overview of ship building industry

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KJSomaiyainstituteofManagementStudies

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ACKNOWLEDGEMENT

We place on record and warmly acknowledge the continuous encouragement, invaluable

supervision, timely suggestions and inspired guidance offered by our guide Dr. J S Lamba ,

K J Somaiya Institute of Management Studies and Research ,Mumbai, in bringing this report

to a successful completion.

We are grateful to Dr. J S Lamba for permitting us to make use of the facilities available in

the department to carry out the project successfully. Apart, he has been helping closely at a

personal level and we acknowledge his contribution. Last but not the least we express our

sincere thanks to all of our friends who have patiently extended all sorts of help for

accomplishing this undertaking.

Finally we extend our gratefulness to one and all who are directly or indirectly involved in

the successful completion of this project work.

Ajit Kumar

Hamneesh

Rahul Menon

Sandeep Mukhia


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DECLARATION

We hereby declare that the project work entitled Overview of Ship Building Industry

submitted to the K J Somaiya Institute of Management Studies and Research ,Mumbai, is a

record of an original work done by us under the guidance of Dr. J S LambaThis project work is submitted in the partial fulfillment of the requirements for the

Operations Management. The results embodied in this course have not been submitted to

any other University or Institute for the award of any course.

Date- 02-Oct-2012 Place-SIMSR,

Mumbai

Ajit Kumar

Hamneesh

Rahul Menon

Sandeep Mukhia


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CERTIFICATE

This is to certify that the Project entitled, Overview of Ship Building Industry submittedby Ajit Kumar, Hamneesh , Rahul Menon , Sandeep Mukhia in partial fulfillments for the

requirements for course of Operations management at K J Somaiya Institute of

Management Studies and Research, Mumbai

An authentic work carried out by Ajit Kumar, Hamneesh ,Rahul Menon, Sandeep mukhia

under my supervision and guidance.

To the best of my knowledge, the matter embodied in the Project has not been submitted to

any other University / Institute for any course.

Date:

Dr. J S Lamba

K J Somaiya Institute of

Management Studies and

Research, Mumbai


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TABLE OF CONTENT

S.NO CONTENT PAGE NO

1 INDUSTRY OVERVIEW 6

2 MANUFACTURING PROCESSES 9

3 SHIP BUILDING MANUFACTURING TECHNIQUE 14

4 ASSEMBLY PROCESS 16

5 LOGISTICS & SUPPLY CHAIN PROCESSES 22

6 MAJOR DRIVERS OF INDIA SHIP BUILDINGINDUSTRY 27

7 INDIA COMPETATIVE ADVANTAGES OVER COMPETITORS 28

8 CHALLENGES FACED BY INDIAN SHIPBUILDING INDUSTRY 29

9 CONCLUSION 31

10 REFERENCE 32


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1.INDUSTRY OVERVIEW

Shipbuilding is the construction of ships and floating vessels. It normally takes place in a

specialized facility known as a shipyard. Shipbuilders are also called shipwrights.

Shipbuilding and ship repairs, both commercial and defense, are also referred to as "navalengineering".

GLOBAL SCENARIO:

In the 20th century, shipbuilding grew as an important and strategic industry in a number

of countries around the world. This importance stems from:

The large number ofskilled workers required directly by the shipyard, along with

supporting industries such as steel mills, railroads and engine manufacturers; and

A nation's need to manufacture and repair its own navy and vessels that support its

primary industries

Shipbuilding is therefore an attractive industry for developing nations. Japan used

shipbuilding in the 1950s and 1960s to rebuild its industrial structure; South Korea started

to make shipbuilding a strategic industry in the 1970s, and China is now in the process of

repeating these models with large state-supported investments in this industry.

South Korea is the world's largest shipbuilding nation with a global market share of

37.45% in 2011. South Korea is the global leader in the production of advanced high-tech

vessels such as cruise liners, super tankers, LNG carriers, drill ships, and large-sized

container ships.

Japan lost its once industry leading position to South Korea in 2003 and its market share

has since fallen sharply. The European nations' combined output has fallen to a tenth of

South Korea's, and the outputs of the United States and the rest of the world have becomenegligible.

China is an emerging shipbuilder that briefly overtook South Korea during the 2008-2010

global financial crisis as they won new orders for medium and small-sized container ships

based on their cheap prices, although its current production is limited mainly to basic

vessels.

World Shipbuilding market share by countries (2011):

Rank Country Gross Tonnage(GT) %

1 South Korea 137,596,000 37.45%

2 China 123,961,000 33.7 %

3 Japan 63,641,000 17.3 %

4 Philippines 423,000 1.6 %
http://en.wikipedia.org/wiki/Skilled_workershttp://en.wikipedia.org/wiki/Steel_millshttp://en.wikipedia.org/wiki/Enginehttp://en.wikipedia.org/wiki/Navyhttp://en.wikipedia.org/wiki/Primary_industrieshttp://en.wikipedia.org/wiki/Developing_nationshttp://en.wikipedia.org/wiki/Japanhttp://en.wikipedia.org/wiki/South_Koreahttp://en.wikipedia.org/wiki/Transport_in_South_Korea#Merchant_Marinehttp://en.wikipedia.org/wiki/High-techhttp://en.wikipedia.org/wiki/Cruise_linershttp://en.wikipedia.org/wiki/Oil_tankerhttp://en.wikipedia.org/wiki/LNG_carrierhttp://en.wikipedia.org/wiki/Drillshiphttp://en.wikipedia.org/wiki/Container_shipshttp://en.wikipedia.org/wiki/Japanhttp://en.wikipedia.org/wiki/Market_sharehttp://en.wikipedia.org/wiki/Europehttp://en.wikipedia.org/wiki/People%27s_Republic_of_Chinahttp://en.wikipedia.org/wiki/Late-2000s_recessionhttp://en.wikipedia.org/wiki/Late-2000s_recessionhttp://en.wikipedia.org/wiki/Late-2000s_recessionhttp://en.wikipedia.org/wiki/Late-2000s_recessionhttp://en.wikipedia.org/wiki/People%27s_Republic_of_Chinahttp://en.wikipedia.org/wiki/Europehttp://en.wikipedia.org/wiki/Market_sharehttp://en.wikipedia.org/wiki/Japanhttp://en.wikipedia.org/wiki/Container_shipshttp://en.wikipedia.org/wiki/Drillshiphttp://en.wikipedia.org/wiki/LNG_carrierhttp://en.wikipedia.org/wiki/Oil_tankerhttp://en.wikipedia.org/wiki/Cruise_linershttp://en.wikipedia.org/wiki/High-techhttp://en.wikipedia.org/wiki/Transport_in_South_Korea#Merchant_Marinehttp://en.wikipedia.org/wiki/South_Koreahttp://en.wikipedia.org/wiki/Japanhttp://en.wikipedia.org/wiki/Developing_nationshttp://en.wikipedia.org/wiki/Primary_industrieshttp://en.wikipedia.org/wiki/Navyhttp://en.wikipedia.org/wiki/Enginehttp://en.wikipedia.org/wiki/Steel_millshttp://en.wikipedia.org/wiki/Skilled_workers


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World Top 5 players:

Rank Company Place GT Ships

1 Hyundai Heavy

Industry

Ulsan,

South Korea

93,893,700

GT

1428

2 Daewoo Shipbuilding Okpo,

South Korea

68,284,087

GT

834

3 Samsung Heavy

Industry

Geoje, South

Korea

58,082,349

GT

785

4 Hyundai Samho Samho,

South Korea

28,414,515

GT

372

5 Mitsubishi Heavy

Industry

Nagasaki,

Japan

19,506,548

GT

315

INDIAN SCENARIO:

India is a major maritime country, predominantly peninsular in nature having a

coastline of 7515 Km and 1197 islands, and located strategically on major maritime

routes. Indian ship building Industry has around 32 ship yards.

India accounts for just about one per cent of the global shipbuilding industry. Lower

costs of labor, availability of skilled workforce together with robust demand in the

domestic market and a growing steel industry are certain factors that build up a strong

case for shipbuilding sector in India.

Ship building industry in India consists of both Ship Building and Ship Repairing.

New Ship Building yards are mainly active in building commercial and defense vessels.

Commercial vessels are mainly build for European owners and defence vessels are built

for Indian Navy. Four defence shipyards viz. MDL, GRSE, GSL and ASL are presently

engaged in warship building and repairs and refits.

A ship with displacement tonnage of 3,500 tonnes in the South Korea is built in 30

months with 2, 50,000 man hours as against 72 months and 1.8 million man hours in

India.


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Ship repair is an evergreen industry as all ships require periodic maintenance.

India is strategically located in the Indian Ocean and hence, many ships from the nearby

trade routes call on Indian ports. This means that there is a lot of potential for ship

repair industry in India.

However, currently ship repair for these is primarily undertaken in Dubai Dry docks,Singapore, Bahrain and Colombo dockyards.

Thus, India with its great strategic location, and availability of low labour costs and

availability, can position itself among the world leaders of shipbuilding with necessary

industrial and political will and support.


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2.MANUFACTURING PROCESSES

The History of Making of Ship in INDIA:

Shipbuilding is the construction of ships and floating vessels. It normally takes place in aspecialized facility known as a shipyard. Shipbuilders, are also called shipwrights,

Shipbuilding and ship repairs, both commercial and defense , are referred to as "naval

engineering"

The oldest known dock in the world was built around 2500 BC during the Harappan

civilization at Lothal near the present day Mangrol harbor on the Gujarat coast in India.

Other ports were probably at Balakot and Dwarka. However, it is probable that many

small-scale ports, and not massive ports, were used for the Harappan maritime trade. Ships

from the harbor at these ancient port cities established trade with Mesopotamia.

Shipbuilding and boat making may have been prosperous industries in ancient India. TheIndians also exported teak for shipbuilding to ancient Persia.


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The Shipbuilding Process- Step Wise:

1. PROPOSAL

Based on the basic specifications (simplified specifications) provided , lay out a broad

design to get a rough overall picture of the ship.

2. DISCUSSION ON THE SPECIFICATION AND AGREEMENT

Once proposal is accepted by the customer, discuss the specifications in detail shipbuilding

process, general layout, specifications, etc. are determined, an agreement is made.

3. BASIC DESIGN

There are various factors that influence ship performance, other

than speed. Other factors can include load capacity of cargo, shipstability, fuel cost and so on. The key function of basic design is to

design the ship so that all those factors comply with the

specifications.

4. DETAILED DESIGN

Based on the information obtained from the basic design,

the detailed design clarifying the design of components and parts of

the ship to be built. The key point of this step is to work out

drawings that are feasible and accurate enough to facilitate the

actual shipbuilding operation on-site without compromising the

ability or performance of the ship.


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5. PRODUCTION DESIGN

The production design organizes the design information in

the detailed plans into respective component information. The

production design enables the field staff to meticulously control a

large amount of components on site.

6. MATERIAL ORDERING

Place purchase orders for required materials based on the design

information. Since a tremendous volume of materials need to be

ordered to build a ship, it is vital to manage and supervise the

delivery dates of those materials so that the procurement is

timely and accurate.

7. PRODUCTION PLAN

The production plan has a critical impact on manufacturing

efficiency because of the enormous amount of components, and

the large number of workers involved on the job site. It is vital,

therefore, to plan thoroughly so as to control and supervise the

flow of materials, work volume, job assignments and subsequent

progress of the shipbuilding process.

8. CUTTING & PROCESSING

Steel plates are cut and processed according to the

blueprint. The process of heating and bending a steel plate into

curved shapes is of great importance in shipbuilding, and require

sophisticated skill and technique

9. ASSEMBLYThe cut and processed components are assembled block by block.

In order to maximize manufacturing efficiency, the assembling of blocks iscarried out in a phased manner: small-scale assembly comes first, mid-

scale assembly second, and large-scale assembly last.

10. INSTALLATION OF RIGGING ARTICLE

Assembled blocks are further jointed together to make huge blocks, and

at this point, rigging articles such as pipes, electric wires are installed.


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In order to enhance manufacturing efficiency at the dockyard, most

rigging articles are installed while the block is still on the ground

11. MOUNTING HUGE BLOCKS

Following the above step, the huge blocks are mounted on the vessel.

In order to maintain the predefined dimension, even after tens of such

blocks have been jointed together; accurate positioning of each block

is critically important.

12. LAUNCHING

When all the blocks are mounted and jointed, launching is the next

stage.While the launching at a dock simply means filling the dock with

water to float the ship, the launching from a building berth is a veryimpressive and exciting sight to see since the ship slides its way

majestically into the sea. This is one of the most thrilling moments for

all involved with the shipbuilding process.

13. OPERATION AT THE QUAY

The finishing operation is carried out with the launched hull at the

quay. Starting with finishing work of accommodation and control

sections, every equipment and instrument is checked and re-

examined in practice. We are now in the final stretch of shipbuilding

14. TRIAL CRUISE

The trial cruise includes tests of speed, engine performance and

operation of all equipment and instruments. The test results are kept as

the performance record of the vessel .


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15 . DELIVERY

A new ship is born. After the delivery ceremony, the captain, chief

engineer and crew embark for the ships maiden voyage.

IN NUTSHELL

After contract signing and design process, cutting of steel plates into small parts in accordance

with the design and construct blocks with them. Block is a basic component to construct a ship.

Blocks are assembled in workshops which are called bays. Outfitting process is to outfit items

like pipes inside the block. After that, painting of the block is performed. After outfitting and

painting process, the blocks are assembled in the dock to form the hull of the ship, which is

called the erection process. The ship is then launched and finishing process is done at theharbor.


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3. SHIPBUILDING MANUFACTURING TECHNIQUES

Modern shipbuilding makes considerable use of prefabricated sections Prefabrication is the

practice of assembling components of a structure in a factory or other manufacturing site,

and transporting complete assemblies or sub-assemblies to the construction site where thestructure is to be located. The term is used to distinguish this process from the more

conventional construction practice of transporting the basic materials to the construction

site where all assembly is carried out .

The theory behind the method is that time and cost is saved if similar construction tasks

can be grouped, and assembly line techniques can be employed in prefabrication at a

location where skilled labor is available, while congestion at the assembly site, which

wastes time, can be reduced. The method finds application particularly where the structure

is composed of repeating units or forms, or where multiple copies of the same basic

structure are being constructed. Prefabrication avoids the need to transport so many

skilled workers to the construction site, and other restricting conditions such as a lack of

power, lack of water, exposure to harsh weather or a hazardous environment are avoided.

Against these advantages must be weighed the cost of transporting prefabricated sections

and lifting them into position as they will usually be larger, more fragile and more difficult

to handle than the materials and components of which they are made

Advantages of Prefabrication:

Self-supporting ready-made components are used, so the need for formwork, shuttering

and scaffolding is greatly reduced.

Construction time is reduced and buildings are completed sooner, allowing an earlier

return of the capital invested.

On-site construction and congestion is minimized.

Quality control can be easier in a factory assembly line setting than a construction site

setting.

Prefabrication can be located where skilled labor is more readily available and costs of

labor, power, materials, space and overheads are lower.

Time spent in bad weather or hazardous environments at the construction site is

minimized.

Less waste may occur

Advanced materials such as sandwich-structured composite can be easily used,

improving thermal and sound insulation and air tightness


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Disadvantages of Prefabrication:

Careful handling of prefabricated components such as concrete panels or steel and

glass panels is required.

Attention has to be paid to the strength and corrosion-resistance of the joining of

prefabricated sections to avoid failure of the joint.

Similarly, leaks can form at joints in prefabricated components.

Transportation costs may be higher for voluminous prefabricated sections than for

the materials of which they are made, which can often be packed more efficiently.

Large prefabricated sections require heavy-duty cranes and precision measurement

and handling to place in position.

Larger groups of buildings from the same type of prefabricated elements tend to

look drab and monotonous.

Local jobs may be lost, if the work done to fabricate the components being located in

a place far away from the place of construction. This means that there are less locals

working on any construction project at any time, because fabrication is outsourced.

A superstructure is an upward extension of an existing structure above a baseline.

This term is applied to various kinds of physical structures such as buildings,

bridges, or ships.


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4 .ASSEMBLY PROCESS

The different parts assembled are as shown under:

1. Block:

In the block assembly process, we make blocks in the bays by assembling the small parts

made in the cutting process. There are two types of bays in the particular shipyard we

considered. One is called fixed-bay and the other is called moving-bay. Moving-bay is more

efficient in its operations but it can only assemble small and flat blocks. On the other hand,

fixed-bay is mainly used to assemble curved blocks and large blocks.

2. Hull:


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The hull is the main body of the ship below the main outside deck. The hull consists of an

outside covering (or skin) and an inside framework to which the skin is secured. The skin

and framework are usually made of steel and secured by welding.

The main centerline structural part of the hull is the keel, which runs from the stem at the

bow to the sternpost at the stern. The keel is the backbone of the ship

the ribs of the ship and gives shape and strength to the hull

Deck beams and bulkheads support the decks and gives added strength to resist the

pressure of the water on the sides of the hull.

3.Construction of a Hull

The skin, or shell plating, provides water-tightness. The plates, the principal strength

members of a ship, have various thickness.

A ship's hull endures harsh conditions at sea in bad weather.

For a ship to float, its weight must be less than that of the

water displaced by the ship's hull

There are many types of hulls, from logs lashed together to

form a raft to the advanced hulls of America's Cup sailboats.

A vessel may have a single hull (called a monohull design),

two in the case of catamarans, or three in the case of

trimarans. Vessels with more than three hulls are rare, but some experiments have been

conducted with designs such as pentamarans. Multiple hulls are generally parallel to each otherand connected by rigid arms.

Hulls have several elements. The bow is the foremost part of the hull. Many ships feature a

bulbous bow. The keel is at the very bottom of the hull, extending the entire length of the

ship. The rear part of the hull is known as the stern, and many hulls have a flat back known

as a transom. Common hull appendages include propellers for propulsion, rudders for

steering, and stabilizers to quell a ship's rolling motion. Other hull features can be related

to the vessel's work, such as fishing gear and sonar domes.

Hulls are subject to various hydrostatic and hydrodynamic constraints. The key hydrostaticconstraint is that it must be able to support the entire weight of the boat, and maintain

stability even with often unevenly distributed weight. Hydrodynamic constraints include

the ability to withstand shock waves, weather collisions and groundings.

Older ships and pleasure craft often have or had wooden hulls. Steel is used for most

commercial vessels. Aluminium is frequently used for fast vessels, and composite materials


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are often found in sailboats and pleasure craft. Some ships have been made with concrete

hulls.

4.Bulkheads:

The interior of the ship is divided by the bulkheads and decks into watertight

compartments. A vessel could be made virtually unsinkable if it were divided into enough

small compartments. However, too many compartments would interfere with the

arrangement of mechanical equipment and the operation of the ship. Engine rooms must be

large enough to accommodate bulky machinery. Cargo spaces must be large enough to hold

large equipment and containers.

5. External Parts Of The Hull:

The external parts of the Hull are as depicted in the above figure.


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6. Propulsion Systems:

Propulsion systems for ships fall into three categories:

human propulsion, sailing, and mechanical propulsion.

Human propulsion includes rowing, which was used

even on large galleys. Propulsion by sail generallyconsists of a sail hoisted on an erect mast, supported by

stays and spars and controlled by ropes. Sail systems

were the dominant form of propulsion until the 19th

century. They are now generally used for recreation and

competition, although experimental sail systems, such as the turbo sails, rotor sails, and

wing sails have been used on larger modern vessels for fuel savings.

7. Steering Systems:

For ships with independent propulsion systems for each

side, such as manual oars or some paddles,[62] steering

systems may not be necessary. In most designs, such as

boats propelled by engines or sails, a steering system

becomes necessary. The most common is a rudder, a

submerged plane located at the rear of the hull. Rudders

are rotated to generate a lateral force which turns the

boat. Rudders can be rotated by a tiller, manual wheels, or electro-hydraulic systems.

Autopilot systems combine mechanical rudders with navigation systems. Ducted propellersare sometimes used for steering.

8.Equipment

Shipboard equipment varies from ship to ship depending on such factors as the ship's era,

design, area of operation, and purpose.

Some types of equipment that are widely found include:

Masts can be the home of antennas, navigation lights, radar transponders, fog signals,

and similar devices often required by law.

Ground tackle includes equipment such as mooring winches, windlasses, and anchors.Anchors are used to moor ships in shallow water. They are connected to the ship by a

rope or chain. On larger vessels, the chain runs through a hawsepipe.

Cargo equipment such as cranes and cargo booms are used to load and unload cargo

and ship's stores.

Safety equipment such as lifeboats, liferafts, and survival suits are carried aboard many

vessels for emergency use.


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9.Hydrostatics

Boats and ships are kept on (or slightly above) the water in three ways:

For most vessels, known as displacement vessels, the vessel's weight is offset by that of

the water displaced by the hull.

For planing ships and boats, such as the hydrofoil, the lift developed by the movementof the foil through the water increases with the vessel's speed, until the vessel is

foilborne.

For non-displacement craft such as hovercraft and air-cushion vehicles, the vessel is

suspended over the water by a cushion of high-pressure air it projects downwards

against the surface of the water.

A vessel is in equilibrium when the upwards and downwards forces are of equal

magnitude. As a vessel is lowered into the water its weight remains constant but the

corresponding weight of water displaced by its hull increases. When the two forces are

equal, the boat floats. If weight is evenly distributed throughout the vessel, it floatswithout trim or heel

10. Hydrodynamics

The advance of a vessel through water is resisted by the

water. This resistance can be broken down into several

components, the main ones being the friction of the

water on the hull and wave making resistance. To

reduce resistance and therefore increase the speed for

a given power, it is necessary to reduce the wetted

surface and use submerged hull shapes that produce

low amplitude waves .To do so, high-speed vessels are often more slender, with fewer or

smaller appendages. The friction of the water is also reduced by regular maintenance of the

hull to remove the sea creatures and algae that accumulate there. Antifouling paint is

commonly used to assist in this. Advanced designs such as the bulbous bow assist in

decreasing wave resistance.

A simple way of considering wave-making resistance is to look at the hull in relation to its wake. Atspeeds lower than the wave propagation speed, the wave rapidly dissipates to the sides. As the hull

approaches the wave propagation speed, however, the wake at the bow begins to build up faster than it

can dissipate, and so it grows in amplitude. Since the water is not able to "get out of the way of the hull

fast enough", the hull, in essence, has to climb over or push through the bow wave. This results in an

exponential increase in resistance with increasing speed.


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This hull speed is found by the formula:

or, in metric units:

where L is the length of the waterline in feet or meters.

Lifecycle of Ship:

A ship will pass through several stages during its career. The first is usually an initial contract tobuild the ship, the details of which can vary widely based on relationships between the ship-

owners, operators, designers and the shipyard. Then, the design phase carried out by a naval

architect. Then the ship is constructed in a shipyard. After construction, the vessel is launched

and goes into service. Ships end their careers in a number of ways, ranging from shipwrecks to

service as a museum ship to the scrap yard .


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5. LOGISTICS & SUPPLY CHAIN PROCESSES

Currently, one of the main challenges for most of the shipbuilding companies is to manage

the activities performed by a network of suppliers worldwide. Shipbuilding involves

activities carried out by companies in different countries that are challenging to manage.

One consequence of globalization is that competition is going to occur between supply

chains composed of companies of different nationalities. As firms globalize, they realize

that no matter how large they are, they lack the total resources and requisites for success.

Viewing the complete supply chain for producing value, they recognize the necessity of

partnering with other organizations.

The lack of integration and coordination between partners of the same supply chain affects

the quality and the delivery date.

The function of Supply chain management (SCM) is to manage the flow of material,

information, and service.

The supply chain that better learns how to manage the flow of material, information, and

service through different companies tends to be more competitive.

We are now entering the era of network competition, where the prizes will go to those

organizations who can better structure, coordinate and manage the relationships with their

partners in a network committed to delivering superior value in the final marketplace.

Shipbuilding has many specific challenges that are not common to other industries, like;

The need to involve multiple companies to design and build a vessel

The generation and manipulation of enormous amounts of information

The complexity of information flow because of the operation itself and the

numerous working disciplines involved

Every vessel is different; even vessels from the same series differ somewhat from

each other

Approximately 6080 per cent of the value of a ship is outsourced, and the complex

structure of a ship demands a considerable coordination between all those involvedin the design, engineering, and production

Hence, the competence in a supply chain lies in the ability to coordinate activities across

businesses and to interact with different partners as if it were a single business unit.

The increasing complexity of products, as well as the number of technologies and

competences in the production process, has created enormous challenges. In the past,


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shipbuilding companies were responsible for performing most of the activities to produce a

vessel; even some equipment was produced internally. This meant that many companies

were vertically integrated. Nowadays, sourcing can cover almost every phase performed in

the shipyard. The so-called full shipyard became an assembly shipyard .Thus, companies

decided to outsource some activities to other shipyards, and focus on the activities where

they could remain competitive.

Procurement- The important link of SCM for Ship Building Companies:

The above flow chart shows the importance of procurement across different functions of

the ship building process


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The competitive advantage derives from all the discrete activities of an enterprise,

including design, production, marketing and delivery. All these activities contribute to the

overall cost of a company. A business can win the competition either through low cost or

better quality.

The costs of the shipbuilding are composed of design cost, procurement cost,

manufacturing cost & labor costs.

Costs are determined at the design stage. Design activities are of little expense, but have a

great impact on the whole shipbuilding costs. When the design is completed, batch

production will follow after a large procurement.

The procurement cost is the largest part of the total cost, and with the increase of technical

content and value added, the proportion of the procurement cost will rise accordingly.

Thus, for a shipbuilding enterprise, the procurement activity is a value activity with highestcosts. Simultaneously, it has a strong impact on the costs of other activities.

The procurement activity runs through all the links of the supply chain, and therefore

presents a significant opportunity to cost reduction.

The supply chain is too complex and random, which leads to heavy organization and

coordination work in the procurement department of the shipyard and creates additional

costs. The change in some ways of the procurement activities will likely increase or

decrease the cost of the whole procurement process.

For instance, the procurement of good-quality and pretreated steel plates will probablyincrease the cost of the procurement but simplify the production process, raise the

utilization efficiency, reduce the construction cost and optimize the total costs of the value

chain. If the procurement department strengthens the management and control of

suppliers, it will reduce the cost of internal quality inspection in the shipyard.


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At present, shipyards pay more attention to increasing production efficiency and reducing

production costs instead of the procurement activities. Procurement is viewed as a

secondary function.

Certain SCM principles followed at Hyundai Heavy Industries, Uslan, South Korea

1. Focus on meeting and guiding the requirements of the clients.

By developing and popularizing the standardized ship types and discovering the potential

requirements of the ship owners, it can promote the combination of complimentary units

and the information share. The whole supply chain can then quickly respond to the

changing demands of the ship owners and make timely adjustments accordingly.

2. Focus on the core business, vigorously improve specialization and subcontract non-key

business.

3. Establish an integrated information system for effective and prompt exchange in terms

of information flow, capital flow and material flow, and provide the technical assistance on

an informational platform to reduce stocking during production, transportation and

storage, to shorten the production cycle.

4.Integrate the internal resources within the Group, mainly to concentrate not on the

trading but on the process of procurement. Use the theory of modern logistics management

as guidance to transform stock-oriented procurement into order-oriented procurement.

Aiming to improve the efficiency of the procurement, reduce storage and save costs, make

analysis from the view of the logistics, attempt to eliminate the unreasonable, the waste

and the low efficiency in the production and the procurement activities, making each link

reasonable and efficient.


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Above figure shows relationship of procurement/design/business groups with the

suppliers.

As shown above, management of supply chains is a systematic process, including business

flow, material flow, capital flow and information flow.

It's like a public pipeline in which there are four cables. The optimization of material flow

and capital flow depends on the design of the business process; the information flow is the

nerve system for the whole supply chains and the basis for the successful operation of

supply chains.

Thus, the management of the supply chain aims at the optimization of the process to

improve efficiency and reduce costs and it covers all the divisions and processes of the

shipbuilding enterprise.


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6. MAJOR DRIVERS OF INDIAN SHIPBUILDING INDUSTRY

Shipbuilding acts as a catalyst for overall industrial growth due to spin offs to other

industries , including steel, engineering equipment, port infrastructure, trade and

shipping. Indias economic growth will continue to create a demand for new ships.

Although India occupies a small percentage of the global shipbuilding market, the

Indian shipbuilding industry is well positioned for growth. According to a study by the

Indian Shipbuilders Association, the industry can grow at a rate of more than 30%, and

this rate of growth could be achieved through supportive measures by the Government,

including incentives for shipyards.

Following are the major growth drivers for demand of Indian ship building industry :

1. World Economy : High levels of economic activity boost the trade of raw

materials and even finished goods need to be moved from one country to another

when two countries are in agreement of trade.

2. Oil : High demand for oil creates the need for bulding tankers for transporting it.

3. Steel Production : As steel constitutes approximately 42% of the worlds dry bulk

trade, it directly influences the demand for buying dry bulk ships.

4. Replacement of aging fleet : With an average span of around 30 years, a sizeable

portion of the current fleet which came into market in around 1980 has reached

the replacement age around 2011., spurring the new demand.

5. Conversion of single hull tankers : Concerns around the risk of environmental

damage arising from single hull tankers have led to the regulation that

necessitates replacement of single hull very large tankers by double hull tankers.

The major supply drivers of the industry are :

1. Capacity : Ship building is a time consuming process. Hence, the industry is

largely unable to increase supply, following a sudden increase in demand.

2. Ship building cost: Low prices may lead to increased orders, fuelling supply in

market.

3. Economic Life : A long fleet implies low growth of the fleet, resulting in low

supply levels.

4. Regulations : Regulations from international maritime organization also

determines supply.


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7. INDIAS COMPETITIVE ADVANTAGES OVERCOMPETITORS

India also enjoys several of the advantages which have propelled emerging countries such as

China and Vietnam into the forefront of global ship building. Some of the key advantages that

can be leveraged by shipbuilders in India are:

1. Low Labour Cost : Low labour cost is a key driving factor in ship building nations, as

it accounts for more than 10% of the total cost. Indian labour costs are slightly

lower as compared to those of the leading ship building industry.

2. Strong domestic demand : Indian shipping trade is booking on the back of the

economic at the growth rate of around 8%. Domestic base lines have expanded

their fleets and have placed orders with global yards. There is also strong thrust in

sectors such as power and steel and companies are looking to acquire ships to

control transport from international mines. The governments new initiatives in

coastal shipping and IWT, is likely to boost further demand for new ships.

3.

Long Coastline : India has along coast line of over 7500 km long with several deepwater ports serving as good locations for setting up ship yards.

Other drivers for shipping industry in India include the limited surplus capacity available

with the globalship building yards and a booming capital market which could provide easy

financing for capital and operational expenses of these yards.


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8. CHALLENGES FACED BY INDIAN SHIPBUILDING

INDUSTRY

Onerous Tax Regime

According to a Research Paper by Ministry of Finance, Government of India, the shipping

industry is facing significant tax burden, though the tonnage tax has been introduced. The

paper lists out taxes such as minimum alternate tax, dividend distribution tax, withholding

tax liability on interest paid to foreign lenders,withholding tax liability on charter hire

charges paid to foreign ship owners, seafarers taxation cost to employers, wealth tax, sales

tax, VAT on ships and spares, lease tax on charter hire charges, customs duty on import of

certain categories of ships, stores, spares and bunkers, and services tax.

Multiplicity of Regulations

Shipping industry, catering to the demand across continents, is regulated by both domestic

and international regulations. Internationally, the International Maritime Organisation has

a set of rules to ensure safe, secure and efficient shipping, besides the labour standards

required for seafarers worldwide. There are also international regulations on operations of

ships, such as International Convention for the Safety of Life at Sea, International

Convention for the Prevention of Pollution from Ships, convention on the International

Regulations for Preventing Collisions at Sea, International Convention on Loadlines,

International Ship and Port Facility Security Code, and International Safety Management

Code. There are also international regulations for seafarers, such as International

Convention on Standards of Training, Certification and Watch-keeping for Seafarers, and

ILO Merchant ,Shipping Convention.

Working Capital

Typically a shipyard requires a working capital of around 25-35 percent of the cost of the

ship during the entire construction period. The interest rates on working capital in India

average 10.5%. In contrast to other countries like Korea it is 5-6%.

Other Costs

Indian shipping industry is at an early stage but has to compete against established yards in

Korea and China to grab a share of the market. Its lower scale leads to several

disadvantages in design and manpower costs. Leading shipbuilding countries support the

industry by creating enabling policies for development of technical and manpower

capabilities.


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For instance, China provides scientific research subsidy to maritime universities, and

provides R&D and living allowance to post graduate students, to ensure availability of

talent pool for shipyards.


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9. CONCLUSION

The shipbuilding industry dates back many years back, and holds a great prospect in future

also. As globalization and trade between countries increases in 21stcentury, there would be

a substantial growth in the shipbuilding industry.

Shipbuilding industry is capital intensive, labor intensive and has a great impact on the

overall economic development of a nation. Hence countries like South Korea and China are

in a race to establish their expertise and supremacy in this field.

India though at present far away, has great potential to use its resources to the maximum

and make its presence shown in the world of shipbuilding industry.


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10. REFERENCE

http://www.skdy.co.jp/english/e-product/index.html

http://www.dtic.mil/cgi-bin/GetTRDoc?AD=ADA458698

http://www.higaki.co.jp/en/technology/building.php

http://www.transport-pf.or.jp/english/umi/07_dekirumade.html

http://www.ilo.org/wcmsp5/groups/public/---ed_protect/---protrav/-

safework/documents/normativeinstrument/wcms_107897.pdf

ILO_Safety and health in shipbuilding and ship repairing

http://www.shipbuilders.org/Portals/Shipbuilders/documents/pdf/Safety%20Alert%20on%20Ve

ntitlation_FINAL.pdf

overview of ship building industry

Documents