SNAME Transactions, Vol. 109, 2001, pp.

285-308

World-Class Shipbuilders: Their Productivity Using

Lean-Manufacturing Principles
T. Lamb, Fellow, The University of Michigan

ABSTRACT

In this paper observations on what makes a shipbuilder world-class, their productivity

and how lean manufacturing principles are being applied in shipyards are presented.
Based on the description of world-class used herein, it is concluded that there are no perfect
world-class shipbuilders.
A detailed look at world-class shipbuilding productivity showed a wide range of productivity
and that the gap between the best and the U.S. was a factor from 5 to 7. This would not be easy to
do, but there are approaches that can help. It was suggested that lean manufacturing, could
help.
Lean shipbuilding practices are principles, not a set of individual tools, which can be cherry
picked one at a time. Moreover, lean shipbuilding requires an enterprise-level view of the value
stream--from raw materials" to the finished ship delivered to the customer.
It appears that there is no shipbuilder that applies" all the lean manufacturing principles to its
business. Some lean manufacturing principles have been embraced by shipbuilders and many of
the examples presented in the paper are.from world-class Japanese shipyards. There is a focus
on .flow, use of standardized methods, built-in-quality, continuous improvement, and a high
degree of involvement by flexible, motivated employees.
Shipyards that practice lean shipbuilding (manufacturing) may become world-class. Those
thaf do not - probably will not/

NOMENCLATURE predictor and how lean manufacturing principles are

being applied in shipyards.
CF Compensation Factor Visits were made over 20 shipyards in Asia and
CGT Compensated Gross Tonnage Europe, and most of the U.S. shipyards over the past
GT Gross Tonnage five years. These visits were undertaken as part of
Group Technology projects for the National Shipbuilding Research
LMP Lean Manufacturing Principles Program (NSRF'), the Office of Naval Research (ONR),
MH Man hours and as part of his NAVSEA Professor of Ship
MH/CGT A Productivity Metric Production Science responsibilities.
NSRP National Shipbuilding Research Program This activity was a follow on to shipyard
ONR Office of Naval Research benchmarking and during it in projects introducing new
concepts to improve the performance of U.S. shipyards
in the areas of design for production, build strategy
INTRODUCTION approach, and concurrent engineering (Lamb 1993,
1994, and 1995). As a part of this projects a
In this paper the author offers his observations on database/comparison was created for the shipyards so
what makes a shipbuilder world-class, their they could be benchmarked against each other.
productivity, a description of the productivity target Recent studies looked at supply chain management
(Fleischer 1999) and the current application of and

285
 future implementation o f Lean Manufacturing into
shipyards (Liker 2001). Over the past 4 years research
was focused on ship design management (Lamb 1999)
and the derivation o f a productivity equation, which
takes into account readily available shipyard parameters
(Lamb 1998 & 2001).
The main objective o f these projects was to transfer
this knowledge to three groups:
1) Students in the Ship Production and Ship
Design courses.
2) N A V S E A personnel and their support
organizations.
3) US shipbuilders.
W H A T IS W O R L D C L A S S
One definition is that world-class means "being
able to compete with the best in the world at what you
do." What does that mean?
Financial performance alone is not the measure o f
world-class. The ultimate j u d g e o f which companies
are world-class is the customer.
The attributes of a world-class organization
include:
9 best value,
9 highest quality,
9 excellent service,
9 superior reliability,
9 continuous learning, and
9 innovativion
The following characteristics are used in this paper
to describe world-class organizations:
o High Standards o f Business Performance
9 Profitably meeting customers needs
9 Highly Productive
9 Internationally competitive
9 Excel in organizing work
9 Concentrate on core competencies
9 Continuously improving
o Design and build in quality from start
9 Seamless organizations with flat structures
9 Recognize that employee involvement and
commitment are key to success
Kvaerner, in 1997, presented the following world-
class shipbuilding characteristics :
9 makes money
9 is dynamic
9 makes decisions
9 makes investments
9 thinks big
9 is strong in guidance
9 knows where they are
9 has clean facilities
9 their people "have time"
9 they plan for the future
9 has clearly structured production
9 has good operational technique
9 works indoors
9 know their strengths and weaknesses
9 takes care o f their people
Table I is an attempt to use these characteristics as
metrics in order to compare the performance o f
different shipbuilding countries and to determine who
meets the world-class status. While each country has
good and poor performing shipbuilders it is both
convenient and justified by the results to group the
shipyards bycountry. Some countries that have
shipyards that have high attributes are currently
financially operating at a loss. Thus it could be said,
based on the description o f world-class used herein,
that there are no perfect world-class shipbuilders.
This is extreme and does not give us a goal for
discussion. It could be said that U.S. shipbuilders are
world-class in profitability, quality, and service.

TABLE ! - WORLD-CLASS ATTRIBUTE RANKINGCOMPARISON

Attribute U.S. Japan Korea Germany Italy France

Profit High Low Medium Negative Negative Negative
Productivity Low High Medium + Medium - Medium - Medium-
Internationally competitive Low High High Medium Low Medium
Value Low High High Low Medium Medimn
Quality High High Medium High High High
Service High High Medium High High High
Product Reliability Mediuna High Medium High High High
Excel in organizing Work Low High High Medium Mediurn Medium
Concentrate on core competencies LOW High Medium Medium High High
Design and build in quality from start Low High Medium Medium Medium Medium
Seamless organizations with flat structures Low High High Medium Medium Medium
Employee involvement and colnmitment key to success Low High Medium Medium Medium Medium
Continuous learning, and innovativion Low High Medium Medium Medium Medium

286 World Class Shipbuilders: Their Productivity

[ Continuously improving I Low High I Medium I Medium I Medium ]Medium
For the purpose of this paper a shipbuilder will be The make up of the current new ship deliveries is
considered world-class if it: shown in Table II.
9 competes,
9 has short delivery times, TABLE I! - SHIP DELIVERIES BY TYPE
* has an order backlog of at least two years Ship Type % of Total GT
work, Tanker 36
9 is a recognized leader in development, Bulk Carriers, 29
design and construction of ships, Container 16
9 has a high reputation for the quality of its Other 19
products,
9 is using up-to-date shipbuilding practices, They were delivered by the countries shown in
and Table lIl. Table IV gives the productivity range for
9 continually improves performance shipbuilders in the different countries.

It seems that some writers on the subject of world- TABLE !il - C O U N T R I E S OF BUILD AS % OF
class have collected all the management guru T O T A L GROSS TONS
prescriptions for excellent companies and packaged Country 1988 2000
them together. One (Drennan 1999) proposes 12 Japan 46 32
"ladders" to world-class status, namely: Korea 4 34
1) aligning management objectives, Europe 23 14
2) customer focus, Rest of the World 27 20
3) organizing the workplace,
4) visible measurment systems, TABLE IV - S H I P B U I L D I N G P R O D U C T I V I T Y
5) managing for quality, Country Man Hours/CGT
6) eliminating waste, Japan 7 to 14
7) best operating practices and continuous Korea 20 to 24
improvement, Northern Europe 16 to 60
8) teamwork, U.S. (Commercial) 49 to 75
9) worker empowerment and involvement, U.S. (Naval) 68 to 102"
10) rewards and recognition, * Based on Tentative Naval Ship Compensation
11) purposeful communication, and Factors
12) continuous learning

It is interesting to note that many of these are Lean GENERAL OBSERVATIONS

Manufacturing Principles (LMP). These will be
discussed later.
T H E UNEVF, N W O R L D - W I D E P E R F O R M A N C E
World shipbuilders delivered over 25 million
Gross Tons of commercial ships in 1998. World
shipbuilding capacity is over 40 million Gross Tons.
This over capacity results in fierce competition and low
new ship prices.
For example the price for a 250,000 TDWT
double hull tanker in 1990 was over $100 million.
Today the price is less than $70 million. This is due to
changing exchange rates, low cost of steel and
significant productivity improvements. Man hours for
the same ship reduced by 42% from 1975 to 1993.
This is in contrast to the U.S. where the price for
naval ships have been pegged to inflation.
It can be seen from Table IV that the Japanese
shipbuilders are the most productive in the world.
Korea is next in the productivity league. The best
shipyards in Europe are between Japan and Korea but
many are struggling to attain productivity between 35
and 60 MH/CGT. The U.S. productivity ranges from
49 MH/CGT for small sized shipbuilders to 75
MH/CGT for the larger shipyards that are currently
constructing the new tankers for the Jones Act fleet.
Unfortunately, as will be discussed later there are no
internationally agreed Compensation Factors for
military ships, so it is difficult to calculate the
productivity of the 4 large U.S. shipbuilders that only
construct military ships. However, an attempt has been
made by the author to derive CFs for military ships
(Lamb 1999) and based on these the productivity
ranges from 1001:o 150 MH/CGT.

World Class Shipbuilders: Their Productivibj 287

 Japanese shipbuilders have ship production into Zones is to reduce the management tasks in size by
workers from 700 to 1,200, of which up to 50% could being "Product-oriented" rather than System-oriented.
be in-house labor sub-contractors. Each shipyard
deliver from 5 VLCCs to 21 Bulk Carriers per year.
Annual steel throughput ranges from 120,000 to
300;000 tonnes. Japanese shipyards are highly
automated.
Korean shipyards have production workers from
5,000 to 12,000 with very little in-house sub-contracted
labor. Each shipyard delivers from 12 to 70 ships per
year. They have an annual steel throughput varing
from 300,000 to 1,200,000 tonnes. Korean shipyards
are not highly automated although they are beginning
to introduce more automation to offset difficulty of
attracting people into the industry.
European shipyards have production workers of
300 to 3,000 with very little in-house labor sub-
contractors, except in the case of cruise ships where
turn-key sub-contractors are involved. They deliver
from 2 to 7 ships per year. Steel throughput varies
from 50,000 to 100,000 tonnes. A number of the Figure 1 - Curved Block
recently rebuilt shipyards, in the former East Germany,
are among the most modern in the world.

W O R L D CLASS S H I P B U I L D I N G P R A C T I C E S

Most current shipbuilding practices are not new,

many have been around for more than 20 years.
World-class shipbuilders integrate and implement the
ones that improve productivity and delivery time, while
eliminating the practices that are not productive. The
Japanese are know for their fervor in eliminating waste
and then optimizing the production processes. This
coupled with up-to-date work organization and good
personnel usage results in their superior performance.
Most world class shipbuilders use the Block
Construction and Zone Outfitting approach. Successful Figure 2 - Grand Block
world class shipbuilders have developed the approach
into a stabilized flow of information, material and
people.
Hull Block Construction decomposes the structure
into blocks. The blocks can be defined as single skin,
double skin, 2D, 3D and curved as shown in Figure 1.
World -class shipbuilders take it one step further in that
they join a number of blocks together to form Grand
Blocks ( Figure 2) which is a continuation of the drive
to move work content up stream and thus minimize the
work to be done in the building dock. The blocks and
grand blocks can be advanced outfitted as shown in
Figure 3.
Zone Construction is a management
methodology based on organizing work by Zone rather
than by System. The intent of breaking the ship down Figure 3 - Advanced Outfitted Grand Block

288 World Class Shipbuilders: Their Productivity

r

have up to 200 blocks to erect on the building berth.

High performance shipyards all construct Grand
Blocks, which weigh 500 to 2000 tons.
They are either lifted onto the building berth by
Gantry Cranes or moved into place by transporters
The benefits of Zone Construction are: and/or elevators as shown in Figure 4. The most
9 Reduced Work Package size and scope, successful shipyards know the number of blocks that
by focusing on Zones rather than the ship must be erected daily - the tempo of the shipbuilding
or large portions of it. process.
9 It results in a level that an individual is
more capable of understanding and
managing.
9 It forces all departments to pay attention
to the planning and interfaces in which
they are involved.
9 It forces Production to take an active role
early in the product development.
9 It promots the use of multi-skilled teams.
9 Engineering provides technical
documentation that supports Zone
Construction.
9 More realistic and reliable scheduling.
9 Improved scheduling by early
involvement of all departments.
9 Matching design and planning with the Figure 4 - Bremer Vulcan Ship Elevator System
actual way work is performed. That is,
across Systems and Trades. Advanced Outfitting
9 All interfacing work is considered and Advanced Outfitting is the fitting to ship structure,
correctly sequenced. outfit items at a significantly earlier time in the building
9 Production efficiency is improved by sequence than is traditional.
performing all the work, which can be It involves the organization of information and
done by the same workers at the same materials to a plan that applies labor and facilities to
time and same location. integrate ship's structure and outfit materials at the
earliest and most cost effective stage of the construction
The most important factor is the organization of process. Advanced Outfitting is normally divided into
the work. This includes: three types, namely: On Unit (Figure 5), On Block
9 The development of planning similar to the (Figure 6), On Board.
Shipbuilding Policy and Build Strategy Some shipyards have another type called Blue Sky
approach (Landing outfit on the ship under construction on the
9 Technical documentation format suitable for berth before the compartment is decked over), but this
direct use by Production is really a subset of On Board. Thyssen Shipyard in
9 Use of work stations and work station Germany developed a Modular Engine Room system,
documentation and planning shown in Figure 7, the goal of which was to reduce
9 Highly trained workers engine room work content by 30%.
9 Decision making/planning delegated to
appropriate level
9 Early involvement of Production in the
design process
9 Concurrent development of product and
process design.

The major difference in large shipbuilding is the

approach to block erection. U.S, shipyards typically
handle 200 to 400 ton blocks. This means that they can
Figure 5 - On Unit Advanced Outfitting

World Class Shipbuilders: Their Productivity 289


Figure 6 - On Block Advanced Outfitting
Figure 7 - Modular Engine Room Outfitting
In this country, NASSCO, has developed a similar
but more advanced system and are building up to its
implementation in its current shipbuilding programs.
The goals of advanced outfitting are to:
9 Minimze on board outfitting
9 Reduce outfitting time
9 Simplify outfit planning
9 Avoid interference between trades
9 Improved use of cranes
9 Improved quality, productivity and
worker safety
The benefits of advanced outfitting are:
9 Reduced/eliminated
290 World Class Shipbuilders: Their Productivity
overhead work
9 Improved access, (workers and material)
ventilation and lighting
9 Reduced/eliminated scaffolding
9 Reduced/eliminated on board services
9 Improved tool/equipment availability
Most world-class shipyards utilize advanced
outfitting to maximize the work done in the shops and
minimize the work performed in the building dock and
on the ship after launch.
World-class shipyards generally build in drydocks
(Figure 8) but a few still build on inclined ways as
shown in Figure 9.
Most Japanese shipyards were built in the late 1960s
but have continuously maintained their shipbuilding
technology lead over the years. Figure 10 shows the
typical layout of these late 1960 shipyards which
consisted of a single building dock and material flow
straight to the apron alongside the dock in a TEE
arrangement. Some were arranged to flow in a straight
line to the dock.
Korean shipyards were built in the late t970s and
are large than those of any other country. They cover
vast acreage, have at least two building docks, employ
over 4,000 employees, and deliver at least 10 ships a
year.
Figure 8 - Building in a Drydoek
Figure 9 ~ Building on Inclined Ways

Hyundai has 7 drydocks, 18,000 employees and
delivers more than 70 ships per year. Samsung and
Daewoo are about have the size of Hyundai and airial
views of both are shown in Figures l l and 12
respectively. Two of the major shipyards are really a
number of shipyards within each facility, having been
expanded a number of times. Because of this some of
them do not have a clear layout type. For example one
of them has staright line arrangement for the original
shipyard and the TEE arrangment for the new extension

Figure 10 - Typical Japanese Late 1960 Shipyard

Figure 11 - Samsung Shipyard, Korea

World Class Shipbuilders: Their Productivity 291
 Figure 12 - D a e w o o S h i p y a r d , Korea

The East German shipyards have been rebuilt in the
last 10 years and are among the most modern in the
world. Each is capable of delivering between 100,000
and 200,000 CGT of ships per year. Unfortunatley for
them, when the German government received
apporaoval to use state funds to rebuild them from the
EEC government they agreed to limit the output from
each shipyard to about 100,000 CGT.
The best known shipyards are the three that are
now owned by Scandinavian companies, namely:
1) Kvaerner Warnof
2) Aker MTW (see Figure 13)
3) Odense Volkeverft (see figures 14 and 15)

Figure 13 - M T W , Rostock Figure 14 - Volkeverft

292 World Class Shipbuilders: Their Productivity

 ,.

Figure 15 - Isometric View of Volkeverft Shipyard Showing Material Flow

A noticible change in world-class shipyards is the are a Korean shipbuilders reducing work content for a
reduction in their storage space both for incoming new double hull tanker by 17% and of course the well
material and equipment as well as work in process. known Kawasaki "apple slot" arrangement for webs
Figure 16 shows a modern steel stockyard and the and stiffeners.
absence of piles of steel is very evident. As discussed
later in the section on Lean Shipbuilding world-class
shipbuilders are have frequent, insome cases daily, steel
deliveries and equipment is delivered to point of use.
World-class shipbuilders are aware of the latest
equipment that can be used for shipbuilding and use
that which is appropriate for their throughput and
processes, such as the laser cutting and marking
machine shown in Figure 17.
World-class shipbuilders use robotic machines
where appropriate and where there is sufficient
throughtput to justify tjem, such as profile cutting and
marking (Figure 18), curved plate forming (Figure
19),subassembly welding (Figure 20), block assembly
welding (Figure 21), Curves shell plate welding tilting
station (Figure 23), and pipe manufacturing (Figure
23).
World-class shipbuilders develop new approaches Figure 16 - Modern (small) Steel Stockyard
to ship design and shipbuilding processes as a way to
improve productivity and competitiveness. Examples

World Class Shipbuilders: Their Productivity 293

 Figure 17 - Laser C u t t i n g a n d M a r k i n g M a c h i n e
F i g u r e 20 - Robotic S u b - a s s e m b l y W e l d i n g

F i g u r e 18 - Robotic Profile C u t t i n g a n d M a r k i n g

Figure 21 - Robotic Block W e l d e r

Figure 19 - Robotic C u r v e d Plate F o r m i n g

Figure 22 - C u r v e d Shell Plate T i i t a b l e W e l d i n g
Station
294 World Class Shipbuilders: Their Productivity

Figure 23 - Robotic Pipe Manufacturing
PRODUCTIVITY
Productivity is defined as output divided by input.
Having made this simple definition it suddenly
becomes very complex. How do you measure output
and input? This depends on the users and their
intentions.
A metric that has been used by the global
shipbuilding industry for a number of years is man-
hours/CGT. CGT stands for Compensated Gross
Tonnage, which is the Gross Tonnage of a ship
compensated for its size and complexity compared to a
standard ship, namely a dry cargo ship of 15,000 GT.
The International Gross Tonnage is simply the
molded volume, in cubic meters, of the enclosed hull
and deckhouse of a ship multiplied by a coefficient, or
GT=KlxV
The coefficient is to convert volume to
admeasurement tons (0.35), and to keep the new Gross
Tonnage as close to the average of the Gross Tonnage
for existing ships as possible. The coefficient varies
from 0.22 for very small ships to 0.32 for very large
ships.
The shipbuilding productivity for the major
shipbuilding counries/areas, including U.S. was shown
in Table III. In case anyone has trouble accepting the
values, they are validated by the recent U.S.
Shipbuilding Benchmarking Project, as shown in
World Class Shipbuilders: Their Productivity
Figure 24, developed from their updated chart showing
productivity for a range of Best Practice ratings. (First
Marine International 2000). The dots represent
individual shipyards used in the recent study to develop
a productivity prediction equation (Lamb 2001).
COMPENSATED GROSS TONS
The concept of Compensated Gross Tonnage
(CGT) developed from the need to have a basic
measurement that could take into account the
differences in ship type, complexity in design and
construction, and size. People had been working on
this since the mid 1960s and it has developed into a
world- wide accepted approach. The Compensated
Gross tonnage Coefficients (CGTC) have been
developed internationally and accepted by the OECD.
The coefficients are for commercial ships and are
provided in a number of sources such as (Bruce 1992)
(Lamb 1998).
CGT: A BASIS FOR PRODUCTIVITY METRIC
To overcome the productivity metric problem the
concept of Compensated Gross Ton (CGT) was further
developed in 1967 by the Association of West
European Shipbuilders and the Shipbuilders
Association of Japan as an aggregate productivity
metric.
Man-hours per CGT has been accepted as a
potential measure of productivity. A comparative
aggregate productivity measure used for assessing an
individual shipyard's performance is it's labor hours for
producing a CGT over a period of 3 to 5 years.
How effective is the CGT approach? If it was
precise, for different ship types, sizes and complexity
constructed in the same shipyard, the man-hours per
CGT would be the same. Table V, shows a comparison
between man hours/tonne of steel and man hours/CGT.
It can be seen that there is significant improvement
with the CGT approach but it still is not precise. From
the CGT productivity metric, the concept of a
competitive constant cost curve was developed. Such a
curve is shown in Figure 25, which is an updated plot
from the author's earlier paper (Lamb, 1998). It is
based on plotting the productivity metric, MH/CGT,
against total cost of labor.
It is then possible to enter country averages or
individual shipbuilders on the plot and compare them to
the constant cost curve that passes through the lowest
entry, who will be the price setter.
295
 CGT coefficients are not available from the acceptance has been obtained (Lamb 1998) (Bertram
OECD for naval ships. The author, and some of his 1997).
friends in Europe, have been working on developing
compensation factors for naval ships over the past 6
years but they cannot be used until international

100 A

k- US
L9

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t~ 80~
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m
& A Ai Europe

L) 40 ~ k A
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EL 2 0 * Larg ~ A A Japan
[] Small Shipyards &
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Trendline
2 3 4 5
BEST PRACTICE RATING (BP)

Figure 24 - International Shipbuilding Productivity

296 World Class Shipbuilders: Their Productivity

 IOO /an.n I
90 k,,$2/Hr~ [

s~
70 @
Man
Hours
per 60 *50 to 80
CGT 5O

40

20

lo
0
10 20 30 40 50 60
Total Cost (Fully Burdened)per Man Hour (U.S. dollars)

Figure 25 - Competitive Iso-cost Curves

TABLE V - C O M P A R I S O N OF P R O D U C T I V I T Y many considerations, not all of which are technology)

MEASURES were used (Lamb 1998).
Ship Type MH/ST. WT. MH/CGT Figure 24 clearly shows that BP directly affects
VLCC 16 32 Productivity. It also showed the difference between
SuezMax Tanker 19 22 small and large shipyards with the same BP.
Product Tanker 27 20 However, it is clear that there are other factors
Chemical Tanker 46 36 that are not included in the BP, that impact
Bulk Carrier 19 20 productivity.
Container ship 4400TFEU 19 22 Originally (Lamb 1998), only a very preliminary
Container ship 1800TFEU 28 22 analysis was completed. It involved limited data points
Reefer 43 34 and relied on published data, including some from the
General Cargo 56 29 referenced reports and paper. The resulting equation is:
Ferry 51 39
Ocean Tug 105 31 MH/CGT = 28.75 x TE ~ x B P "3~~

where TE is the number of total employees in the

PRODUCTIVITY TARGET PREDICTION shipyard and BP is derived from the Technology Audit
Survey.
An equation that carl predict what the productivity Continuing work (Lamb 2001) in this area, based
of a shipyard should be, based on readily available on significantly more information, resulted in the
shipyard parameters has been developed. following update:
At first only the shipyard's size and technology
level (Better to use term Best Practices Level (BP)as MH/CGT = 3302 x TE ~ X B P "473

the Technology Level (TL) metric is made up from

World Class Shipbuilders: Their Productivity 297

 Table VI gives a comparison of the actual them to those derive in earlier studies (Lamb 1999). It
productivity and the predictions from both equations can be seen from the above tables that U.S. productivity
for a number of shipbuilders. The actual Total lags the best by a significant amount. If the U.S. is to
Employment and BP are not shown to protect the become internationally competitive and thus able to
identity of the shipyards. It can be seen that the 2001 win foreign commercial ship orders, it must close the
predictions are quite good. However, the objective of productivity gap. Fortunately, because of the
the research was to determine the impact of a number difference in wages it does not need to reach the best
of shipyard parameters. This led to the introduction of productivity to be competitive. Reference back to
additional shipyard parameters to see if the prediction Figure 25 shows that, at the present fully Burdened
could be improved. Labor Rate, the U.S. shipbuilders would need to
improve their productivity to just below 20 MH/CGT.
T A B L E V! - PRODUCTIVITY PREDICTIONS This is between 2 to 5 times more productive. Is this
Country Actual MH/CGT MH/CGT possible? The author believes that it is, but that it
MH/CGT 1998 2001 would require many difficult steps to be taken. The
JAPAN 6.3 4.5 8.7 goal of performance improvement can he accomplished
JAPAN 10.1 5.6 9.7 through a number of approaches including the
KOREA 31.9 37.0 30.4 application of Lean Manufacturing Principles to the
KOREA 26.0 21.7 24.1 shipbuilding industry.
USA 50.9 32.5 57.9
USA 42.5 21.9 41.2 T A B L E VII - P R O D U C T I V I T Y 2001
PREDICTION EQUATION
The additional parameters are:
Production/Total Employee Ratio PR Shipbuilder Country Actual Predicted
Dual Purpose Effect DP
MH/CGT MH/CG
Vertical Integration VI 1 Japan 6.3 8.6
Number of Ships Delivered Per Year ST 2 Japan 20.0 2 I. 1
3 Japan 10.1 10.1
The final equation that was developed is: 4 Japan 10.4 10.9
5 Japan 13.9 12.6
MH/CGT =111 TE ~ B P L 3 ~ p R ~ D p ~ VI -~ S T -~176
6 Japan 19.0 19.3
7 Japan 9.8 9.7
Table VII gives the predictions from this equation 8 Korea 26.0 25.2
for the same examples as Table V and it can be seen 9 Korea 31.9 30.6
that the prediction is better. 10 Korea 17.7 20. l
A sensitivity analysis determined that the influence 11 Europe 22.8 23.4
of the different parameters. The Best Practices rating 12 Europe 34.2 34.8
had the greatest influence. The actual ranking and 13 Europe 33.9 36.3
influence for greatest to least was: 14 Europe 48.6 48.6
Best Practice Rating 29 41% 15 Europe 43.3 33.6
Dual purpose 21 30% 16 Europe 30.3 36.2
Total/Production Employees 8 11% 17 Europe 21.1 22.7
Vertical Integration 8 I1% 18 Europe 16.1 16.4
Total Employees (size) 4 6% 19 Europe 18.3 15.6
No. of Ships Delivered/No. of ship Types 1 1% 20 Europe 29.6 32.7
21 USA 77.9 82.1
An interesting by-product of the study was the 22 USA 67.7 69.0
determination of Compensation Factors for Naval 23 USA 50.9 59.6
Ships. This was accomplished by applying the 24 USA 42.5 46.3
prediction equation for shipyards building naval ships 25 USA 73.6 66.1
and working back through the process to derive the 26 USA 102.3 99.7
compensation factor that would make the shipyard's
actual productivity the same as the prediction. T A B L E VIII - N A V A L SHIP C O M P E N S A T I O N
Table VIII shows the reversed engineered FACTORS
naval ship compensation coefficients and compares

298 World Class Shipbuilders: Their Productivity

Ship Type Compensation Coefficients competitive, and fast delivery products through
1994 1999 2001 shortening the production flow by eliminating waste.
Aircraft Carrier 2.5 4.5 5.8 To further assist in the understanding of lean
Cruiser 4.3 11.3 NC manufacturing so it can be recognized in shipyards
Destroyer 4.6 12.4 11.3 some of the principles will be further described. For a
Frigate 7.7 12.4 NC complete description see (Liker 2001).
LSD 3.6 5.1 4.8 A major player in the dissemination of lean
LHA 3.1 4.6 4.0 manufacturing in the US is the US Airforce who have
had a Lean Aircraft initiative and program in work at
MIT since 1996.
LEAN MANUFACTURING Benefits of Lean Manufacturing
The goal of Lean Manufacturing is to deliver a
Lean Manufacturing is the name given to the product of Highest Quality, Lowest Cost and in the
principles behind the Toyota Production System Shortest Lead Time, eliminating every possible waste
(Womack 1993). (waste being any activity that does not add value to the
The Toyota Production System (TPS) was product being manufactured).
developed to enable Toyota to become competitive on In the auto industry, lean manufacturing
world markets, particularly competing with Henry reduces the following by about 50%:
Ford, while addressing the particular circumstances 9 engineering hours
Toyota faced in Japan. Toyota started by following the 9 manufacturing man hours
basic principles set out by Henry Ford with the moving 9 maunafacturinf:, space
assembly line. 9 equipment investment
Through years of trial and error on the shop floor o time to develop new products
Toyota discovered that they could simultaneously
achieve high quality, low cost, and just-in-time delivery It also improves the working environment in all the
by "shortening the production flow by eliminating right ways; worker involvement, self-direction,
waste." This simple concept is at the heart of the TPS teaming, decision making at the lowest level, etc.
and what distinguishes it from the older mass
production paradigm it supplants. The theoretical ideal Why Change to Lean Shipbuilding?
is continuous one-by-one piece flow. Change is not a natural state for most people, even
Lean Manufacturing is a philosophy based on the though it is prevalent in the environment surrounding
following two basic principles, which are the two pillars them. Most people prefer stability. In fact the
of the TPS, Jidoka and Just in Time, namely; Scientific Management School is based on the concept
Jidoka building in quality and designing that it is management's task to protect workers from
operations and equipment so that workers are not tied such change and provide a stable environment in which
to machines but are free to perform value added work. they can work. Today that approach is doomed to
To do this it uses the principles of: failure. Change touches us all in many ways.
9 workplace safety, order and cleanliness There is a minority that finds change exciting and
(5S), invigorating. The change adverse majority often
9 error proofing, designates them as foot loose or unstable. Therefore
9 visual control, and change is often difficult to accomplish as there is
9 line stopping when problems arise always a strong inertia resisting it. Because of this,
(Autonomation) countries, industries, companies and even individuals
Just in time - the right quantity, the right part, at the only undertake change when they face a crisis and
right time, at the right place. This is accomplished change is the only hope for survival. Unfortunately, for
through the following principles: many, it is too late! In tile case of shipbuilding the
9 one-piece flow, British experience is proof of this fact.
9 metered productivity (takt time) The U.S. shipbuilding industry is ahnost at, and
9 pull systems (kanban), and may even have ah'eady past, the critical stage. U.S.
9 level production (heiiunka) Navy orders are dwindling and the major shipyards are
incapable, at this time, of winning new build orders for
These two pillars support the rest of the system, and commercial ships at world competitive prices. Most of
the goliath crane, which shows the objective of the tile U.S. shipyards have made improvements to
system and that is to deliver high quality, cost

World Class Shipbuilders: Their Productivity 299

 facilities and processes over the years, but the results
have been marginal compared to Japan and even Korea.
Productivity in U.S. shipyards is half that of Europe
and third o f the Japanese shipbuilding productivity, and
this is for an apple to apple comparison based on the
internationally accepted productivity metric based on
Compensated Gross Tonnage (CGT), that accounts for
differences in size and complexity o f the ships
involved. In addition to the productivity problem, U.S.
shipyards also take twice as long, or more, to build
ships. An extreme example is a comparison between
Newport News Shipbuilding and Hyundai in Korea.
Both have approximately the same number o f
employees. Hyundai delivers 74 ships a year (ULCC,
VLCC, LNG, Car Carrier, Container and Bulk
Carriers). Newport News delivers one aircraft carrier
every 5 years! Of course an aircraft carrier is
significantly different and more complex that
commercial ships, but "that much?"
If the U.S. major shipyards are all to survive they
must change enough to be competitive enough to entice
U.S. ship owners to begin to replace the aging and time
restricted Jones Act fleet. This would keep them busy
for the next 10 years. But what about after that? It is
unlikely the U.S. Navy will be able to fill the demand
gap. To continue to survive the U.S. shipbuilders must
be able to win international commercial ship orders. So
effectively, U.S. shipbuilders have 5 years to become
internationally competitive. How can they do it?
There are many things that could and should be
done, but one way that could significantly help, is to
adopt the lean manufacturing principles. Of course the
major requirements is adequate throughput to which the
new approach can be applied. It is recognized that this
is a "chicken and egg" situation. The desired
productivity cannot be achieved without adequate
throughput and new orders cannot be achieved unless
the productivity is improved.
It is anticipated that implementing lean
manufacturing principles in shipbuilding could improve
productivity by at least 50% and shorten build time by
100%. Such achievements would certainly assist U.S.
shipbuilders to improve their prospects for the future.
This Lean Shipbuilding Guide presents the lean
manufacturing principles and gives examples of how
they are, either, currently applied in some shipyards or
how they could be implemented.
Recognizing Waste
Toyota made famous the seven wastes in
manufacturing illustrated in Table IX Traditional batch
manufacturing separates processes with buffers. Large
batch manufacturing with big buffers leads to sub-
optimal behavior. One operation may be greatly
300 World Class Shipbuilders: Their Productivity
improved without improving the overall system
performance. And it also reduces the motivation to
improve.
There must be a full range o f tools in place that
support building in quality (e.g., quality checks, error
proofing, etc.). The point o f stopping production and
signaling problems is to make the problems visible so
they can be solved. This is not useful without a culture
that supports problem solving and continuous
improvement.
In traditional systems the operator is tied to the
machine and must wait for it to cycle, leading to waste
of the operator's valuable time. Giving machines the
ability to stop themselves when there is a problem and
alert the operator can free up the operator to do more
value-added work. The separation o f person and
machine is illustrated in Figure 26. This separation is
enabled by an andon system. That is, the operator can
be freed from watching the machine if it has the ability
to detect a problem and alert the operator.
TABLE IX- THE S E V E N W A S T E S IN
MANUFACTURING
I. Over production - Producing more material than is needed
belbre it is needed is the fundamental waste in lean
manufacturing--Material stops llowing.
2. Producingdefective products - Deti~ctive products impede
flow and lead to wasteful handling, time, and eflbrt.
3. Inventories - Material sits taking up space, costing money.
and potentially being damaged. Problems are not visible.
4. Motion- Ally motion that does not add value to the product is
waste.
5. Processing - Extra processing not essential to value-added
from the customer point of view is waste.
6. Transportation - Moving material does not enhance the value
of the product to the customer.
7. Waiting - Material waiting is not material llowing through
value-added operations.
Takt Time Planning: The Tempo of the Production
System
In order to make material flow through
manufacturing processes at the rate needed to match
customer demand, a pacing mechanism--the tempo at
which product is made, is needed. Takt time is the
German word for meter and in lean manufacturing is
the targeted pace o f production. Takt time is also
referred to as the "Customer Demand Rate" and is
measured as the total available production time/total
customer demand for some period of time (Figure 27).
This leads to a calculated amount of time per piece.
For example, one vehicle should come off the line
every 60 seconds.
 Takt tirne is the target and should be the driver in
developing the way the product is scheduled and the
way material flows through the system.
Ideally, the cycle time should equal the takt time.
Almost by definition, not to follow the takt time implies
that waste will exist in the system.
To run faster than takt time will generate inventory
(something made today that the next process does not
need today), somewhere in the system. Running slower
than takt time will generate the need for accelerated
production, overtime and/or excess inventory.
B A D = P e r s o n Tied to Mach in e
= Japanese shipbuilders use a number of them.
G o o d = M a c h i n e cycles on its own
....Z _ _ X
~ L ! :......~ I
Figure 26 - Takt Time
5 S's
A well-organized workplace is necessary for
operational stability. Having clear standards for where
things belong enables visual control---it becomes clear
when there is a deviation from the standard. Making
the workplace clean and organized is called the 5Ss in
lean manufacturing (Hirano 1990):
Sort--Sort through items and keep only what is
needed while disposing of what is not.
Stabilize (orderliness)--"A place for everything
and everything in its place."
Shine (cleanliness)-- a form of inspection,
which exposes abnormal and pre-failure
condilions.
Standardize (create rules)--Maintain and
monitor the first three Ss.
Sustain (self-discipline)--Maintaining a
stabilized the workplace is an ongoing process
of continuous improvement
The 5s together create a process for improvement
This cycle continues in a process of continuous
improvement.
LEAN SHIPBUILDING
World Class Shipbuilders: Their Productivity
A project was initiated in 1999 to develop a US
Shipbuilding System with the objective to attain similar
acceptance and benifits to the shipbuilding industry as
the Toyota Production System has done for many
industries throughout the world. The project included
introducing the Lean Manufacturing Principles (LMP)
to the shipbuilding industry and visits to Japanese
shipyards to delermine their use of LPM
It appears that there is no shipbuilder that applies
all the lean manufacturing principles to its business.
This should riot be a surprise, as many of the
techniques dew:loped in an industry with process times
of hours and a large number of product delivery, would
be difficult to implement in shipbuilding with its
process time of many months and even years and very
low product deliveries. However, many shipbuilders
use those principles that are applicable. Most of the
A
number of U.S. shipbuilders are implementing 5Sand
other Lean Manufacturing principles.
Within this year (2001), there has been a
significant interest by US shipbuilders and the US
Navy in lean manufacturing.
LMP can only be applied when there is
~ sufficient product throughput with minimum variability
and using stable processes. Even though the average
Japanese shipyard produces 7 to 10 ships per year, it is
not enough throughput when considering completed
products. Japanese shipyards have met the above
requirements by focusing on Group Technolgy (GT),
interim products (IP) and processes at IP level rather
than the whole ship.
However, lean shipbuilding cannot be mandated
by the customer (private, US government or Navy).
The decision to implement LMP must come from the
shipyard top management. It will be driven by market
needs an must be based on sound business policy.
Japanese Shipbuilding as Lean Manufacturing
Japanese shipbuilders have adapted some of the
lean principles to suit their unique situation, such as
one-piece flow and JIT.
A major factor was the involvement of all
employees in the continuous improvement effort, not
just management and some technical employees. Other
important factors (now lean manufacturing principles)
were standardi;,ation, one-piece flow, flow smoothing,
focus on elimination of waste, group technology and
part families, dedicated interim product lines, and
multi-task assignment for employees. They have also
applied 5S to some level.
It is not possible to say how much lean principles
helped them to achieve their exceptional productivity
gains, as they applied other aspects of Japanese
301
 manufacturing technology at the same time. In fact
lean manufacturing blurs with Total Quality
Management and other Japanese developments to
provide their unique and successful shipbuilding
production model.
Just In Time and Shipbuilding
The ideal for JIT as mentioned earlier is a one-
piece flow. For many parts operations the main focus
of lean manufacturing is creating one-piece flow. This
means identifying families of parts that go through the
same set of processes and dedicating a production line
to that product family. All products assigned to the
workstation will go through those operations one piece
at a time. It is possible to have some parts skip a step so
not every part must go through every single step.
Typically, this approach has been used for large volume
production, but world-class shipyards have adapted it,
particularly Japanese.
Figure 27 gives a simple example of batch
processing versus one-piece flow. In the batch
processing case some rectangular steel shapes for a
block are cut, along with some stiffeners. This is done
in large batches, which are moved as large batches to
be assembled into interim products. These parts must
be sorted before they are assembled. This batch
cutting leads to a large pile of inventory which must be
moved to another buffer and then sorted through to be
sub-assembled; and finally the subassemblies are
moved and sorted through to get the parts needed to
construct the actual blocks. Notice how much non-
value added work there is in this process--all of the
moving and storing and sorting are pure waste.
The alternative ideal from a lean
manufacturing point of view is a pure one-piece flow
302 World Class Shipbuilders: Their Productivity
that is shown in the bottom of Figure 27. In this case
one plate and one stiffener would be handled at a time
and cut just the material you need, pass it on, do the
final cutting, pass it on, do the subassembly, pass it on,
and build up the block. While it may not be feasible to
make one and move one, the smaller the batch size the
better from a lean manufacturing point of view. Figure
30 provides a bigger-picture view of the ship
production process. Traditionally, shipyards have been
organized by functions. For example all the plates are
processed in one shop, whether curved or flat, and the
profiles are processed in a separate shop, both straight
and curved. Large batches of plates and profiles are
processed and then pushed into storage. They are then
pushed into subassembly where they need to be sorted
as seen in Figure 30.
The bottom part of Figure 28 shows a proposed
arrangement for a lean shipyard. In this case the
shipyard is organized by "product line." Product line
does not mean separate ships but rather similar part
families, in this case flat blocks go through one set of
processes and a separate set of processes are reserved
for curved blocks. So for example all the flat plates are
cut in process lanes, as are straight profiles, and then
small batches are brought to the flat block line for
assembly. Figure 28 shows the paint shop segregated
into two shops, one for flat blocks and one for curved
blocks.
The flat blocks and curved blocks are then outfitted
in separate areas and finally come together in grand
block construction Notice the convoluted paths
materials take in the functional batch process and how
clean and smooth the flow is in the product-flow
process.
 m
SORTING ~
~ __.SORTING, ~ m ~~
BUFFER x ~ ~
--*
~
,@ -.
.~. BLOCK
~ . ~ ~ ' CONST-
~SORTINO __~ : __~SORTI~G/ RUCTION
BUFFER
STORAGE

BLOCK
CONST-
RUCTION

Figure 27 - Batch Processing vs One-piece Flow

I I YL]f ..... ,
ff . . . . . . . . .
i
1 IPLAT~ bATE ~ ~ ~ . _ _
i IPROCESSlN~_STORAGE I ~
r ...... ~ i - - - - ~
ASSEMBLY[~__.~ [LA~.. L ' '
i
iP LATE
i
i
! I I~PLA~E ~ /~,.~.=I.IX/~ SHOP ~' OUT-
2
"l
I
I
l AND I / I STO~OE~L~ "~/" X ~ ' FITTING* ..... '
i PROFILE
iSTOCKYARDi
i
i I/ PROFILE I.ST~G"T~~'ff'~'~'~
T "PROFILE / / ~ / ~1~ BLOCK ~
/ 2 S"OP-I"i ..d J .......I
! GRAND ~ ] I
1PROCESSIN~-yORAGI/ I PIPE [ ~ ' ~ . ~ L ~ - - J
Ei 'BLOCK I
[ CONSTR i
i i
i i
I "~ROFILE i~"'-~~/
I I STORAGE

PMNT FLAT BLOCK

FLAT BLOCK LINE ----I~
SHOP OUTFITTING
" ~ GRAND
- -

PLATE
? + BLOCK
-~ SUB-ASSEMBLY PIPE SHOP BERTH
AND CONSTR-
.L I
PROFILE UCT1ON
PAINT -- --~ CURVED BLOCK--
STOCKYARDI -I~ CURVED BLOCK LINE -- --~ SHOP OUTFITTING

!. r ,~( r[: :....

Figure 28 - Functional-Batch versus Product-Flow Process

World Class Shipbuilders: Their Productivity 303

 Lean Value Chain
Lean manufacturing depends not only on processes
inside the yard, but integration with suppliers as well.
Ultimately it is a value chain proposition. For example,
getting steel to the yard so large inventories do not
have to be held requires a new way of working with
steel suppliers. Similarly with pipe and other raw
materials. Some of the best Japanese shipbuilders take
delivery of steel every day or even multiple times a
day, so that the traditional stockyard appears empty, or
newly developed stockyards are small and arranged as
Lean "supermarkets." On a larger scale, in some cases
it may be necessary or cost-effective to purchase whole
blocks from outside in which case the suppliers of
those blocks must fit into the precise timetable of the
ship builder--Just In Time. A number of shipyards
purchase entire deckhouses from key sub-contractors.
Clearly this level of dependence on outside contractors
is not possible with an arms length relationship with
suppliers. It requires a very high degree of trust and a
high degree of mutual learning between customers and
suppliers to understand program timing and how to
adjust to the inevitable changes and setbacks that occur
in a major construction project.
CONCLUSIONS
This paper presents observations on world-class
shipbuilders, their productivity and how lean
manufacturing is being applied in them.
A detailed look at world-class shipbuilding
productivity showed a wide range of productivity and
that the gap between the best and the U.S. was a factor
from 5 to 7. It was shown that to be competitive in the
international commercial shipbuilding market, U.S.
shipbuilders would have to improve their productivity
to just below 20 MH/CGT.
This would not be easy to do, but there are
approaches that can help. It was suggested that lean
manufacturing, could help. To this end a brief
description of lean manufacturing and how it is and
could be applied to shipbuilding was presented.
Lean shipbuilding practices are principles, not a set
of individual tools, which can be cherry picked one at a
time. Moreover, lean shipbuilding requires an
enterprise-level view of the value stream--from raw
materials to the finished ship delivered to the customer.
A goal of this paper was to present lean
manufacturing as a system of production. Some lean
manufacturing principles have been embraced by
shipbuilders and many of the examples presented in the
paper are from world-class Japanese shipyards. There
is a focus on flow, use of standardized methods, built-
304 World Class Shipbuilders: Their Productivity
in-quality, continuous improvement, and a high degree
of involvement by flexible, motivated employees.
Shipyards that practice lean shipbuilding
(manufacturing) may become world class. Those that
do not - probably will not!
ACKNOWLEDGEMENT
The author would like to thank the many shipyards
in the U.S. as well as throughout the world that he
visited for their hospitality and open discussions. In
addition he acknowledges the contribution from Dr. J.
Liker of the University of Michigan and would like to
thank him and NASSCO for including him in the
Shipbuilding Production System NSRP ASE Project.
REFERENCES
Bertram, V. and Weis, H-M, 1997, Evaluation of
Competitiveness in Shipbuilding, HANSA 134, Nr.9
Bruce G. and Clark, J. 1992, Productivity Measures as
a Tool for Performance Improvement," Transactions
RINA
Drennan, D. and Pennington, S. 1999, Ladders to
World Class Performance, Kogan Page US, Dover,NH
Hengst, S. 2000, The Future of European Shipbuilding
Industry, RINA Conference on European Shipbuilding
in the 21st Century, December
Hirano, H. 1990, 5 Pillars of the Visual Workplace,
Productivity Press, Portland, Oregon
Lamb, T. 199 , Build Strategy Approach, 1995 Ship
Production Symposium, Seattle, WA, June 13-15
Bennett, J. and Lamb, T. 199, Concurrent Engineering,
1995 Ship Production Symposium, Seattle, WA, June
13-15
Lamb, T., et al 1995, A Review of Technology
Development, Implementation, and Strategies for
Further Improvement in U.S. Shipbuilding. Transaction
SNAME Annual Meeting, October 4-7
Lamb, T. 1998, A Productivity and Technology Metric
for Shipbuilding. SNAME Great Lakes and Great
Rivers Section Meeting, Cleveland, Ohio, January
Lamb, T. 1999, Naval Ship Compensation Factors,
Lamb, T. and Hellesoy, A. 2001, A Shipbuilding
Productivity Predictor, 2001 Ship Production
Symposium, Ypsilanti, MI, June 13-15
Liker, J.(Editor) 1998, Becoming Lean, Productivity Womack, J. P., et al 1991, The Machine That Changed
Press, Oregon The World, Harper Perennial

Liker, J. and Lamb, T. 2001, Lean Shipbuilding, 2001

Ship Production Symposium, Ypsilanti, MI, June 13-15
Ohno, T. 1988, Toyota Production System,
Productivity Press, Oregon

World Class Shipbuilders: Their Productivity 305

 Discussion
W. O. Gray, Member
The author has provided SNAME generally, and American
shipbuilders, particularly of major merchant ships, with a clear
and concise analysis of the dilemma in which they currently
find themselves. He gives them a warning---either improve your
productivity 3-5 fold or face extinction in about five years when
even the federal protections they've enjoyed can't save them
from being phased out by alternative transportation modes.
The author's analysis, based mainly on comparing foreign
and American MH/CGRT and describing "lean-manufacturing"
(the Toyota Production System) or "do it right the first time,"
are persuasive indications of both the disease and the main cure.
But I do wonder if there aren't a few other factors still at work
which help explain why a major ship built here cost 3-4 times
what it does in Europe/Asia. How does he feel about:
Several studies have shown that the cost of materials alone
for a U.S.-built merchant ship exceeds the price of the fin-
ished foreign built vessel. So are U.S. yards buying mate-
rials and equipment at the "world price" ?
Studies have also shown that while U.S. workers work OK,
poor planning of their work is where the problem lies. Is
this an area where "lean manufacturing" helps? I would think
so, just as eliminating rework is vital.
Studies like Howard Bunch's PD 241 have also shown that
U.S. engineering hours can exceed those for a foreign yard
by a factor of 8-10. Isn't this a part of the problem?
Finally, I question whether the "high" marks for quality as-
sessed for U.S. and some foreign yards are valid. Certainly
in the tanker and bulker world, many standard ships, which
is what most yards force most owners to buy these days,are
what one classification chairman calls "short-life" ships. Of
course, this is partly the fault of class societies and their
short-sighted policy of trying to offer the least possible steel
weight. They are finally taking steps to harmonize and, I
hope, increase their scantling rules and also force decent
coatings into new builds. Also on quality, from personal
experience on U.S.-built chemical tankers and VLCCs in the
80s, the quality generally was pretty bad.
Finally, I commend the author for Fig. 24 that shows by plot-
ting Best Practice Rating vs. Productivity, that small yards (pre-
sumably here and abroad) perform much better than large ship-
yards. What used to be called "shade tree" yards in the U.S.
Gulf area certainly have been able to compete on the world
stage, a feat their larger brethren have failed to duplicate
throughout the 20th century. Having started in a big but inef-
ficient U.S. yard 42 years ago I am convinced that complacency
about the Jones Act protection for coastal shipping, and reliance
on CDS for international, is what caused U.S. shipyards to de-
cline so far. The result was that alternative transportation
(pipelines, tug/barges,rail, trucks, etc.) took nearly all the coastal
cargo that used to move in ships, and we have no U.S.-built
internationally trading ships. I hope, as I know the author does,
that at least some of our yards will open their eyes and take
up the challenge that this author has given them.
Tim Colton, Member
[ congratulate the author on yet another stimulating paper
documenting the continued improvements in shipbuilding prac-
tice to be found in Europe and the Far East. My problem re-
lates to the idea of a "world-class" shipbuilder. It's an inter-
esting concept but if you were rich and stupid and about to
306 World Class Shipbuilders: Their Productivity
invest in the shipbuilding business, would you want to invest
in a "world-class" shipbuilder or in a "successful" shipbuilder?
Because "world-class" does not, unfortunately, equal "suc-
cessful."
I have no doubt that the seven major Japanese shipbuilding
companies are "world-class"; they, not Newport News, are the
world's most advanced shipbuilders. These seven shipbuilders
cannot, however, be described as successful, because they do
not make any money; over the past five years, the seven of them
together have made a net profit equivalent to three tenths of
1% of their total revenues.
I have no doubt that the five major Korean shipbuilding com-
panies are "world-class": they are not as advanced as the Japan-
ese, but they are catching up. Their output is amazing and their
achievements are awesome but they cannot be described as suc-
cessful, because they do not make any money. Over the past
five years, two of them have been bankrupt and two have had
to be bailed out by their parent companies.
I have no doubt that the five major European shipbuilding
companies--Atlantique, Fincantieri, IZAR, Kvaerner and
Odense--are "world-class"; they build very large, highly com-
plex and prodigiously expensive ships in magnificent facili-
ties, using highly advanced techniques. But, whoops, they can-
not be described as successful, because they do not make any
money Like the Japanese, their combined net profit over the
past five years has averaged just about zero.
By contrast, the three major U.S. shipbuilding companies
may not be world-class in the categories studied in this paper,
but they certainly make money; their combined net profit over
the past five years has averaged just about 5.5% of revenues.
It seems to me that the lesson to be learned here is that you
don't have to be good to succeed in shipbuilding, you have to
be smart. Being recognized as "world-class" is of no value if
you're bankrupt. The hypothetical investor in shipbuilding needs
to identify companies in markets where the competition is lim-
ited and focus on ways of making those markets still more
limited. That way, his success is assured and any move in the
direction of being world-class, however gradual, can only make
him more successful.
Would the author please comment on this business strategy?
Joe Comer, Member
The author has collected a large amount of data regarding
ship-manufacturing productivity and as he points out in his pa-
per, the World-Class methods emulated by US shipyards vary
greatly. I think we would all agree that what the author describes
as 'World-Class Shipbuilding Practices' are what many ship-
yards have tried to implement over the last ten years or as-
cribe to now through continuous improvement or the National
Shipbuilding Research Program (NSRP). At our shipyard we
have a Shipbuilding Policy and we use a Build Strategy. O u r
technical documentation format is suitable for direct use by Pro-
duction and we do advance outfitting along with many other
attributes described as World Class. In fact our shipyard lay-
out is very similar to the ones pictured in the paper. So why
are the U.S. (Commercial) Man-Hours / CGT so high?
Certainly 'Lean' brings a refinement to previous work
organization structures put in place. Through our exposure with
some Korean shipyards and previous experiences with other
World Class yards one might conclude that there is more than
just facilities and ideals of organization of work that improves
productivity. It appears that World-Class shipyards have a
knowledge base that begins in Engineering and flows through
Planning into Production. There is a methodology and disci-
pline that applies this knowledge to achieve such low Man-
Hours / CGT. It would be helpful if the author could identify
that common thread among the twenty-two odd International
Shipyards with 'Best Practices' that achieves this.
After seeing the engineering product of a few World-
Class yards, my sense is we tinder sell the importance of a
thoroughly engineered ship that specifies all the material re-
quired for construction. The World-Class engineering product
(not to be confused with the technical documentation for Pro-
duction) leaves no doubt that the final product (the ship) tech-
nically meets the requirements of the customer and the Regu-
latory Bodies. We get so caught up in the business need to
keep our Production workers employed that we are still defin-
ing (Engineering) the vessel as we begin cutting *,he first steel.
Can you imagine Detroit still working on the shape; of the fender
as the Production line begins to flow'? How would the author
categorize the maturity of the Engineering at various business
stages such as pre-contract, before product modeling and be-
fore cutting steel at these same twenty-two World Class ship-
yards?
Through another initiative at our shipyard we are be-
ginning to implement some 'Lean' methodologies identified
in the paper. While 'Lean' principles are relatively easy to adopt
in Production, the application of these philosophies and prin-
ciples over the Enterprise seem to be where the U.S. shipyards
differ from World-Class shipyards. How have the World-Class
shipyards aligned their 'Value Chain' (Engineering, Supply
Base, People Systems, etc.) and their entire Enterprise to sup-
port their 'Lean' improvements?
Patrick D. Cahill, Associate Member
Professor Lamb's paper provides excellent background and
insight into one of the latest "buzzwords" in the shipbuilding
industry; "lean manufacturing". The topic is especially timely
in light of the significant funding recently awarded by the NSRP
to support Lean Manufacturing implementation al two medium
sized, commercial U.S. shipyards.
The authors summary of what constitutes a world class ship-
yard is especially interesting from my perspective at a medium
sized commercial yard. "Profit" is first on the list of attributes,
and is the only attribute in which U.S. yards are ranked above
the rest of world. In a capitalist, market driven economy, profit
is paramount. Negative profit in a U.S. shipyard means the end
of the shipyard. Low profit means that there is little left over
to invest in improvements to increase profits. From the per-
spective of a large yard building Naval vessels at the highest
profit margin in the worldwide shipbuilding industry, what in-
centive is there to adopt lean manufacturing or any other effi-
ciency improving methods?
For the small or medium sized yard, it is a different story.
Smaller yards work on the botlom line, and already have, by
default, many of the attributes which the author suggests large
yards should strive for such as flatter organization,< shorter pro-
duction cycles and less inventory and Work in Process (WIP).
A "world class" benchmarking study that exchides the five
largest shipbuilders in the U.S. would make an interesting study.
The vessels are smaller, but generally very complex, so the
MH/CGT figures would likely show a downward trend. This
theory is supported by the authors curves of BP vs. productiv-
ity, which shows that smaller yards obtain greater productivity
with less effort expended in "Best Practices".
Professor Lamb notes that in the shipbuilding industry, lean
manufacturing methods are "cherry picked" to suit the specific
needs, capabilities and requirements of the implementing ship-
yard. This is a significant observation, since the product
throughput paradigm in shipbuilding is far different than that
World Class Shipbuilders: Their Productivity
in automotive manufacturing. The supply chain issue is also
far different in shipbuilding; particularly in small commercial
yards where many vessels are one-off productions and nearly
all equipment supplier selections are driven by the customer
and his logistics concerns, not by the shipbuilder and his effi-
ciency issues.
U.S. shipbuilding has long held the title of "world class" in
the construction of warships. No one will argue that the United
States possesses the most technologically advanced and most
capable Navy in the world, and there is no reason to believe
that the American taxpayer will ever settle for anything less.
If the measure of world class is to be based on the global com-
mercial market, then it may be time to shift the focus away from
insinuating that large yards need to become globally commer-
cially competitive and concentrate on the smaller yards that
are actively competing in the world market now. Implementa-
tion of "lean manufacturing" is about to begin, with NSRP fund-
ing, at Atlantic Marine and Todd shipyards. The true effec-
tiveness of implementing "lean manufacturing" principles in
U.S. shipyards should be measured by the change in world class
competitiveness at those yards over the next two years.
Author's Closure
l would like to thank the discussers for there contribution
to the paper.
Mr. Comer points out that his shipyard follows many of the
world-class processes and also that their layout is similar to
those identified in the paper and poses the question regarding
the U.S. shipbuilders' low productivity. I believe the first rea-
son is that our shipyards do not have the level of annual through-
put nor a significant backlog of shipbuilding orders that can
support the investment in facilities, process improvement and
training that is required. However, even when most of these
are available there is still a significant difference in productiv-
ity as in the case of Europe and Korea versus Japan. So what
is the answer'? I believe it is in the way we organize our com-
panies, work and workers. The best practices that I have seen
in the world-class shipyards are:
9 Eliminating waste from engineering, administration and then
the other departments,
9 Re-use of ship components Io make up a new design,
9 Use of shipyard standard interim products,
9 Single focus of all employees--elimination of internal pol-
itics,
9 Domination in at least one sector of their product line,
9 Better educated production managers,and
9 Technical people running the shipyard.
I have personally been in the situation discussed by Mr.
Comer where the bid plan had steel fabrication starting six
months after contract award bul once we had the contract, the
president of the company and his financial VP pleaded with
me to give them "some steel to work on in two months so they
could maintain employment levels (no layoffs)." This requires
rework of the early produced steel because of interfaces with
other systems, thus it costs more man-hours. World-class ship-
builders with their one to two year backlog of orders do not
face this situation. While they may have reduced actual build-
ing times down to less than a year, they usually do not start to
build a ship until a year or more after contract award because
of the order backlog. Thus they have sufficient time to com-
plete most, if not all, of the engineering for the ship before
any construction begins.
If one goes looking for lcan manufacturing principles in
Japanese shipyards they will find a number. However. it is
307
 only recently that they have been referring to them as such.
They did not learn them from Toyota but developed them them-
selves about the same time Toyota was developing its produc-
tion system. This is not surprising as they were all attempting
to do the same thing, namely improve quality and productiv-
ity. A significant lean manufacturing principle that a number
of Japanese shipbuilders have implemented is one-piece flow.
They select an interim product level (such as blocks), use this
to set the takt time and as the demand pull and every other
process responds to it.
Contrary to popular belief, Japanese and Korean shipyards
have not adopted state-of-the-art supply chain management ap-
proaches. Their handling of suppliers is still very traditional.
Where they differ is that they know exactly when they want
the material and have sufficient leverage with their suppliers
to get it when they want it. They have recently begun to re-
search supply change management, but in response to their need
to begin considering foreign suppliers to maintain their com-
petitive position. They have found that their traditional approach
does not work with the foreign suppliers and many problems
with them have caused significant adverse impact on their build-
ing programs.
European shipbuilders, on the other hand, have implemented
SOA supply chain management approaches, including partner-
ships and long-term alliances.
Mr. Colton puts an interesting spin on the current relation-
ship between being world-class and making a profit. He sug-
gests that being a smart shipbuilder may be better than being
world-class. This business strategy (successful profit making)
is only available in countries, such as the U.S., where the busi-
nesses operate in a protected industry. These companies are cer-
tainly not successful in competing in the international market,
and that is why they are protected. I would also suggest that
the Korean government sees its shipbuilders as being success-
ful as they are achieving their goal of world shipbuilding dom-
inance (albeit, some would claim at the financial support of
the World Bank). Making a profit is obviously not one of their
high priorities. Japan and Europe are successful, in that they
still compete in a global industry, while hoping that the world
new ship prices will increase to a level where they all can
make a worthwhile profit.
In response to Mr. Cahill, a recent Booze Allen report
(Booze Allen 2000) showed that the U.S. defense industries,
in general, and the shipbuilders specifically, do not generate ad-
equate returns on assets to interest the average U.S. stockholder.
Until this is changed (improved) there will be no capital to in-
vest in significant new facilities and processes.
I agree with Mr. Cahill that there is a lack of incentive for
the large U.S. shipyards to improve their productivity by adopt-
308 World Class Shipbuilders: Their Productivity
ing lean manufacturing principles. Actually, as long as their
contracting is cost plus type, there will be no incentive to im-
prove.
Again, I agree that the situation in the small- or medium-
sized shipyard in the U.S. is different. I would have liked to
have had the information about, say, 20 small shipyards in the
U.S. for my productivity prediction study. I believe that we
would have at least the same and probably more difference than
shown for the small shipyards in Europe in Fig. 24 in the pa-
per.
The problem with cherry picking approaches was that the
approach often fails to provide any significant benefit because
essential parts as well as the infrastructure support are not in-
cluded.
The outcome of the implementation of lean manufacturing
principles at Atlantic Marine and Todd Shipyard will certainly
be carefully watched as will the performance of Kvaerner
Philadelphia Shipyard.
Mr. Gray raises some issues of concern as well as ques-
tions. First, in regard to the increased material cost for U.S.
ships, I feel that while that may have been true in the past for
U.S.-flagged ships financially supported by the Title XI Loan
Guarantee Program, which required U.S. material supply, it
should not be the case for building of commercial ships for
foreign owners in the U.S. The only barrier to obtaining world
prices for material and equipment from foreign suppliers is the
inexperience of U.S. shipyard buyers and their normal reluc-
tance to depart from the known.
We tend to focus on the productivity of production and not
the other areas. While there is a significant difference in the
productivity of world-class shipyards for the workers, it is even
worse for engineering. However, I am not sure it is quite as
bad as mentioned by Mr. Gray. It is certainly part of the prob-
lem. It is even more impacted by the lack of continuous through-
put of ship designing in our shipyards. There also seems to be
a lack of interest in improving design productivity.
The item of concern that I referred to above is Mr. Gray's
statement of the poor quality of U.S.-built commercial ships.
Most of the U.S. shipbuilders I know like to explain the ap-
parent lack of productivity on the fact that we are not comparing
apples to apples and that the higher cost of U.S.-built ships
are of significantly better quality. If this is not the case then
the problem is even worse than I thought. I also believe that
the setter of quality is the customer. I do not see why a
shipowner willing to get a ship from China for $100 million
would not be willing to accept the same quality of ship from
the U.S. if he could get it for the same price.
I refer Mr. Gray to my response above to Mr. Cahill about
small shipyard productivity.