety of product technologies—ship designs, propulsion technologies, new materials, and other shipboard systems and components—might offer competitive advantages for U.S. shipbuilders. Table 2-1 shows a few selected areas of ship design and product technologies that the committee examined to gauge the current development for these technologies and their potential impact on and applicability to different segments of the shipbuilding market. Because of the different technology needs for different products and shipbuilders, product technologies could not be clearly ranked overall (nor could all potentially valuable technologies be examined). However, an attempt was made to rank the potential competitive advantages of technologies informally within five general categories, such as technologies for shipyard improvements, ship transportation systems, and so forth. Particular competitive advantages in the technology areas identified would be seen if the following were developed: breakthrough design capability, which allows a new design to be developed, implemented, built and marketed before the competition can copy it; shallow water draft oceangoing ship designs for short-cut trade routes,

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--> such as the Siberian Sea route between the north Pacific Rim and northern Europe; unstiffened curved plate technology, which can enable more automated production and longer lasting ballast tank coatings; automated cargo handling, including necessary dockside intermodal facilities (e.g., ship to truck/rail), with a time goal of unloading and distributing cargo in less than one shift (one to two hours is a conceivable goal, but distribution out of the harbor currently presents a bottleneck.); ten years or greater maintenance cycle for drydocking and classification special survey (implementation of such technology would be dependant on acceptance by regulatory agencies and classification societies.); reduced manning, as in a six-person or smaller crew, with one person stationed on the bridge (implementation of such technology would require changes by regulatory agencies.); and improved maintenance/manning balance, including an optimization between shore-based and shipboard maintenance, considering turnaround time in port (manning, port time, and maintenance are interdependent; the goal is to reduce all to an optimum point). Potential Competitive Impact The following brief review illustrates how a few of the technologies identified by the committee might offer U.S. shipbuilders critical competitive advantages. Advanced Propulsion Technologies Interest in new propulsion technologies is driven by the search for improvements over current slow-speed, direct-drive diesel engines. The main candidates—gas turbine and gas-turbine diesel or combined electric integrated propulsion systems—are relevant only to niche markets, such as LNG tankers, short-distance shuttle tankers, extremely environmentally friendly tankers, fast ships, and cruise ships. Other prospective propulsion types, such as fuel cells and permanent magnet motors, are worth pursuing partly because of potentially low environmental impacts and also because they might reduce manning requirements. Diesel electric drive systems cost $4 million to $6 million more than slow-speed diesels for shuttle and Suez max tankers and offer 6 percent less thermal efficiency. Thus, they are useful only for niche markets or where high priority is given to ship control for environmentally friendly operation. However, a higher-frequency generator operating at a higher speed would make this technology more attractive. With permanent magnet drives, a major problem is the large diameter of the motor and the high acquisition cost. At present, there are few restrictions on burning low-grade fuel at sea.

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--> TABLE 2-1 Ship Design and Product Technologies Technologya Technology Groupb Technology Typec Technology Sophistication     Today 5-Year Goal Improved producibility 1 E Medium-Low Medium-High Commercial ship design tools/ technology 1 E Low Medium-Low Protective coatings 1 E Low High Breakthrough design capability 1 B     Unstiffened curved plate tanker structure 1 B Point Design "Fast ship" technology 2 E Low High Cargo handling, including port and ship/terminal interface 2 E Medium Medium-High Shoal draft 2 E Medium-Low Medium-High Advanced propulsion systems 3 B Medium Medium-High a Technology types listed by priority order as determined by the committee. Individual technologies listed within technology type by sub-priorities as determined by the committee. b Technology groups: Shipyard-product improvement/development Transportation system requirement Material supplier driven Owner cost driven Social issues driven: implemented through rules, regulations, insurance and litigation costs However, the restrictions on emissions of pollutants in or near port are increasing and encourage the development of new propulsion systems. An example of advanced propulsion plant technology applied to tankers is now being evaluated as part of a fiscal year 1994 ARPA MARITECH project. Overall ship design tradeoffs are being made between alternate designs of integrated electric propulsion and ship service power plants; conventional direct-drive, slow-speed diesel propulsion; and geared medium-speed diesel propulsion.

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--> Competitive Impact Technology Application Today 5-Year Goal Crude Oil Tanker Bulk Carrier Container Ship RO/RO Fast Ferry Cruise Ship Medium-Low Medium-Highd X X X X X X Low Highe X X X X X X Medium-Low High XX XX X X X X         X X X X Medium High X X X X     Low Highf     X X X X Medium Highg     X X X   Low High   X X X   X Low Medium-High     X X XX XX c Technology types: Evolutionary—incremental changes in the immediate future Breakthrough—successful implementation will cause major changes d Includes structural design for automated construction and extensive use of ship component and material standards. e Design is only 5 to 10 percent of commercial shipbuilding costs. However, a bad design will be costly to build, operate, or to rebuild to correct. f Here is an area where experience with U.S. Navy ships and technology from a good high speed commercial ship base. g Turnaround of a large ship in less than eight hours, preferably less than four hours. Initial results of the studies indicate a more compact electric propulsion plan that permits use of a larger portion of the hull to carry cargo than do the non-electric drive alternatives. Ship control and maneuvering are superior, and electric plant/propulsion plant system redundancy greatly increases the environmental friendliness of the ship (backup for failed systems or components). The speed potential is also increased, as are potential revenues and the ability to make up for weather or scheduling delays.

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--> Technologya Technology Groupb Technology Typec Technology Sophistication Today 5-Year Goal Composite materials design, test, and certification A. GRP Structure 3 E Medium-Lowh Medium-High B. Other Composite Structure 3 E High High C. Composite Machinery 3 E Low Medium Reduced manning (≤6) 4 B Medium-Low Medium-High Advanced ship management and control 4 E Medium High Improved maintainability 4 B Medium-Low Medium-High Improved environmental ''friendliness" 5 E Medium-High Medium- Low Improved worker safety 5 E High Medium-High a Technology types listed by priority order as determined by the committee. Individual technologies listed within technology type by sub-priorities as determined by the committee. b Technology types: Shipyard product improvement/development Transportation system requirement Material supplier driven A vital developmental issue is presented by the U.S. Navy's development of new power plants. Wherever possible, commercial systems should be adopted for Navy use rather than developing independent Navy systems that are too complex and expensive for commercial purposes. The U.S. Navy should buy engines off the shelf to achieve significantly more affordable ships and to help support a broad industrial base. Committee members and workshop participants felt strongly on this subject, which is addressed in greater depth in Chapter 3. Ballast Tank Protective Coatings Another technology area that may have major competitive impacts is ballast tank protective coatings. Cleaning and recoating (painting) ballast tanks has

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--> Competitive Impact Technology Application Today 5 Years Crude Oil Tanker Bulk Carrier Container Ship RO/RO Fast Ferry Cruise Ship Medium-Low Medium-High     X X X X Medium-Low Medium-Low     X X X X Low Medium-Low     X X X X Medium-Low High X X X X X X Medium Medium X X X X X X Medium-Low Medium X X X X X X Low Low X X X X X X Medium-Low Medium X X X X X X Owner cost driven. Social issues driven: implemented through rules, regulations, insurance and litigation costs c Technology types: Evolutionary—incremental changes in the immediate future Breakthrough—successful implementation will cause major changes h Behind Europeans, ahead of Far East. U.S. is hindered mostly by regulations. always been a messy, expensive job. But with new environmental and safety regulations, it has become an extremely expensive maintenance function, and shipowners are looking for coatings that will last 10 or 15 years or longer. For handy max-size and larger tankers, a ballast tank cleaning and recoating job can cost up to $10 million; it thus becomes the largest cost item of the five-year inspection survey. The double-hull tanker configuration makes the job even more difficult. Moreover, recently instituted human health and environmental regulations for shipbuilding make blasting and painting even more expensive than they have been in the past. Extending the life of ballast-tank coatings does not mean simply buying better paint and applying it more carefully. The life of the coating is affected by the configuration of the steel structure and the quality of the steel fabrication process.

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--> Coating breakdown and resulting corrosion begin at the inside and outside corners of the structure. Paint doesn't stick well to sharp edges or crevices; therefore, a double-hull ballast tank structural design needs to be developed that will minimize total stiffener structure length and associated welding length. Exposed plate edges that are clean and without sharp corners and that have no weld splatter lengthen the life of coatings, and their use is becoming standard practice by many foreign shipbuilders. Tanker construction technology that uses unstiffened curved plates is potentially valuable because it accomplishes several goals and reduces the costs of the shipbuilding process. The unstiffened-curved–plate construction technology increases coating life in a ballast-tank structure built in standard cells welded together in standard double-hull sections. These sections can be hermetically sealed and automatically blasted and painted in a controlled environment without contact by shipyard workers. The internal structure is relatively smooth, with minimum stiffeners, because of the inherent stiffness of the curved plate. The result is low-cost, long-lived coatings that may last more than 20 years, if they are not damaged during ship operation. The unstiffened-curve–plate technology potentially provides an excellent example of systematic, joint product-and-process technologies that should be developed and applied by U.S. shipbuilders to other types of ships and ship features. Summary This chapter has considered the technologies employed in shipbuilding and how the application of those technologies must be improved for U.S. shipbuilders to become commercially viable in the international shipbuilding market. Business processes in particular must be changed, including marketing, bidding and estimating, sourcing, and management systems. Additional investments will be needed in system technologies, production processes, and product design. In some cases, significant capital investments will be needed to improve efficiency. Table 2-2 summarizes each of the four technology categories important to the commercial competitiveness of the U.S. shipbuilding industry. The priorities of Table 2-2 are based on the judgment of committee members of the importance of each technology area and the status of U.S. shipbuilders in each area relative to foreign competitors. A more comprehensive study could define the U.S. shipbuilding industry's current capabilities for building commercial ships of various types and capacities in terms of construction time; design and engineering labor requirements; nonrecurring labor, recurring production labor, and direct material costs; general requirements cost; and overhead expenses. Construction time could be broken down into two periods: (1) contract signing to start of construction (cutting steel) and (2) start of construction to delivery. The capability of U.S. shipbuilders with the leading international performance levels

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--> TABLE 2-2 Priorities for Technology Investment Technology Status Priority Business process technologies Very much behind, especially in marketing, costing, sourcing, and management systems; need to buy materials on the world market Most important; urgent for marketing System technologies Somewhat behind, particularly in process simulation and standards Middle priority Shipyard production process technologies Behind in material handling, accuracy control, and in block assembly and fabrication, although not desperately in any one area; primarily need to apply best practices; little new technology needed Less important New materials and product technologies Behind in design for the world market Varies by market segment could then be compared for each element. This framework for evaluating the different technologies would provide another perspective on the assignment of priorities. Clearly, improvement is needed in all areas, and improvements in one area cannot occur in isolation from the others. Business-process technologies require significant attention by the U.S. shipbuilding industry, and marketing strategies must be developed; but it is difficult to secure a sale without competitive price and delivery schedules. However, improvements in production processes cannot occur in isolation; they must be part of a total manufacturing process, which requires contracts for ship production. The current marketing strategy of many U.S. shipbuilders of awaiting requests for proposals from either the government or private shipowners is changing to a strategy of actively pursuing commercial contracts at home and abroad. However, shipbuilders are hampered by the lack of market information, poor customer relationships, the inability to respond rapidly to customer needs, and the general lack of predesign capability, standard designs, established reputations, and general marketing expertise. Improvements in all of the above areas are necessary if U.S. shipbuilders are to become internationally competitive. However, because these are factors that relate mostly to individual shipbuilders and only to a small extent to the U.S. shipbuilding industry as a whole, improvements will have to come from individual shipbuilders improving their own capabilities. Shipyard cost-estimating procedures today use a ship-systems–based approach rather than an activity-based approach in alignment with emerging

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--> production practices. The influence of government procurement requirements currently hampers a change. U.S. shipbuilders require expertise in rapidly developing parametric designs and associated cost estimates to suit customer needs. Automated design systems can be a great help in this area. Current procedures used by most U.S. shipbuilders for sourcing materials and components are based on compliance with the procurement requirements imposed by the U.S. Navy. These requirements have brought about distant relationships between shipbuilders and their suppliers rather than cooperative relationships based on mutual trust. Developing better relationships with suppliers, changing from requesting multiple bids to material control, and working directly with suppliers on product development can reduce procurement time, reduce rework, and reduce costs. Many suppliers for shipbuilding components are overseas, so U.S. shipbuilders must extend their sourcing capability worldwide, including development of multilingual skills. Methods of sourcing components are tied to a shipbuilder's marketing niche strategy and to developing a working relationship with vendors who specialize in that market. Engineering capability in most U.S. shipyards has been developed to meet the needs of detail design of U.S. Navy ships rather than the precontract and contract designs of commercial ships. The training U.S. shipyard workers have received to achieve the high quality of workmanship required for U.S. Navy ships, however, is compatible with the quality now required by some commercial owners and classification societies. The greatest need may be for management to convert from government-procurement-based practices to international-commercial management practices. Information management systems are required that are integrated with a shipbuilder's various cost, accounting, labor, design, scheduling, and production systems. These systems should include the capability of using simulation to predict the effect of changes before they occur. In addition, these management systems must support both government and commercial needs if shipbuilders intend to produce ships for both markets. From the standpoint of system technologies, a design process that is consistent with international competitive standards should be capable of developing a database to describe the ship during conceptual design and should continue to use and build on that same database throughout shipbuilding stages to production and delivery of the ship. This type of design process is not only more efficient in transfer of data; it also helps to ensure that the design best accommodates the needs of production. In the transition to commercial shipbuilding, U.S. shipyards are acquiring and developing new production methods. Efficient planning for the adoption of these methods can be made through the capability of process simulation. This capability is especially important in shipyards with limited space so as to obtain the best yard layout for production. Standardization of parts and production processes can both reduce price and

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--> improve quality. Standardization can encompass not only overall ship design but also standard components between different ship designs. Adoption of international standards by shipbuilders for parts and materials will assist with commercial marketing of ships. Increased use of CAD/CAM is seen today in most U.S. shipyards. Full realization of the benefits of these processes requires concurrent improvements in other technologies, such as process flow, material acquisition, and standardization. Shipyard layout can present difficulties, especially where space for production facilities is limited. However, many successful foreign yards have the same problem. The use of process simulation to investigate the effect on production of changes in yard layout is an important tool for overcoming the difficulties of limited space. U.S. and foreign shipbuilders currently employ the same level of mechanization and automation of production processes. The most advanced systems have been developed for foreign shipbuilders, and the developers of these systems are selling them to U.S. shipbuilders. Material-handling technology within U.S. shipyards today is about equal to world class standards, with the exception of large transporters, in which some foreign yards have greater capability. The area that needs the most improvement is logistics. Improving logistics will reduce the amount of material to be moved. Accuracy control in shipbuilding can be improved through better application of dimensional process control and statistical process control. A commitment by management to enforcing production standards is required for in-process work and the final product. A major improvement in steel fabrication in most U.S. shipyards would be the use of automated profile cutting and preparation equipment. Likewise, U.S. shipbuilders do not apply the same degree of automation in the production of structural units of the hull structure as foreign competitors. The level of technology application in the United States for outfitting and preoutfitting U.S. Navy ships is the same as that in foreign shipyards for commercial ships. The automation of design and production planning are not at the same high level to support fully the outfitting process. Blasting and coating of structures in the United States is not usually performed in large halls that many foreign shipyards have. No primer for steel available today is capable of being welded-over under conditions of high-productivity welding. Robotic grinding of primers prior to welding is also not practiced by U.S. shipbuilders as it is abroad. The expertise in testing that U.S. shipbuilders have gained from naval shipbuilding will be of little advantage in commercial production. Improvements in product technologies or facilities do not reveal any new technology that will give U.S. shipbuilders a tremendous competitive edge over foreign shipbuilders. As will be seen in the following chapter, the primary

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--> emphasis in government programs is on developing product technologies intended to improve the capabilities of shipboard systems. The real need is for improved design capability, so that when new concepts and products are developed, they can be moved into production quickly. Continuous innovations can provide a competitive edge. References CNA Corporation. 1994. The Shipbuilding Game: A Summary Report (CMR 94-84). Alexandria, Virginia: CNA Corporation. Storch, R. L., and T. Lamb. 1994. Requirements and Assessments for Global Shipbuilding Competitiveness. Project funded by the National Shipbuilding Research Program, for the Society of Naval Architects and Marine Engineers, Ship Production Committee, Program Design/Production Integration Panel. October 7. Report NSRP 0434. Ann Arbor, Michigan: University of Michigan Transportation Research Institute.