the ship acquisition process

2

PROJECT MANAGEMENT

WITH REFERENCE TO THE CAPITAL

ACQUISITION PROCESSCopyright C. R. Cushing

2011

3

Charles R. Cushing, Ph.D., P.E.30 Vesey Street, 7th Floor

New York, NY 10007Tel. (212) 964-1180Fax (212) 285-1334

E-mail [email protected]

5

Typical Ship PricesShip Type $, MillionsContainer Ship, 12,600 TEU 165

Tanker, Capesize 95

Tanker, VLCC 115

Container – Reefer, 7450 TEU / 3400 Reefer 143

Container Ship 70

Bulk Carrier, 92,500 DWT 70


Tanker, Chemical 4,300 DWT 20

Ore Carrier, VLOC 350,000 DWT 135

Cruise Ship, 6,400 Passenger 1,240

Log Carrier, 35,000 DWT 30

Multi-Purpose Cargo, 5,670 DWT 14


6

World Population of Merchant Ships, December

2010Commercial Ships: No.(%) GRT x 1,000(%)

General Cargo 18,178(23.4) 63,525(6.8)

Container Ships 4,869(6.3) 158,112(16.9)

Ro Ro Ships 1,556(2.0) 41,704(4.5)

Bulk Carriers 8,920(11.5) 292,906(31.4)

Oil and Chem Tankers 12,014(15.4) 260,735(27.9)

Gas Tankers 1,552(2.0) 48,159(5.2)

Passenger Vessels 6,382(8.2) 34,100(3.7)

Offshore Vessels 6,283(8.1) 19,248(2.1)

Tugs 3,757(17.7) 3,879(0.4)

Other 4,257 (5.4) 10567(1.1)

Total 77,768(100) 932,935(100)

7

Ships on Order (December 2009)

No. 9,226*GRT 300,500,000CGT 152,000,000* Of which 7,282 are cargo vessels

Source: Lloyds Fairplay Dec. 2009

8

Process Applies To:

Ships Ports Cranes Factories Refineries Other Capital Projects

9

Capacity Acqusition Alternatives

New Construction Conversion Purchase Second-hand Vessel Bareboat Charter Time Charter Contract of Affreightment Freight Service Agreement Consecutive Voyage Charter Spot Charter Vessel Pooling Slot Charter

10

History of Project Management

Dates back to early civilization

Creative architects and engineers

11

Capital Projects

Egyptian Pyramids

12

Capital Projects

Great Wall of China

13

History of Project Management Imhotep – Pyramids (2630 BC) Qin Shi Huang – Great Wall (221

BC) Vitrvius – Roman Aqueducts (100

BC) Christopher Wren – St. Paul’s

Cathedral (1632 – 1723 AD) Thomas Telford – Bridges & Canals

(1754 – 1834 AD) Isambard K. Brunel – Great

Western Railway (1806 – 1859)

14

Recent Developments in Project Management

Fredrick Wilson Taylor – Pioneer in theories of scientific management (WBS)

Henry Gantt – Father of planning and control techniques – (Gantt Chart)

Dupont / Remington Rand – Critical Path Method (CPM)

Booz – Allen & Hamilton – Program Evaluation and Review Technique (PERT)

15

Capital Projects Ships Ports

16

Project Management

Planning Organizing Managing Resources to Achieve

Specific Goals

17

Project

Temporary Endeavor Defined Beginning Defined End Unique Goals and

Objectives

18

Traditional Project Management

Initiation Planning Design Execution

Commercial Production

Completion

21

Project Management Process Traditional PM Critical Chain PM Extreme PM Agile PM Event Chain PM Event Chain Methodology Prince2 (Prompt + Prince) Process-Based Management

22

Planning Design Commercial Production

The Process Consists Of:

23

“Now here’s an advanced organism. You’ll note the nucleus and cytoplasm development, along with what appears to be the first draft of a strategicplan.”

28

Origins of Strategic Planning

473 BC Sun Tzu’s The Art of War 1645 Miayamoto Mushashi’s A

Book of Rings

1800 Napoleon 1850’s Industrial Revolution 1860’s Policies and Procedures 1900 Work Norms and

Standings

29

Origins of Strategic Planning (Cont’d.)

1916 WWI Battle Strategy 1920’s Financial Planning and Control 1930’s Management by Objectives 1940’s WWII O.S.S./C.I.A. 1950’s Strategic Planning 1970’s-80’s Global Spread of

Strategic Planning 1990’s Strategic Management

30

Development of Planning

31

Factors that Make Strategic Planning Essential in the Marine Industry

Cyclical market conditions Fluctuating currency exchange rates Uncertainty in fuel costs Uncertainty in interest rates Emergence of trading partners and trading

alliances Over tonnaging due (partially) to overly

generous subsidies Regulatory and governmental restraints Fast paced technology (leading to

premature technological obsolescence) More rapid response by Safety and

Environmental Regulatory Bodies to disasters

32

Benefits of Using this Process

Opportunity to optimize vessel characteristics

Improved delivery time Better use of lead time Better financing and currency terms Better guarantees Control of extra costs and changes Improved quality Chance to introduce innovation Product is more “obsolescence – proof” Fewer disputes or litigation

33

Strategic Planning Asks Four Questions

How did organization get to its present position?

Where does organization want to go?

How will it get there? How will it function successfully

when it gets there?

34

Strategic Planning ProcessAppraisals

External Internal

Create Strategies

Evaluate and Choose Strategy

Implement Strategy

34a

Strategic Planning Process (Cont’d)

Strategic Planning Process

34b

37

The Company Environment

The Industry The Company The Market The Competitors

38

Other Aspects of the Company Environment

Legal Regulatory Suppliers Service Technology

39

Internal Factors

Company strengths Company weaknesses Areas of vulnerability Profitability Productivity Customer satisfaction

40

Other Internal Environmental Factors Load factors Service levels Transit times Frequency of sailings Schedule reliability Cargo damage statistics

41

The Competitive Environment

Strength of competitors Weakness of competitors Market shares Technology Pricing

42

Analysis of the Market Historical demand Current demand Forecast

43

FORECASTING

44

Sources of Data for Cargo Flow Studies

Government report (National and U.N.) Custom revenue statistics Manifests Census data Government statistical abstracts Industry commodity trade data Trade association reports Newspaper/trade journal traffic reports Port authority statistics Trade Conference data Market research consultants

45

Sources of Data for Competitor Analyses

Advertising Sailing schedules Web sites Directories Classification society computer

searches Shipping directories Ships-on-order publications Search services

49

Pricing Studies

Tariffs Charter fixture data Industry scales Periodical summaries Cost analyses National and international

economic indices

50

Pricing Perturbations

Government aid International conflicts and

calamities “Cut Throat” competition Predatory pricing practices Price wars Technology breakthroughs

51

Global Events AffectingShipping and Shipbuilding

Natural Disasters Major Earthquakes (i.e. Kobe) Tsunami El Nino Effects Drought in Panama Global Warming Pollution Epidemics, Plague, etc.

52

Global Events AffectingShipping and Shipbuilding

Economic Conflict Subsidies Embargoes Protectionism Trade Wars Monopolies Etc.

53

Global Events Affecting Shipping and Shipbuilding

Protectionism Nationalism Tariffs Subsidies Cabotage Preferential treatment Bi-lateral trade agreements Cargo sharing Restriction on flow of capital Barriers to investment Government aid

54


Economy and Trade OPEC Shipbuilding Shifts: Europe to Japan to

Korea to China Availability of Capital for Investment World, Regional, and Local Economies Confidence of Investors Availability or Shortage of Workers Depressions and Recessions Inflation Market Volatility

55


Technology Channel Tunnel Second Isthmus Canal Superconductivity Fuel Cell Propulsion Post-Panamax Containerships Double Stack Rail Cars Land Bridges Etc.

56


Anti-Social Activities War Terrorism Piracy Drug Trade Government Corruption Commercial Corruption Etc.

57


Legal Impact of Marine Disasters Torrey Canyon Amoco Cadiz Herald of Free Enterprise Estonia Braer Erika Prestige Etc.

58


Shipping and Shipbuilding Conventions and Legislations

Port State Control Erika I and II Basel I and II Ballast Regulations Air Pollution Regulations Etc.

59

Strategy Development

Corporate objectives

Strategic objectives

60

“Objectives are the fundamental strategy

of a business.”- Drucker

61

Corporate Objectives Profitability Return on Investment/Payback

period Market share Growth Stability Product or service quality Meeting market needs Competition

59a

“No Smedley! I said we need more profits, not more prophets!”

63

Strategic Objectives – Fixed Elements Competitive environment Company resources Management values Societal expectations

64

Strategic Objectives – Controllable Elements Corporate structure Marketing policies Finance policies Accounting policies Manufacturing or service policies Human resources policies Research and development policies Organizational policies

65

Strategic Issues

Volume of cargoes Actions of competitors Technological developments Governmental restraints Other external environmental

factors impacting the company’s ability to meet its projections.

66

Strategy Selection

Develop a number of options Prepare pro forma financial

projections Compare alternatives against

corporate objectives Compare alternatives against each

other Select best alternative Optimize selected alternative

67

Selection Process Pro forma financial projections Carry out simulations Perform sensitivity analyses Test options against financial

criteria Minimize risk Optimal use of corporate resources Examine impact of unexpected

changes in forecasts

68

Risk Analysis

Risks we can afford to take Risks we cannot afford to take Risks we cannot afford not to

take.- Drucker

69

Entry Plan Timing and scheduling Time table Coordination of corporate activities Coordination with external

organizations Marshalling of resources Government actions, permits,

licenses Political support

70

Exit Plan - Actions

Scrap the plan Sell Swap Merge Withdraw gradually Withdraw completely

71

Alternatives to Exit

Commit additional resources Shift priorities Reduce effort Merge

72

Strategy Implementation Business plan Marketing plan Competitor plan Operations plan Financial plan Technology plan Organization plan Corporate development plan

73

Business Plan Description of Company Company History Marketing Strategy Management Team Organization & Personnel Operations Funds Required & Their Use Financial Data Risks R & D Required Legal Issues Insurance Considerations Schedule

74

Financing Plan Amount Requested Purpose of Financing Use of Funds Description of Collateral Source of Repayment Whether Seeking Other Debt Financing History of Company Description of Business Description of Market Financial History of Company Financial Projections Financial Assumptions Schedule of Assets & Liabilities Description of Management & Ownership Financial Status of Owners References

75

“On second thought, maybe a periodic re-assessment of the MISSION STATEMENT might not be such a bad thing”

NON SEQUITUR-WILEY

76

Mission Statement - Route Origin, destination and route Transit distance Transit time Frequency of service Delays in service, planned and unplanned Weather conditions Current Vessel traffic systems Canal characteristics Ice conditions

77

Mission Statement - Cargo Quality of cargo Type of cargo Cargo characteristics Cargo stowage and securing

requirements Cargo care requirements

78

Mission Statement - Infrastructure Port characteristics

Terminal characteristics Physical restrictions Port costs Cargo handling methods and rates Turnaround time Inland transport considerations Weather conditions Docking assistance and mooring

requirements Fuel availability and cost

79

Mission Statement - Vessel

Type of vessel New, converted or existing vessel Number of vessels Capacity, normal and maximum Speed, normal and maximum Type of machinery if known Type and source of fuel Chewing – nationality, unions,

quarter standards

80

Mission Statement- Commercial Existing or projected freight rates Competitor characteristics Anticipated market share Conferences Trade restrictions

81

Mission Statement - Economic Required international rate of return

Prime and/or other rates Subsidies and/or grants Crew rates Insurance rates Fuel costs Tolls Port charges Vessel financing and interest rates Life of vessel Tax schedules

82

Mission Statement - Government

Vessel registry and classification Governmental restrictions Cabotage laws Environmental restrictions Safety restrictions Registry

84


85

Engineering

The art of applying – Knowledge Scientific principles

86

DESIGN is the essence of ENGINEERING

- Buxton

87

The CPCD Design Sequence

Concept Preliminary Contract Detailed

89

Design Drawings Sketches Artist renderings Diagrams/Schematics Computer imaging Calculations Models Model testing Research/Development Experimentation

90

Design Includes

Industry standards Classification society rules Governmental regulations Manufacturers’ specifications Shipbuilder’s design detail

standards

91

The Engineer Is Faced With Conflicting RequirementsExample

Physical – minimum weight Economic – minimum cost Social – maximum safety Environmental – minimum impact Commercial – maximum efficiency Esthetic – maximum stylishness Etc.

92

The engineer resolves these conflicts and

searches for “optimum” solutions.

93

Design is solving a problem with many VARIABLES.

94

Design is an ITERATIVE process.

95

Prior to 1970, designers used

The DESIGN SPIRAL.

96

DESIGN SPIRAL Hull form Appropriate dimensions Hull prismatic coefficients Power estimates Weight estimates

- Hull- Machinery- Outfitting

Deadweight capacity

98b

Computers permit multiple criteria – multi variate search

patterns.

104

“Conservative pressures increase as the design progresses.

Hence the early stages should be biased towards the novel.”

- Brown

105

“New ships should be 25% novelty 75% well proven

practice.”

- Baker

106

CONCEPT DESIGN

Requires Innovation Creativity Judgment Technical perception Economic awareness Analytic log “Hands on” control of the synthesis

process No computers

107

Concept Design Synthesis takes place. Requirements evolve into form and

configuration. Some dimensions and principal

characteristics may evolve. Results in sketch or drawing. May include a written description. May include more than one

alternative. 10 to 80 man – days.

108

Preliminary Design

Should also establish

Ability of vessel to meet mission statement.

Regulatory feasibility. Patent infringements (if any). Need for new technology. Model testing requirements.

103a

Preliminary Design The second iteration in the design

process. Provides more detail. Provides more accurate dimensions. Focuses on essential features. Provides enough detail to verify.

- technical feasibility- economic feasibility

Provides outline specification. Provides enough information for

- Construction cost estimate- Operating cost estimate- Revenue generating estimate

110

Contract Design The third iteration in the design process. Creates definitive description of the

vessel. Can be used as contract documents. Permits total meeting of the minds

between designer and builder. Increase details and accuracy of the

design. Increase accuracy of feasibility checks. Decreases risks.

111

Typical Ship Design Package

Plans Specifications

Reference material- Drawings- Guidance calculations

112

Contract Design

Should Avoid ambiguity Avoid excessive specifics. Be precise. Use legal terminology. Avoid use of guidance drawings.

113

Classification Societies

114

The Role of Classification Societies Construction Standards

- Rules- Survey

Maintenance and Repair Standards- Rules- Survey

Certification Safety Auditing (ISM) Environmental Auditing (ISO) Technical Guidance Regulatory – Flag state

116

THE IACS SOCIETIES

ABS BV CCS DNV GL KR

LR NK RINA RS CRS (Associate) IRS (Associate) PRS (Associate

117

Class is not a substitute to an effective project management, inspection and survey program.

An owner cannot delegate his responsibility to assure that his vessel is seaworthy.

- Sundancer decision

119

Model Basins Resistance and Propulsion

- Still water- Waves

Seakeeping Mooring forces Maneuverability Forces and motions Propeller performance Wake field Ice breaking Wind resistance (wind tunnels) Smoke flow (wind tunnels)

120

The Role of the Manufacturerin High Tech Equipment

Technical Information Quality Control During Manufacture Installation & Start-Up-Support Guarantees Service Stock of Spares Crew Training Documentation

121

Consulting Naval Architectsand Marine Engineers

Transportation planning Marine economic analyses Conceptual design Preliminary design Contract design and specifications Working (detailed) drawings Plan review Tests, sea trials, witness same Construction and repair inspection Contract management (owner’s

representative) Guarantee engineering

122

Terms Used for EngineersWorking in Marine Field

Naval Architect Marine Engineer Naval Engineer Naval Constructor Ocean Engineer Shipbuilding Engineer Marine Surveyor Licensed Marine Engineer

123


124

Commercial Selection of yards for invitation Request for expression of interest Invitation to bid Bid analysis invitation to bid Pro-forma contact invitation to bid Negotiations Financing Contracting

125

Factors in Selecting Yards for Invitation

Physical characteristics Technical capabilities Experience Order book Employment Location Ability to assist financing Reputation References

128

Request for Expression of Interest

Simple and brief inquiry. Sent by e-mail or fax. Saves time and effort. Permits assessment of number

of yards participating.

129

Invitation to Bid (RFP)

Best process. Make create legal obligations. Not to be used to develop price

estimates. Use standard formats. Formality is required. Use bid form.

130

Information to be Sent in Invitation to Bid

Brief description of vessel. Name and address of person requesting

proposal. Number of vessels and options (if any). Documents

- Plans- Specifications- Pro-forma contract or Heads of Agreement

Required delivery. (cont’d.)

131

Requirement for cash price Currency Financing terms Confidentiality of owner’s documents Performance bond (if any) Period of validity of bid Obligations on owner concerning bids Signature by authorized representative

(Cont’d.)

132

Additional yard information- Quality information- Yard standard details- Current order book- Financial statement- Bank reference- Management plan- Technical plan- Major event schedule

Complete bid form

133

Tips in Bidding

Hold bidders’ conference. Use addenda, if necessary. Be firm on submittal date. Create short list. Be courteous and fair. Ensure ethical practices.

134

Bid Analysis Price for one vessel Price for a multiple vessel order Currency of payment Additional cost for financing Location of yard (and distance to where

vessel or vessels will be deployed) Cost of positioning vessel Reputation, experience and quality of yard Financial health of yard Proposed building schedule Owner’s costs as they relate to yard

location (i.e. inspectors’ housing, travel, taxes, etc.).

135

Negotiations Have primary bidder and two back-up bidders. Beware of driving bidder below level of

profitability. Be well informed and prepared. Be aware of legal obligations in negotiating

stage. Have at total and complete meeting of the

minds. Yard to take total responsibility for design. Avoid split responsibilities. Review, in detail, all documents and initial

every page and drawing.- Contract- Specifications- Drawings

136

Tips in Negotiating

Be fair. Be patient. Be firm, until it is absolutely

necessary to be flexible. Take enough time for the process.

137

McCormack’s Rules for Negotiating Do not get stranded by “how much”.

Money issues are only one part of the transaction.

Let the other party go first (with terms and numbers).

Play in majors. Do not deal in round numbers. Avoid showdowns. Negotiate backwards. Trade places. Mollify then modify. Deflect with a question. Question positions but do not ignore them.

138

McCormack’s Rules for Negotiating (Cont’d.)

Improve the offer with other parties’ self interest.

Consider barter. Keep your time frame quiet. Step back and relax. See emotional outbursts as

opportunities. Act in anger – never react in anger. Give the other parties side victories. Use candor.

139

Silbiger’s Rules for Negotiating

Know your opponent. Know yourself. Do your homework. Understand your strategy. Understand your limits. Review your negotiations,

afterwards.

133a

Buyers’ Market

Low prices Early delivery Attractive financing terms Proactive engineering Yard flexibility Buyers’ contract terms

133b

Sellers’ Market

High prices Long delivery Little or no yard financing Sellers’ terms Inflexibility

142

Ship Finance

Sources Equity Debt Grants

143

World wide need for Ship Financing

$250,000,000,000 per year

144

What form of financing to use?

FRICT approach Flexibility Risk Income Control Timing

145

Factors to Consider in Financing Unused tax depreciation - Leasing

Excess debt - Equity Potential business risk - Equity Buyer’s market - Shipyard Credit Large earning power - Debt Strong, predictable cash flow - Debt Low stock price low expectation – Hybrid Long term, fixed rate- Bonds

146

Debt Financing Least expensive Most restrictive Commercial or government loans Loans secured or collateralized Mortgages Possible pledge of:

- earnings- insurance- corporate guarantees- pledge of shares- personal guarantees

Seldom 100%

148

Sources of Debt Financing Commercial banks Ship finance banks Investment banks Government banks Commercial finance companies Saving and loan associations Pension funds Insurance companies Commercial credit companies Account receivable factors Manufacturers and vendors

149

Debt – Commercial Finance Cos.

GE Capital Greyhound CIT Kleinwart Benson Henry Ansbacher Samuel Montagu Others

150

Debt – Commercial Banks Norwegian owners -

Norwegian banks Chinese owners - Hong Kong

banks Japanese owners - Japanese

banks Greek owners - Non-Greek

banks

151

Debt – Mezzanine Financing

Used when bank unwilling to loan owner sufficient money.

High yield corporate debt, i.e. Junk Bonds.

Closes gap. Provides high return. Compensates for high risk. Usually arranged by investment

banks.

152

Debt - Bonds

Issued by shipowner Certificates of indebtedness Specific purposes Specific rates and period

153

Debt – Ship MortgagesPurposes: Public record of lien Priority of the lien Sequence of prior liens Agreement between lender and

owner:- Operation- Insurance- Maintenance- Trading areas

154

Debt – Factors Considered in Granting Loans

Age of business Type of operation Method of payment Currency of loan and repayment Collateral Character of management Credit history National economic factors Industry Mortgage and loan terms

156

Quality of Borrower Liner Co.

- Ability to Market it’s Service

Bulk Carrier Owner- Ability to Service Debt- Cash Flow- Quality of Charters

157

Debt - Rates Floating (variable)

- usually tied to LIBOR Fixed

- Rare from commercial banks. “Swap”

- Swaps are more costly- Lender and third party who have excess variable and fixed rate funds arrange swap.

“Cap”- Protects against rising rates.- Lender pays interest over an agreed level.

“Collar”- Reduces extra costs for a cap.- A combination of a cap and “floor”.

158

Spread Difference between cost of funds to

the lender and the borrower. Based on:

- Credit worthiness of owner- Risk in shipping operation- Size of loan- Period of loan- Type and amount of security- General supply and demand for loans

159

Leases

Operating Finance

160

Leveraged Leases

Most ship leases are leveraged leases.

Owner Lessor■ Provides equity portion of funding■ Provides debt portion■ Retains ownership ■ Holds mortgage■ Make lease payments ■ Receives assignment of lease

payments.■ Tax benefits■ Residual at end of lease (sometimes).

161

Off-Balance Sheet Financing

Indebtedness does not show on balance sheet.

Usually done through chartering Not legal in U.S. nor GAAP.

162

Sources of Equity Funds

Retained earnings Cash Flow Sale of Assets Sale of stock

- common- preferred

Limited partnerships

163

Sale of Stock Public Offering

- Strict government controls- Rigorous accounting- Expensive- Time consuming

Private Placement- Insurance Cos. (casualty and property)- Mutual funds- Finance cos.

164

Hybrid Financing Schemes

Convertible debt Debt with warrants DIFKO (Danish) K/G System (German) Blocked currency schemes Barter deals

165

Government Grants Loans Loan guarantees Subsidized interest rates Cash grants (owner or builder) Cash or credit to allied industries Operating subsidies Favorable tax treatment Moratoria on debt repayment Training funds R & D Scrapping subsidies

166

The Shipbuilding Contract

167

ContractingWhy It Can Be Complicated

International transaction Different laws:

- construction/building- provision of services- sale of goods

More than 2 parties Much money Obligation may occur early, during

- bidding phase- negotiations

Constantly changing- laws- interpretations of law- tax regulations

168

Contracting

Written (usually) Involves legal advice and

assistance Often starts with “Heads of

Agreement” and a “pro forma” contract

Sometimes letter of understanding

169

Shipbuilding Is Governed By Many Laws

Contract law Other laws:

- tort- fraud- negligence- employment- environmental- etc.

170

Contract

A promise enforceable by law. “A contract is a promise or set of

promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty.”

Pact Sund Serventa (Promises made must be kept)

171

Conditions for a Contract An offer An acceptance Consideration Intent to create a legal relationship In writing (sometimes oral) Parties are competent Form required by law Not impossible of performance Not contravene law or public policy

172

An Offer Complete Free of ambiguities Properly communicated Fixed time of acceptance (or kept

open for a reasonable time) May be revoked

- before acceptance- providing offer provides for

notice of revocation.

173

An Acceptance

Creates the binding contract Must be absolute and complete Qualified or conditional is NOT

an acceptance (it is a counter offer).

Silence is NOT an acceptance.

174

A Contract May Be Voided

Material misrepresentations

Fraud Duress Improper conduct

175

Shipbuilding Contracts

Specially drafted Owner or builder’s standard form Industry standard

- SAJ form- AWES form- MARAD form- Norwegian form-BIMCO

PRINCIPAL ELEMENTS OF A SHIPBUILDING CONTRACT

166a

177

A Comparison of Standard Form Shipbuilding Contracts

179

Basic Elements of a Shipbuilding Contract

The parties What is to be done Price Delivery Guarantees Tests Change procedures Right to reject Default Title Jurisdiction

170

Escaping Contracts

Walk Away Delay Renegotiate Delivery Frustrate Greenfield Yards

171


182

Production Management

Specialized Management Techniques

To Plan and Control Projects To Complete Defined Work On Schedule Within Budget Meet Quality Constraints

183

Purposes of Production Management

Fulfill original objectives Keep project within budget Keep project on schedule Coordinate project team Detect need for and take corrective

action Communicate progress to

management

184

Define Project

State objectives and goals Prepare mission statement Develop work plan Create Work Breakdown

Structure Document (WBSD)

185

Establish Schedule

Define Tasks Select milestones Define interrelationships Establish timing and deadlines

186

Prepare Budget Identify or estimate all

costs Allow for

margins/contingencies Establish timing of

expenses Adopt financial controls Obtain approvals

187

Team Budget Elements Wages Benefits Local taxes – if any Global taxes – if any Travel expenses Supplies and equipment Communication costs

188

Owner’s Expense Budget Owner furnished equipment Crew costs Professional costs

Legal Accounting Technical

Stores and supplies Fuel and lube Entertainment and ceremonies

189

Team Select and recruit team leader Develop team position/tasks Establish timing for each Recruit members Indoctrinate Delegate

190

Managing Your Team Staying in control Evaluating your team Identifying and dealing with

different personality types Motivating your team Managing clients Effective team organization

191

Control Project Communicate Coordinate Meetings – scheduled and

unscheduled Review and audit Make adjustments/corrections as

necessary Document

192

Production Control Techniques

Full wall scale charts Gantt charts PERT CPM Programs

193

Gantt Chart

194

PERT Chart

195

Monitor Critical Elements

Require production statistics Monitor milestones Watch critical paths Identify choke points/bottlenecks Make projections/extrapolations Anticipate problems

196

When Things Go Wrong

Identify real problems Get input from team Investigate thoroughly Analyze possible solutions Take timely corrective action Meet with yard Communicate with stakeholders

197

Tips Delegate effectively Be a good listener Be fair with everyone Use good time management Avoid bureaucracy Be decisive and clear Communicate thoroughly Insist on ethical behavior

198

Production Activities Owner’s representative Contract management Project management Plan approval Inspection Quality control Testing Crewing, storing, fueling Delivery and acceptance Post production activities Warranty and guaranty Closing the project

199

Detailed Design Materials Working plans Finished drawings Posted plans Vendor drawings Field sketches Shop drawings Schematics Drawing changes Operating manuals Safety manuals Maintenance, repair and trouble shooting manuals Test agendae, protocols and results Tech specs for equipment procurement

200

Inspectors Hull Machinery Outfitting Electrical Coatings Welding

201

Delivery and Acceptance Title passes when

- physically delivered- at another time, if both parties contractually agree- vessel registered- execution of bill of sale- when both parties so declare- when ship is in a “deliverable” state- bill is paid- builder completes his performanceprogressively

202

Post Production Activities Deficiencies Unfinished work Temporary and permanent

documents Warranty and guaranty

203

Management Science Techniques Linear programming Integer linear programming (simplex

method) Network flow models PERT/CPM Queuing models Inventory models Computer simulation Decision analysis Goal programming Analytic hierarchy process (AHP) Forecasting process models Dynamic programming

192a

Innovative Techniques Clarification of aims Abstract reformulation Morphological synthesis Inductive reasoning Deductive reasoning Value analysis Brain storming Brain writing Heuristic programming

192b

Innovative Techniques (Cont’d.)

Idea combinations Negative brain storming Re-thinking through questioning Lateral thinking Independent review S Curve strategy The in-and-out strategy The 5-15 idea generating

206

ProblemSolving

DecisionMaking

Define the ProblemIdentify the AlternativesDetermine the Criteria

Evaluate the AlternativesChoose an Alternative

Implement the DecisionEvaluate the Results

193b

Innovative Techniques (Cont’d.) Synetics process

Attribute listing PMI evaluation Matrix thinking Forced relationships Force field analysis The angel’s advocate Extrapolation and interpolation

194

ComparingTechnologies

FeasibilityStudies

Ideal DesignIn one

TechnologyOptimization

Studies

195

Economic Analysis