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February 18, 2020
Industry TrendsShipbuilding

With today’s business transformation of the shipbuilding industry, I am starting to see some new business strategies take form. One of particular interest is the transition of shipyards starting to embrace the fact that their involvement with the product (the ship) does not end at delivery of the vessel. There are more and more shipyards that are evaluating the strategy of providing services for the ships they have built after delivery. It is not to the same level as in other industries, like the common case study of fly-by-the-hour jet engines, but still can have a significant impact on the future of the business of shipbuilding.

While not all shipbuilders have the luxury of offering these services with their current business structure (for example, if many of their ships are operated in a region or country where they have no facilities); however, you are seeing some that are expanding their shipyard facilities in different locations to support this strategy.

This is being driven by the needs and wants of ship owners/operators as well as by shipyards. To fulfill this business transformation, there are several significant and difficult hurdles to overcome:

Owner Operators

As with every industry, owners/operators are also going through a business transformation. They are looking at not only modernizing their fleet with more capable ships using IoT technology, but also at maximizing the number of goods they transport (commercial) or their national defense readiness (Navy, Coast Guard).

With all the new technology advances in IoT, big data, AI, etc. as well as cyber threats, drones, etc.  owner/operators are looking at ways to focus on their business and off load certain activities. One of the activities that more and more owners/operators are looking at offloading is the MRO (Maintenance, Repair, Operations) of their ship fleet. MRO is still very important to the owner/operator; however, it is an item they feel takes significant effort to do especially since other parties exist that may be able to do a better job for the same or even less $.

This may on the surface seem to conflict with the owner/operator’s additional need of getting a digital model (not just 3D geometry). However, the reality is that the digital artifacts they would get from the shipyard which initially built the ship are not at a level that would allow the owner/operator to guarantee their accuracy to another shipyard doing any MRO activities for them. Without this guarantee, the shipyard conducting the MRO would still require similar amounts of hours as if they did not have the digital model. This would change if the same company (ex. Shipyard) is building the ship as well as managing the MRO activities.


From a shipbuilder’s perspective it also makes business sense to extend their services for a product that they create. They already have a significant portion of the ship in a digital representation as well as the best knowledge of the design and the decisions and compromises that were made during design and manufacturing that can be leveraged for MRO work. In many cases, the shipbuilder who initially built the ship should be in the position to provide a very competitive bid for any MRO contract.

Offering MRO capabilities at a current shipyard that is only designed for new construction may actually significantly increase the complexity and cost of conducting any MRO activities. Also, the MRO activities will need to be scheduled alongside new construction and use the same facility which was designed for new construction. Therefore, there is potential to affect the shipbuilder’s current new construction business if not managed correctly.

Expanding any business always has a level of risk and shipbuilders which do plan on expanding into the MRO space will need to make sure that they take this opportunity to improve various parts of their business. Expanding to offer MRO capabilities will allow many improvements to new construction as well.

Adding MRO to Business will Improve New Construction

Adding an MRO offering to the ships that a shipbuilder builds can also improve quality and reduce the total cost of ownership of the ship. It is well known that the decisions during design, engineering and manufacturing define up to 80% of what it will cost to maintain the ship. However, the reality is that shipbuilders are not motivated financially to make decisions that will reduce operating and maintenance costs if there is no incentive to do so. Shipbuilders are paid to build a ship. As a result, they make decisions that allow them to build the ship faster and cheaper which sometimes comes at a long-term cost for the owner/operator, not the shipbuilder.

With shipbuilders adding this new lifecycle phase (MRO) to their offering, shipyards will now be motivated to make better decisions that will reduce the TCO of the ship. They will make decisions that may increase the cost or effort in manufacturing to reap the larger benefit during maintenance, repairs and operations. In theory, this could have happened even when they were only responsible for the initial build, but in the real-world decisions which require the owner/operator and shipbuilder to agree and coordinate are not very seamless. This results in the “easy” decision being chosen most often, even if it is not the best overall decision.

With shipbuilders taking on MRO, they will finally be financially motivated to have a more holistic system view of the ship throughout its lifecycle. This is a good for both the shipyard and the owner/operator.

MRO and New Construction Require Different Information

Even though MRO is an extension of the new construction, MRO does require different information and different representations of information. For example, new construction requires a build strategy or assembly sequence for planning how the ship blocks will be assembled on the deck plate, as well as information on individual steel parts that have to be plate nested and then welded together.

However, once the ship is built, these manufacturing assets (assembly sequences, individual steel parts and other manufacturing artifacts such as spools) are not really important any more or at least will not be used in the same way when conducting MRO activities. Capturing information during the initial construction of the ship and then transitioning that information to something that makes sense for MRO activities will require some forethought and planning.

Despite this, a lot of digital information from new construction can be used. For example, the requirements and functionality of each system, functional schematics, initial design calculations, system/ship breakdown structure (SWBS), compartments and their rules, classification approval drawings, testing procedures, VFI and manuals associated to equipment, etc. Also, the ability to know why a decision was made by following the digital thread to the ECO can save many hours and foster much better decisions.

A potentially really good by-product of shipbuilders doing new construction and MRO will be that we might actually get the infamous “As Built” models. This new business strategy will probably get us the closest to having an As-Built model as now there is business benefit for the shipyard to do so.  

Closing Remarks

Business transformation is happening across our entire industry ecosystem. Both owner/operators and shipyards are steering towards the trend of having shipbuilders take on more of the operating services MRO (Maintenance, Repair & Operations) of the ships they built. This allows owner/operators to be able to concentrate on other innovative ideas as well as allow shipbuilders to expand their business.

Expanding any business always has a level of risk and shipbuilders which do plan on expanding into the MRO space will need to make sure that they take this opportunity to improve various parts of their business including new construction. Shipbuilders will finally be financially motivated to have a more holistic system view of the ship throughout its lifecycle. This is a good for both the shipyard and the owner/operator.

This strategy might also be the catalyst that will finally get us the “As Built” model as well as a solid foundation for the Digital Twin. Exciting times indeed.

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Post Comments

  1. Varunlal says:

    Good information. I want to start my own startup. I’m in sailing. may be few years later will start. Needs to get updated on latest.

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