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April 9, 2019

In my previous post Uber of the Sea, I talked about the possibility of having an Uber of the Sea. I am not sure if it will happen or not; however, what we do know is that many owner/operators are investing a lot of their resources in improving the operations of their fleet.

I have discussed (and even predicted) how this trend is already affecting the shipbuilding industry through the production of smarter more complex ships, but also by leading owners to ask for more useable information about their ship. This is the trend which is driving the request and eventual requirement of a digital twin of their ship.

However, one potential outcome I have not discussed yet and am still thinking through, is how this trend of Fleet Excellence will affect the number of bespoke/tailored/custom types of ships we build. We all know, no two ships are the same, even in a series; however, we may see an increased trend towards series ships.

This may be noteworthy for anyone in the shipbuilding industry as we are currently going through an industry wide digital transformation and looking at how we can prepare ourselves for the future. Our future largely depends on the needs of our customers, and if there is something that will change our customers’ needs, then we need to be aware of it.

What does Conventional Wisdom and our Expertise Tell us?

Traditionally in shipbuilding, each ship is purpose built and therefore unique from any other ship. There are several reasons for this. For example, each owner/company thinks they are unique and wants something exclusive that satisfies their unique needs. These unique needs can be the route it takes, its specific contents, the clients it serves, duration of the journey, ports, etc.

To build a ship that is unique does cost more obviously. How much more? Well that depends on how different it is from previous designs, where you are building it, your timeline of when you need it, etc.

Even with the additional cost of building one of a kind ships, because the cost of building a ship is only a portion of the total cost of ownership of the ship, it will make financial sense. If you can design a ship to be optimized for the cargo, route, ports, duration, etc. this can significantly reduce the operating costs of the ship, therefore reducing your total cost of ownership.

So, investing an additional 10%-30% on your ship will pay off in the 30+ year life span of your ship…. assuming your needs do not change?.

The Realities

Our industry, as well as others, never really runs as smoothly as we plan. It is common that a ship, that was designed for a certain function, is soon being used for a different function: different cargo, different route, different ports, etc. This means that the savings which would have been gained from the design uniquely tailored for your initial needs will not really materialize.

What If?

What if there was a company that focuses on Operational Excellence over anything else. This company would optimize and even abstract away many of the complexities for the customers who need to transport anything via water. They would need a flexible fleet that can perform multiple functions ‘well enough’ and not a fleet that would be comprised of many unique and custom ships.

Having a fleet with several general-purpose ships will allow the company to have:

  • Easier scheduling of resources: If more of the fleet are similar in capabilities and constraints the ability to schedule trips will be easier as there will be more ships that can meet the needs of the trip.
  • More predicable maintenance: If you have many of the same type of ships you will be able to collect better insight on how that ship class performs as well as better predictability of its unpredictable maintenance.
  • A streamlined crew and maintenance team: The fleet management team would not need to have specialists for every single type of ship. If you have more similar ships you will require less specialists or at least have specialists that can operate and service multiple ships. This is similar to why airlines and trucking companies try to minimize the number of different types of planes and truck they own. Having multiple crew that can maintain and operate multiple assets has a lot of value and reduces operating costs.
  • Lower cost of ships: Purchasing many of the same ship reduces the cost per ship.
  • Higher quality: Having similar ships will usually result in higher quality ships, even at a lower price. Most ships with sister ships (multiple ships in the class) will usually have less issues with the ones built at the end of the series, especially compared to if they had been uniquely designed.
  • More resilience to unpredictable events: There is always going to be an event that you cannot predict: an accident, faulty equipment, etc. If an unfortunate event happens, you can leverage another ship. This may still affect schedules but provides the option to the company to decide what will have the least negative impact.
  • A rolling repair cycle: Can have a rolling repair/maintenance cycle where one ship is being maintained and repaired without affecting any schedules.
  • Many more

There will be some inefficiencies with some of the operations of the ship as they may not be best suited for the cargo, route, duration, etc.; however, this may be overcome by other operational improvements and business flexibility that they will gain from having a move streamlined fleet.

How does this affect Shipbuilding?

If this trend is what we will see in the future, it will affect shipbuilding. We will see more multiple ship contracts than we see now. Every shipyard loves it when they get a series of ships as it guarantees predictable work for a longer duration and the risk of losing money on the series is usually lower with every additional ship that is built in the same class.

However, it is not all good news. There will be many other shipyards trying to land the same contract. So, who will be the winners of these contracts? It will be the shipyards that can:

  1. Provide a Digital Ship (Digital Twin): As mentioned before, the companies that are focused on Operational Excellence will require a digital replica of their asset (ship) as it is imperative for their digital business.
  2. Have a streamlined sister ship process/strategy: As mentioned in my blog post Hardest Problem in Shipbuilding: Sister Ships, the hardest problem we have is to efficiently handle changes across sisterships. Companies that can provide a high value for a low cost will be the ones which win these lucrative contracts.
  3. Provide additional value: The ability to provide additional value to the owner/operator after the ships are delivered will make a difference. These companies are focused on getting the most out of their ships and if there is a service or additional value you can provide that will align with their needs, you will be in a better position to win.

Closing Remarks

It is important for us to look at the direction that our clients are moving so we can attempt to predict what their needs will be in the future. It is hard, but it is a necessity if we want to be the best at what we do. Changing any portion of our business takes time and cannot happen in weeks or even months. To have time to adjust, it is important for us to look far enough in the future.

I am not sure if the future will start to have less bespoke ships and more series ships, but it is definitely a possibility if we look at the current trends. Many owner/operators are investing a lot of their money to operate their fleet more optimally. It makes sense for them to do so. The question is how this will affect the requirements and needs for future ships?

Currently a tailored ship can make sense with their current business model; however, if they change their business model, which we are seeing signs they are, this will change what they need and therefore the type of ship they invest in. A tailored ship may be a better if the ship will always function in only the role it was designed for, but in many cases, ships change functions several time in their 30+ years of life.

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