Investments to up productivity

The quest is on at Korean shipyards to make most productive use of drydock space. Song Deuk Lee, director of the international cooperation office at the Korea Shipbuilders? Association, reckons Korean shipbuilders? productivity is rising but is still about 10% below that of Japanese shipbuilders. Drydock turnover in Korea is about five times per year, whereas Japanese yards achieve a turnover of about five-and-a-half times per year, he says.

Aside from making productivity gains to catch up with Japan, the shipbuilders need to make productivity gains, among other things, to counter the rising threat of Chinese shipyards. China may have much lower drydock turnover ? about two-and-a-half times per year reckons Lee ? but it has stolen the price advantage that Korea held for so long.

This productivity quest is, among other things, leading to the construction of bigger and bigger steel blocks for assembly in the building dock, investment in state-of-the-art design and production software, more automation, a greater emphasis on employee skills and the development of sophisticated planning systems.

Grand pre-erection

Hanjin Heavy Industries & Construction, in Busan, is currently assembling blocks of 1,500t before committing them to a building dock. It calls the process grand pre-erection. The process is particularly critical to Hanjin?s pursuit of productivity as unlike the other large Korean shipbuilders, space is constrained at the Busan yard and there is no room for facility expansion on the fringes of the yard.

Steel cutting is split between the Busan yard and another Hanjin yard up the coast in Ulsan. Much of this cut steel, particularly from Busan, is then shipped out to subcontractors to construct 300-400t blocks. C S Chung, senior manager of the contract administration team, says up to 70% of mid-size block assembly is undertaken outside the Busan yard. The blocks are subsequently shipped back to Busan, where the giant blocks are assembled. The efficiency of the process is strongly reliant on just-in-time manufacturing principles.

“This is one way we can utilise a small shipyard for bigger vessels,” says Chung.

Having assembled 1,500t blocks, the Busan yard, which is unusual in that it has no goliath gantry cranes, uses a chartered in 2,000t-lift floating crane to move the blocks from the dockside into the front of a building dock. The blocks are shifted into position along the dock and dropped onto the keel blocks using a jack-up rail system.

Chung reckons the grand pre-erection process has enabled the shipyard to reduce drydock turnover time from three-and-a-half to two-and-a-half months. It is targeting two months, which would give Hanjin capacity to complete up to 18 ships a year. Its new order target for 2003 is $900 million, which equates to about 15 ships.

Ultimately, however, Hanjin management may be re-evaluating the whole future of its shipbuilding wing. Busan city authorities, according to Chung, have in mind an alternative use for the yard site and have recommended that the company relocate outside the city. Management have recently sold the Masan yard to Masan city authorities for urban redevelopment (by the second half of this year Hanjin will have completed the transfer of employees from Masan to Busan). The Ulsan shipyard, whose largest drydock is 40,000 dwt, has strained under the weight of intense competitive pressure from China in the mid-size ship market and is thus employed solely to build blocks for the Busan facility.

Target in sight

Some 80km south-west of Busan, in Tongyeong, Shina Shipbuilding is seemingly less affected by the rising competitive threat of Chinese shipbuilders in the mid-size shipbuilding market. It has negotiations in progress for two ships and four outstanding options that the yard?s general manager of ship sales Soo-H Lee is relatively confident will result in positive conclusions. With two orders already secured this year, this would take it to its order target for the year of eight ships.

“We may achieve our target very early in the year,” says Lee. “If owners accept 2006 delivery, we can extend [the target] further.” The shipbuilder is responding to new enquiries with an offer of delivery in the first quarter of 2006.

The shipyard?s order backlog and sales focus is currently on the MR (medium range) tanker business, with three design of product tanker offered: 37,000 dwt, 47,000 dwt and 49,700 dwt. Lee says this concentration on one ship type, albeit in three sizes, is allowing it to raise productivity simply through the accumulated experience of building in series. By 2006 it will be on to its 26th product tanker in succession.

The yard wants to raise its annual output from its two building slips from the eight per year achieved in 2002 to 10 per year. If it is to be achieved it will involve cutting slipway assembly time from 13 weeks to 10 weeks out of the total 9/10 months total construction time. Like its bigger neighbours Shina is using large blocks that are assembled in front of each slipway before being lifted into place by either the No.1 slips 200t-lift jib crane or the no. 2 slips 160t-lift gantry crane. If the yard keeps to schedule it will complete nine ships this year, all 37,000 dwt.

3-30 dock turnover

Production at Samsung Heavy Industries, 30km east of Shina on Geoje island, is focused on the giant 640m x 97.5m No.3 drydock, in which five ships ? principally tankers ? are under construction at any one time. Yard management has targeted a turnover of 30 ships from this dock per year with the yard?s other two drydocks and single floating dock meant to chip in with 20 ships.

“We are working to maximise block size and reduce construction period,” explains Jin-Ki Kim, sales engineering manager at the yard.

The No.3 drydock has a 900t lift goliath crane. However the yard?s pi?ce de résistance as far as shifting bigger blocks around is concerned is its 3,000t-lift floating crane. Used in combination with the yard?s floating dock blocks can be completed top-to-bottom, explains Kim.

Samsung, like Hanjin, has a significant quantity of its blocks built outside its main yard facility; by local subcontractors on Geoje and at its wholly-owned block construction factory, 900km south-west across the East China Sea in Ningbo, China. Steel is cut at Geoje and shipped to the outside assembly sites. Large blocks are shipped back to Geoje. Samsung is currently investigating the possibility of employing a semi-submersible to allow it to ship bigger blocks from Ningbo to Geoje.

When blocks arrive back at the yard Samsung employs what it calls TACT, a just-in-time system, to the block outfitting. A team is dedicated to transporting blocks around the yard between outfitting teams – cabling, piping etc. The system is set-up to work to a fixed schedule of block movements. If a job overruns, the block is still dispatched to the next outfitting stage on schedule so as not to hold up the entire workflow. The outstanding work is completed further down the production line.

Planned facility investments at Geoje are for a new assembly and inspection area and a new painting shop. There is a landfill area to the west of the yard into which it can be expanded; foundations are not strong here and there are no quay facilities, but the area gives Samsung the opportunity to relocate office buildings etc. out from the centre of the yard and replace these with production facilities. The yard also plans to increase its lifting capacity by investing in an additional floating crane and a goliath crane dedicated to undertaking topside work on offshore vessels. The intention is to complete these works by the end of next year.

By the end of 2005, the yard plans to have built a larger hotel (to be operated by the Samsung Corporation-owned Shilla chain) and office complex for owners and rearranged its stock facilities including the outsourcing of low value items.

Moving mountains

The DSME shipyard in Okpo Bay, 15 minutes drive across Geoje from Samsung, has recently undertaken a big expansion of its landside area to the south-east of the shipyard. The sloping topography of the area has proved no obstacle to the expansion with mountains having literally been moved to allow the new facilities to be built on level ground. The expansion is largely driven by a desire to accommodate the yard?s burgeoning interest in the offshore sector. Elsewhere on the site, a new office complex is under construction into which all the yard?s design functions will be consolidated and there are plans to relocate some other offices currently occupied by subcontractors.

Having recently lost a Korean government submarine construction contract to Hyundai Heavy Industries, the company has merged its offshore and special ship production divisions in order to generate some synergies.

The focus of investment in the near future is on facility upgrades (where beneficial to production), research & development, creating better welfare facilities for employees and developing the IT infrastructure. Interestingly, there is a significant Romanian contingent in the workforce, working on temporary secondment from the company?s yard in Mangalia, Romania.

Painting environment

S C Jung, general manager of the ship sales department in Hyundai Heavy Industries shipbuilding division, says the huge Ulsan-based yard is increasing productivity every year. The output from its nine drydocks is over 50 ships per year. A “favourable product mix” will enable an output of as many as 65 ships per year.

“Every year we invest quite substantial amounts to upgrade our facility and secondly to install new facilities,” he says.

This year, for example, the yard is concentrating on meeting owner demands for high quality painting work by investing $9 million in its paint shop areas. “We are creating a better environment for painting jobs,” says Jung.

The yard is constructing a new moving shelter to allow more painting to be undertaken indoors (this task is particularly susceptible to wet weather with prolonged rain potentially having a major impact on production flows if work is undertaken outdoors). It is also outfitting its existing covered paint shops with dehumidifiers. “These investments will improve productivity,” says Jung.

The yard is also continuing its investment in automated steel cutting and marking machines in order to reduce man-hours spent on these tasks and achieve more precise results.

It is also able to juggle its product mix to better effect through the full integration of the two extra large (500m x 100m and 400m x 70m) drydocks at the Hyundai Samho Heavy Industries (named Samho Heavy Industries until the end of last year), yard near Mokpo in south-west Korea into the Hyundai Heavy Industries sales organisation. Ship sales promotion, basic engineering and procurement are undertaken centrally in Ulsan with orders allocated to a specific dock in Ulsan or Mokpo based on ship type, experience of owners and availability of berths.

Independent entity

Hyundai Mipo Dockyard continues as an independent entity to Hyundai Heavy Industries, with the exception of basic material purchasing. This function is integrated to exploit maximum leverage of purchasing power in an industry where material costs can represent up to 65% of shipbuilding price, says Jung.

The mid-size yard, around a headland from its big brother Hyundai Heavy Industries in Ulsan, has felt the impact of China and other low wage countries in the shiprepair business, where 85% of total cost is labour. It has undertaken a progressive reduction of shiprepair business at its Ulsan-yard since it entered the shipbuilding business in 1996. So much so that shiprepair and conversion work now represents just 10% of turnover at the yard, equating to 120 vessels per year according to Man-Choon Kim, senior manager in the yard?s sales department.

One of the shipbuilder?s four docks currently remains given over to shiprepair and conversion ? not all owners discharging and loading cargo in Ulsan and other nearby ports want to incur the cost of extended off-hire time to take advantage of cheaper repair labour. But shiprepair and shipbuilding aren?t always the best mix (blasting in a repair dock, for example, can affect work in adjacent building docks) and it would seem the focus of the yard?s shiprepair sales effort is directed toward its joint venture in Vietnam, Hyundai Vinashin Shipyard. Hyundai Vinashin has two docks and repairs about 180 vessels per year.

China has had less of an impact on the yard?s shipbuilding business, despite Hyundai Mipo being engaged in the supposedly vulnerable mid-size shipbuilding business. At the time of writing, its orderbook stood at 64 ships, 59 of which were product tankers. Kim says management had wanted to diversify the product mix to protect the yard against the risk of a downturn in product tanker building, but the post Prestige increase in demand for tankers has helped alleviate worries in the short-term.

Shipbuilding output from the yard?s three building docks tops 20 ships per year.