Jan Emblemsvag, one of the maritime industry's leading innovators in quality management, recently took the time to speak with SPEI International about savings achievable for shipyards through the study of quality in all phases of operations.
Jan is the former senior vice president of ship design and systems at Rolls-Royce Marine, which has delivered more ship designs for the offshore market than any other firm in the world. Today, he works as independent consultant and adjunct professor at the Norwegian University of Science and Technology, having recently completed the requirements for full professorship.
Quality management: an essential concern
The consistency of an organization, product, or service depends on a commitment to quality management, which includes quality planning, quality assurance, quality control, and quality improvement.
These four principles ensure that companies focus not only on product and service quality, but also on the means to achieve it. Speaking from his experience at Norwegian firms, Jan says that many highly developed industries – such as the automotive, manufacturing, and electricity sectors – have integrated all of them into their everyday processes.
Unlike the auto industry, though, the ship-building and construction sectors often address quality “after the fact” through inspection and repairs. “Quality management in shipbuilding is more for ‘pass-fail’ and . . . it’s not built into the process,” Jan says. "If you talk to a car manufacturer, quality management is seen as important to reduce the cost. It’s exactly the opposite point of view in shipbuilding because quality becomes a debatable topic between designer, shipowner representatives, class, equipment suppliers and shipyard.”
The other reason there’s a “long way to go” regarding quality management in the shipbuilding and constructions sectors, Jan says, is what he calls the “dealing mentality.” “For example, if you’re going to build a boat, and let’s say you find out that a supplier has slightly less cost on a type of equipment, then a lot of shipyards around will change suppliers simply because it’s a little bit cheaper,” Jan says.
The central problem here, however, is that “they don’t consider quality, risks, and related factors.” Indeed, in some shipyards they also fail to realize the impact on engineering hours, production hours, schedule compression and hence less time to secure quality. These issues are dealt with only if problems surface after the building process has started – thus, the “pass-fail," “after the fact” challenge.
“Furthermore, a secondary effect but unfortunately an even more costly issue, is that the dealing mentality results in lack of standardization and lack of long-term focus on productivity improvements through integrated product- and process design. Since the design stage commits somewhere around 80 percent of incurred costs in a project, it goes without saying that here is where really big dollars are lost through unnecessary engineering-to-order," Jan says.
There is hard data to support Jan’s insights into the consequences of the lack of integration of quality management. Based on his studies in manufacturing, the total internal cost of poor quality is approximately 15 percent of total cost. Factoring in external factors, such as customers who do not return due to the lack of quality in the finished products, that percentage is somewhere on the high end of 15 to 25 percent. “In [shipbuilding and construction], I would suspect that we are up on the higher part of this number, meaning 20 to 25 percent,” he says.
Becoming aware of the waste
Are people in these industries aware of the costs of poor quality? It depends on whom you ask, Jan says. “If you talk to the skilled workers and the people who really know what’s going on, they are aware of the waste that is taking place,” he says.
However, “if you consult procurement and finance officials, they can have a completely different view.” This is because, for example, procurement managers will typically seek out cheaper labor. “They move construction to countries with lower cost and so on, but they often don’t see the totality of what happens when you get these vessels out of low cost countries and you have to fix them up,” Jan says. The true costs of quality issues are rarely captured.
This “fixing them up” not only has a quality management price tag, but a hefty monetary one as well. “I have seen on a number of occasions vessels coming from Eastern Europe that are basically hull plus painting plus some basic outfitting and we have to fix them up afterwards,” he says. “We have spent millions to repair some of these vessels to ensure that the customer get the right quality and performance.”
Those shipbuilders that focus on integrating quality management into the construction process, rather than relegating it to an “after-the-fact” concern, not only ensure a finished vessel that enshrines quality, but also remain competitive. Jan cited Norway’s Kleven Maritime as a recent case-in-point. “They are now doing more of their work in Norway and they are actually competitive, versus shipyards operating in Eastern Europe or China, for example. This just shows that cheap labor can be quite costly in the end.”
The evidence can be found at any yard, and Jan challenges a shipyard's management team to perform a correct quality costing project at their own facility. “Go in, break it up into processes, look at the failure rates for each step, look at the amount of rework required and the consequences that rework means for all the other processes, and so on,” Jan says. “Once you sum this up, I think they would be amazed at what they see.”
Jeffrey Reed is VP of Communications for SPEI International Group, an integrated business development company with expertise in the oil & gas, energy, aviation, automotive, product transportation, construction and medical sectors.
The opinions expressed herein are the author's and not necessarily those of The Maritime Executive.
This entry has been created for information and planning purposes. It is not intended to be, nor should it be substituted for, legal advice, which turns on specific facts.