The Case for the Modernized Shipyard

Prompted and encouraged by the U. S. Navy, the nation’s shipbuilding industry is now undergoing a revitalization to regain the technological leadership it forfeited to foreign builders after World War II.

This resurgence, which already has reached Proportions of a revolution, was sparked by the Navy’s new multiship procurement polities that offer a single builder the opportunity to win contracts to produce a series of ships of a single class, as opposed to small lots of only one or two.

Long production runs have the two-fold benefit of forcing a builder to seek the efficiencies—and economies—of modernized Production techniques to be competitive, while at the same time assuring him of sufficient business to warrant investing in the modernizations he needs. It was this long-run principle that resulted in the low-cost, high- output efficiency of U. S. shipbuilding during World War II.

Whether the current revitalization will ever enable U. S. shipbuilders to become cost-competitive with all foreign yards is highly debatable, but it will substantially reduce the costs of U. S. Navy and merchant ships, and, equally important, it will modernize one of the nation’s prime resources.

The industrial renaissance is being led by two schools of thought, both seeking the same objective—modern shipbuilding—but traveling separate paths to achieve it. One school is convinced the answer is an entirely new shipyard, while the other is equally convinced the most prudent course is to modernize an existing facility.

American shipbuilding is divided on the issue. Litton Industries leads the new yard- school, while most other builders, including General Dynamics, favor the modernization approach.

Litton’s “new” approach has been highly and deservedly publicized, but the glamour attached to the new tends to overshadow the equally dramatic and effective achievements of the “modernization” school. Our purpose in this forum is to present the case for the modernized shipyard by examining and comparing both approaches.

On 1 January 1964, General Dynamics purchased the second largest shipyard in the United States, located on the Fore River in Quincy, Massachusetts. Beginning with the basic facility, which included three of the nation’s largest and most modern shipbuilding basins, G.D. has carried out a steady program of upgrading capacities to give a 150-ton steel capability through the assembly and erection process, has added a wholly new concept in cleaning and painting assembled steel parts of ships weighing up to 75 tons, improved material handling and storage, adopted preoutfitting as a standard technique, and installed modern automatic burning equipment along with the computerized systems that guide the cutting torches.

In effect, G.D. over-laid a modern shipyard atop an existing facility. In so doing, it developed the capability to produce a number of ships of a single class efficiently on a production line basis, yet it also retained the flexibility, which it feels the American market demands, to build a variety of ships to particular designs in small lots.

This rationale is based on the premise that sound basic facilities can be improved and modernized, and mass production techniques —such as the work station approach and area management, versus the old craft supervision—can be incorporated into the production plan. Suitable shipbuilding operations can be “processized,” and, in the words of Rear Admiral Nathan Sonenshein, U. S. Navy, “even the finest of facilities are no guarantee of effective and economical ship construction; indeed, many would agree that planning, scheduling, and co-ordinating material flow with manpower efforts represent the primary key to economical ship construction.”

G.D.’s school of thought believes that in this country and abroad the case for the “new” shipyard rests more with an increase in capacity or ship size than in cost savings, and that the “old” yard can just as vigorously and successfully employ modern techniques with equal results. An entirely new facility is a requirement only to the extent of providing a capacity not now existent, or to make possible the application of modern industrial engineering methods. Since the cost of the facility itself is not wholly recoverable by cost savings on the ships built, the major decision point is whether balanced cycling of the work and the employment of the requisite techniques and i controls can be accomplished in the existing facility.

In order to avoid generalizations, we should follow the shipbuilding process logically through its cycles and examine the respective opportunities for cost savings in both approaches.

Steel Handling. Flat stacking of piles of steel using fast gantry cranes in combination with computerized location and withdrawal techniques is equally adaptable to any shipyard- Most large U. S. shipyards have already modernized their steel-handling facilities and installed modern conveyors for moving the raw steel to production.

Steel Transportation Costs. Raw steel, the basic ship material, is sold on an FOB steel mill basis with the customer paying the freight. Since the steel-producing areas are mainly located in Pennsylvania, on Chesapeake Bay, and in the South, New England shipyards suffer a disadvantage compared to yards located closer to the mills. If you are building a new yard, you quite naturally have a choice of location, an advantage over the old yard whose geographical site is already fixed. But is this significant? The differential on the average ship is about 1/2 of 1 per cent of the ship’s cost.

Steel Size Standardization. A costly item is the proliferation of steel sizes both as it pertains to extra costs at the mill and to storage, particularly with stacking. Can the new yard do better? Since we are all at the mercy of the naval architects and the vagaries of ship design and weight, we conclude, no. All yards have similar opportunities to standardize, especially when producing a large volume of a single class ship. But this is a marketing problem, not a production item.

Computerized Ship Design and Lofting. The huge mold loft floor, characteristic of the industry for years, where skilled loftsmen created the lines of a ship by eye on full sized scale, is rapidly giving way to more automatic methods. First, the process was physically reduced in size by preparing lines on a 1/10th scale, and making small negatives for direct projection on the steel plate—a process known as photo lofting. From this projection in a darkened room, crews would transfer the lines and instructions directly to the plate with paint.

More recently, computerized systems have been developed, of which the “Autokon” system from Europe is one example. Using basic naval architectural information fed in by punched cards, the computer will do the fairing of the ship’s lines, which is actually a trial and error process of creating fair curves. In addition, using the large quantities of information stored in the computer’s memory, punched tapes are produced for use in automatic burning machines to cut the steel to size accurately, make cutouts for holes, frames, and, in effect, produce all the parts of the steel hull.

In the field of design, computers are also being used for interference control to ensure that the numerous engineers engaged in their particular system design, such as piping, ventilation or electrical, keep clear of each other when running their hardware through cramped spaces on the ship.

The next step is much greater use of computer information to create the drawings. But programs, computers, and automatic burning machines are equally available to both old and new yards.

Panel Production. The stiffened panel is the one piece of common ship structure capable of being mass produced. Mechanization ranges from the multimillion-dollar setup at Kockums in Sweden to $500,000 for a simplified work station concept.

The main criterion is the amount of repetitive panel design built into the ship. Tankers and bulk carriers, for instance, comprise tremendous quantities of flat, uniform panels. If the yard is configured for this type of ship, as are the new Japanese yards, the investment in an automated panel line is correspondingly high. For a yard delivering a range of ships other than square body types, much of the advantage is available in less costly fashion.

Since typical U. S. Navy ship configuration is less suited to panel standardization than are tankers, the character of the product mix governs, rather than the glamour of automation. Such simple industrial engineering techniques as work station design and manloading produce the bulk of the improvement, and 1 they are being adopted in most American yards.

Welding Techniques. Welding represents one of the largest manhour expenditures for labor in ship construction, so obviously cost reductions are a prime target in this field. Savings i are generally achieved by positioning work to permit use of the most efficient welding processes, such as automatic vertical welding in which a machine crawls up a ship side as it welds, or single welding in which, as the name suggests, plates are joined by welding on one side only. Maximum use of automatic welding processes and strict quality control measures are the keys to efficiency and cost reductions in welding, and these are by no means the sole province of a new yard.

Cleaning and Painting of Structural Units. Most American and foreign shipbuilders prepare steel for fabrication by blasting off mill scale and rust and then coating the raw steel with a thin coat of primer. This process consists of simple additions to the steel feeding line capable of being installed in any yard.

At Quincy, as a prime example of modernization of an existing facility, G.D. has designed and introduced a successful blasting and painting complex for handling 75-ton structural units after assembly and before pre-outfitting or erection.

Based on the concept of an all-weather facility capable of a white metal surface finish ready for the most exotic coatings, ease of welding on black steel during assembly, less touch up later, and no expensive blasting after erection, this new complex has attracted the interest of the entire industry.

In the blast-paint complex, large three-dimensional assemblies are cleaned automatically in 25 minutes as opposed to 50 hours formerly required by manual methods. They are then painted under climatically controlled conditions. The new complex makes Quincy the first U. S. shipbuilder capable of meeting the latest Navy paint specifications regardless of weather.

Pre-outfitting. Potentially the most productive area for shipbuilding efficiency and cost reduction, pre-outfitting consists of installing as much equipment, wiring, piping, insulation, and other outfitting items as is possible in structural units on the ground before final erection in the building positions.

Pre-outfitting is not a new idea, since Henry Kaiser used it extensively in the Liberty ship program of World War II. But the technique lay dormant ever since except for such obvious applications as in innerbottoms, where access after the ship was erected was too limited to install piping except at great cost. It is now being brought to a high degree of development in the United States and abroad, and it will play a major role in all future multi-ship programs.

Aside from pre-outfitting’s most obvious cost advantage of permitting installations to be made in open spaces rather than cramped quarters, the shift in cycle time caused by the technique and its effect on overall building time is most significant. For example, in construction of a typical naval auxiliary, without using pre-outfitting, 45 per cent of the budgeted manhours are often spent in the final 30 per cent of the construction period. With pre-outfitting, however, building time is compressed and the manpower distribution can be leveled out because outfitting is accomplished at an early stage of production.

The pre-outfitting technique, obviously, is available to any shipyard, new or modernized. But it calls for vast changes in design and material cycles, since, for example, marine engineering must complete piping systems design by the time naval architects finish designing the hull units, and procurement must establish procedures to buy components, such as valves and pipes, as quickly as steel plate.

Large Structural Unit Assembly and Erection. Heavy lift crane capability is essential to modern shipbuilding around the world, but it can be employed in both new or modernized facilities. Goliath cranes of 200 and 400-ton capacity are used abroad to lift giant ship assemblies into place in building positions, while Quincy introduced a 150-ton lift capability as optimum for the variety of ships it builds. With its capability to assemble and erect 150- ton assemblies, Quincy has reduced by about half the number of structural units needed to construct a typical ship.

The advantage of a heavy lift and assembly capability, is illustrated by the fact that the production capacity of any shipyard is dictated by the time its building positions are occupied. The more of the ship that can be assembled away from the final building positions, the greater the yard’s capacity. As an added advantage, similar to that achieved through pre-outfitting, building large assemblies with good access “on the ground” requires some 20 per cent fewer manhours than the same work on an erected hull.

Building Positions. New shipyards, especially those abroad, usually feature one large building position and achieve their production volume by assembling most of the ship away from the position. If a yard were producing six 150,000-ton tankers per year, it would erect the ships in 400 to 600-ton units and schedule a final erection time of two months.

Dependence on a single building position is possible only if the shipyard is building a series of vessels of the same type, such as tankers or bulk carriers. Even with such specialization, the single-position yard faces some inherent disadvantages:

•The building dock or basin is the regulating facility in the production rate. This single position requires a carefully balanced upstream flow which, when achieved for a type of ship, can be severely retarded when you Wish to build another type.

•A construction holdup on the ship in the basin can effectively shut the yard down.

•The single position forces the use of colossal cranes to minimize the construction or “dwell” time and not all ships lend themselves to large unit assemblies.

•The “modernized” school is convinced that a variety of building positions are an absolute necessity in order to build the mix of ships required by the Navy and merchant marine in this country.

Material and Production Flow Patterns. The chief advantage of a new yard is that it can design a more direct and efficient work flow pattern “from scratch,” whereas the modernized facility faces the constraints of existing structures and boundaries. But the question then becomes is the flow improvement worth the investment?

With ingenuity and modern transport systems, a modernized shipyard can achieve the same work flow efficiencies as the new. All yards use conveyors or some form of mechanized handling during steel handling, automatic burning and panel production, the initial phases of the production cycle. Conveyors become useless as the assemblies grow in size, and the yards then depend on cranes and large trailers—and perhaps air cushions in the near future—for handling. When it is realized that shipyard moving costs are principally pick-up and unload, not time or distance traveled, the new yard’s apparent advantage of a straight-line flow pattern becomes debatable.

Modern Control Techniques. American shipbuilding has been slow to employ modern management techniques. Not to be construed as a defense are the circumstances that led to this reluctance. No industry with one or two of a kind to build, and 36 to 48 months to build it in, has any business employing an expensive production control system. It simply has not paid to regulate the manufacturing cycle where work passes from craft to craft in a natural sequence with very few critical interfaces or paths. This has been the normal pattern of U. S. shipbuilding for man; years.

However, when we start introducing outfitting type work into structural sequences setting up work stations for volume production with many crafts participating, and reduce times to the point where scheduler interfaces become critical, then we create the need for controls. In short, as we progress from diversified production of many items to mass production of a single item, we pass through several phases, each of which requires more stringent controls. Today, most yards are approaching the process-organized type of production where emphasis is on standardization of process and the creation of repetitive jobs. The ultimate is the continuous flow system with a single mass-produced product where work flows past fixed stations.

We may not reach the final step since it is unlikely (except under wartime conditions) to expect single item shipbuilding in this country, but by developing the process approach with the requisite controls, we can gain much of the advantage. The Japanese in particular have done much along this line.

The point is that controls arise when the production process demands them, and this fundamental fits either a new yard or a modernized old yard. The techniques of control, planning, work measurement, crewloading, can be applied in either case.

In what way, then, is the “new yard concept” superior? If the economics of the situation are disregarded, probably in the use of the work station approach where work is moved to the worker. This becomes most important in outfitting and installation jobs where much time is lost in getting people and material to the ship, and where work is performed in restricted spaces.

Pre-outfitting is the answer to this, and how well the modernized old yard does will depend to a large extent on its success with this technique and the degree of completion it can achieve before things get buttoned up to the point of poor access.

Other factors that significantly affect the process cost include producibility, the merging of design and production to come up with a ship that is the cheapest to build. This area has been sadly neglected in the United States. We trace this neglect first to the customer, who in most cases, says what he wants in no uncertain terms—i.e., contract plans and specifications. The producer is not given the chance to say what he thinks. This has been equally true of both the U. S. Navy and commercial ship owners.

Variations of this have occurred, most notably the big tanker series built in 1950 mostly for foreign owners, where mainly the ships were the product of the shipbuilding firms, rather than the customer. But even here, the twain never met sufficiently and shipyards built details that were more costly than they should have been. This was owing to lack of communication between the engineer and the yard. Contrast this with tanker building in Japan where, in a five- year period the steel requirement was cut 30 per cent by designing for production.

In emulation of the Japanese and Swedish builders who designed for producibility and offered their customers ships that would do the job, but were also the cheapest to build, the Navy’s recent contract definition studies for FDL, LHA, and DD-963 (Formerly DX), put a premium on producibility and let the shipbuilder, just as is the case of the U. S. aircraft manufacturer, come up with his best and most economical product.

Production engineering, or the study of how you will build a ship, is a most significant item affecting cost. It calls for a study in detail of the best sequences, methods, and tooling. It is expensive, and the trade-off point where you recover your cost probably lies at the fourth to sixth ship. You can vary the amount of production engineering you do to suit the number of ships you are building to the same design, but a full-blown effort to produce a long run of similar ships can run as much as $4,000,000.

Probably of greatest significance is the “learning curve” effect which occurs in any repetitive job. The learning experience in production, seriously studied for the first time in 1936, is such that each time production is doubled, there is a definite percentage of reduction in costs. For example, in an 80-percent-curve, the second article should cost 80 per cent of the first; the fourth, 80 per cent of the second, etc. The variable, of course, is the percentage of reduction which fluctuates widely by industry, ship type, shipyard facilities and processes, and amount of industrial engineering employed to manage the curve. Part of the reduction is automatic—the part you get just by repetitive work—but the balance is highly susceptible to the way the job is managed; i.e., the provision of proper ship spacing to allow transfer of skill from ship to ship, amount of method determination employed and how circumscribed the job is on the first ship, and the discipline of proper manpower utilization.

Lieutenant Commander Charles DiBona* asked, “Is there a learning curve in the shipbuilding industry?” The answer does not lie only in the area of multiship production, it exists even for a two-or-three-ship run and is one of the most competitive factors in shipyard bidding. Many contracts, and particularly those with volume runs, say 20 to 40 ships of a type, become a battle of the learning curves, so great is the effect of the percentage drop on large quantities.

Assume a 40-ship Program % Reduction Selected
	90%	87%	85%
Cost of 1st ship	$30.0M	$30.0M	$30.0M
Cost of 40th ship	$17.1M	$14.3M	$12.6M
Average Cost	$19.8M	$17.5M	$16.2M
Total Cost	$791.0M	$700.0M	$650.0M

 

The relative cost of the first ship is of less import than one might think, since one yard can start with a $33,000,000 figure for the first ship and yet by getting an 83-per-cent- reduction can equal the total program cost of the 85-per-cent-yard shown in the example.

Our question is whether a new yard will better be able to achieve a sharper reduction than a modernized old yard. Learning is most affected by such items as employment of good industrial engineering and sound management. This is the “rationalization” of the Japanese and European yards, and it is credited with lowering their shipbuilding costs more than any other action.

An oft-quoted premise is that the establishment of a new facility provides management with an atmosphere in which new ideas can be more effectively introduced and accepted—a change in scenery if you will. Our experience has indicated a sound industrial engineering approach involving improved equipment, new control systems, cost visibility, and new concepts of shipyard management work as well in the old yard as in the new—location appears to be secondary to good management leadership.

An extended study of Japanese shipbuilding was conducted by General Dynamics in the fall of 1966 starting out with the popular impression that cheap labor, advanced facilities, and government subsidies were the elements of Japan’s commanding position in the world market.

This turned out to be a complete misconception, since it was clear that hard work, sound technical thinking, emphasis on designing for improved production efficiency, willingness to change traditional methods and apply modern industrial engineering, as well as advanced naval architecture and marine engineering were the significant answers. Note that none of these items relates to a new shipyard facility.

Why, then, have the Japanese constructed several new yards?

The basic reason was the demand for bigger ships. The trend to 150,000-ton tankers, then 250,000, now 300,000 and still going up, called for mammoth building docks since existing facilities were quickly outgrown. It is interesting to note that the Japanese government in granting permission for these huge docks made sure that an equivalent capacity in smaller, older facilities was removed to avoid over-production and excess capacity in an industry limited by manpower.

Outside of the current possibilities for large tankers in the Alaska-U. S. coastal trade, marketing opportunities for U. S. shipyards do not include ships which are beyond current facilities or possible modifications thereto.

So the rationale for a new yard must be more capacity in terms of output. Setting aside for the moment the question of the validity of this capacity increase, it appears that by using the techniques of pre-outfitting and heavy lifts of bigger ship sections, we can increase the turnover and output of existing yards—an exact repeat of the Japanese shipbuilding history. Professor E. G. Frankel of M.I.T. in his excellent “Study of U. S. Shipbuilding Capacity and Requirements” for the Office of Naval Research states: “Considering the inherent capacity of the U. S. shipbuilding industry, over one million gross tons of shipping can be produced, in addition to the 40-50 naval ships built annually. To achieve this aim does not require major investments into new facilities, but primarily better use of existing resources in equipment and upgrading of manpower skills and qualifications. . . .”

Not until we are faced with sufficient demand for ships so large they exceed every existing capability, do we need face the “capacity” problem.

There are those, however, who have harsh words today for the industry’s recent unsatisfactory ship delivery record, particularly ships for the Navy. Extra capacity is not the answer to this situation, since the delays result primarily from a domino effect of substantial design changes to ships under construction, and a severe manpower shortage in shipbuilding skills.

What, then, favors the new yard?

It cannot be justified solely on a cost savings basis since the major opportunities in this area exist in any good yard.

The basic premise of a one-contract, sole- purpose shipyard is open to question. The creation of such a venture as an FDL program, or a DD-963 program alone is, in reality, a fiction, for the cost of the new yard cannot be recovered solely through the initial program, and the question of acquisition of sufficient follow-on business to continue absorption of the facility amortization becomes paramount.

We, therefore, submit that this premise is not valid since:

•The probable U. S. market does not appear big enough at this time to warrant additional shipbuilding positions.

•Economic surveys of the U. S. naval and commercial ship market do not show sufficient multi-ship potential to support a large investment in a shipyard.

•Therefore, to make the requisite investment ($100,000,000 to $150,000,000) a sound financial proposition, the new yard must be able to secure enough foreign flag production to supplement U. S. ship production since the modernized old yards will not be at a disadvantage in competing for the usual run of U. S. ships.

But, can the new yard operate on a competitive level with the Japanese and European yards?

The industry is completely divided in its opinions. Messrs. Edwin Hood and Sonenshein in their excellent paper presented at the Diamond Jubilee of the Society of Naval Architects and Marine Engineers (SNAME) in June 1968 concluded: “Return to the world market for U. S. shipbuilders remains a constant goal for shipyard management and national planners, but attainment will be circumscribed for some time by economic considerations and national policy. High costs of certain basic materials and proportionately high U. S. wage rates—by-products of the highest standard of living in the world—estop participation in world competition at this time, and it is doubtful that improvement in capital intensiveness or labor productivity will soon if ever completely overcome the wage advantage which foreign shipbuilders s enjoy.”

Only the future can settle the question of whether American shipyards will ever again be able to compete with foreign builders. For the present, the Navy-inspired resurgence of U. S. shipbuilding will benefit all American shipowners and operators, Navy and commercial, with lower cost ships and better delivery schedules.

We believe the case for the modernized shipyard is a sound one. More productivity and capacity out of existing yards is possible and is happening now. We conclude that equal opportunities for the improvements that really count exist both in a new yard and a modernized old yard, and that the new yard is not necessarily a prerequisite to modernizing American shipbuilding.