Praveen Bhaniramka
3D & Immersive Visualization industry veteran, Author of multiple IEEE research papers, Technology consultant, Trainer & Speaker
INTRODUCTION
Shipbuilding is the backbone of global trade with 90% trade done using ships. Naval shipbuilding is also a major driver of defence expenditure globally. In many ways, the Shipbuilding industry is considered a major driver in the economic development of any country.
However, recently, there have been increasing cost pressures on the industry, especially due to the current circumstances. It’s widely accepted that Digital Transformation is a key enabler for improved competitiveness in the industry by reducing costs, improving efficiencies, etc. This is where these various “the next big thing” technologies like AI, IoT & VR/AR are being introduced in the market. I would urge you to look at these technologies as primarily a driving force behind digital transformation of your industry. Along with other new-age technologies, the role of VR & AR as an enabler for Digital Transformation is game-changing as the technology provides unprecedented capabilities to revolutionize shipbuilding. I will talk more about this in a subsequent blog.
Before we talk about Digital Transformation as an enabler for improving cost efficiencies in the industry, let’s identify some of the key reasons for inefficiencies in our industry.
Based on a recent survey of global shipbuilding companies of various sizes, many representatives from various companies unanimously agreed that rework & project delays were a major source of concern for all shipbuilding companies. The following picture is a snapshot of the survey results!
WHAT IS REWORK… AND WHAT IS ITS IMPACT ON YOUR PROJECTS?
In the previous section, we touched upon the need for Digital Transformation in shipbuilding to improve efficiencies. In this section, I will drill down one level deeper into the issue of rework and its impact on project profitability.
So what exactly is rework? Rework includes activities or work that needs to be done more than once, without any change in the order or scope of work.” In other words, Rework is something that doesn’t quite add value to the project. Rework is work that needs to be done for “other reasons” like errors, changes or omissions. Many of us think of rework as “minor” or ‘insignificant” because the actual cost implications of rework might not be known to us or not measured in our organization.
The question is: what is the impact of rework in dollar terms? Turns out that this topic is well studied in the construction industry with various detailed reports on the subject. The specific numbers vary depending on the type & complexity of projects. However, based on surveys & literature reviews conducted over a set of a few hundred projects, it is widely understood that direct cost of rework in construction projects is typically between 4% to 6% of the project cost with a median value of about 5%. So, if you have a $100 Million project, about $5 Million will likely be ‘wasted’ due to rework! Now that’s a HUGE drop in profitability of the project.
To make things worse, for every dollar spent on direct rework costs, there is an additional overhead of about 80% on indirect costs due to organizational overheads and processes involved in the rework. Now, this takes the total rework costs to over 9%! Many of you might find these statistics a little surprising or too high. But, then it’s also well known that 25 to 50% rework is never recorded in most projects!
On top of the direct & indirect costs, rework is also responsible for a delay of almost 10% of the project schedule on an average. To make things worse, there could be additional delay related costs & potential liquidity damages from the owner.
Unfortunately, most of the rework happens towards the end of the project, which makes it even more problematic due to additional dependencies involved with the rework & rework related additional changes. As one of the construction managers said –
“It takes 90% of the time to perform the first 90% of the work and the other 90% of the time to perform the last 10%!”
Now that we know that rework is a major challenge for the industry and a significant drain on cost efficiencies, let’s look at ways of eliminating these inefficiencies. In the next section, I will look at the key reasons for rework in your projects. That analysis will provide a framework for us to start working on eliminating rework.
WHAT ARE THE KEY REASONS FOR REWORK IN YOUR PROJECTS?
As we embark on this journey of Digital Transformation, the first thing that we need is a deeper understanding of the reasons for rework in our projects. For this, we need to ensure that we measure rework and also assign reasons for every instance of rework that we encounter. From our previous discussion, we know that our overall rework costs are 9.07% including direct & indirect costs. But then, what are the key reasons for this extremely high amount of costs?
Here are some industry statistics with an average of 179 projects with 102 heavy industrial projects. The figure below provides the decomposition of overall rework costs (9.07%) across multiple reasons for the rework.
As can be seen from the above, out of the 9.07% rework related costs, design-related issues are almost 3.5% and contribute to the largest cause of rework. This is followed by Owner related issues (2.27%), Constructor issues (1.21%) & finally Vendor issues (0.70%).
These numbers were confirmed by a recent survey of global shipbuilding companies of various sizes. The results were as follows:
Though there are minor variations between these numbers and the above breakups, you can see that the trends are fairly similar. Design related issues are at the top while the contractor, owner & vendor related issues come next.
Note that the above causes of rework include Changes as well as Errors & Omissions. So when I say 3.5% rework is due to Design related issues, this includes Design changes and Design errors & Design omissions.
Contrary to conventional wisdom that most rework is due to Changes, statistics indicate that errors & omissions contribute to a majority of rework!
“Errors & Omissions can be anywhere from 2 times to 9 times the rework caused due to changes.”
With our improved understanding of major reasons for rework & project delays, we are now able to create a digital transformation roadmap to eliminate these inefficiencies. The end result we are all looking for is improved project profitability with better on-time delivery & customer satisfaction.
3 STEPS TO CREATING A DIGITAL TRANSFORMATION ROADMAP FOR YOUR PROJECTS
With our improved understanding of major reasons for rework & project delays, we are now able to create a digital transformation roadmap to eliminate these inefficiencies. The end result we are all looking for is improved project profitability with better on-time delivery & customer satisfaction.
Let’s start creating a roadmap for digital transformation. I suggest a simple 3-step approach to creating a Digital Transformation Roadmap, as shown below:
- First, let’s identify the current processes & challenges that lead to delays & rework in your projects. You might need to think a bit more about some of these issues. However, I am also sure that most of the key reasons & challenges will be top-of-mind for you & possibly well known inside your organization.
- Second, let’s think if there are ways in which we can transform these processes into a digital workflow while accomplishing the same objectives. This is where we might need to do a little more “what if” thinking due to long-established ways of doing things. As part of my blog series, I will give examples from numerous such exercises that you can use as a reference.
- Third, let’s think about the key requirements to make this digital transformation (DX) successful and the steps to be taken for them. Identifying bottlenecks or reasons why digital transformation will fail gives us insight into the requirements and “problems to be solved”.
To make more sense of this approach, let’s look at a case study of a Shipbuilder that I have been working with for over 5 years now. When I first met them & completed this exercise, they highlighted a few key reasons for rework & delays in their projects. Here’s the list of processes & challenges as provided by them:
- Physical inspections & approvals by the owner are time consuming. This blocks our project from moving ahead as fast as we would like to.
- Poor appreciation of the design during inspections leads to errors & omissions. These are unfortunately reported much later in the project, which then results in rework.
- Large number of changes related to equipment accessibility & ergonomics. These are discovered during inspections of the ship construction and require costly design changes, ultimately leading to rework.
- Significant errors occurred during construction due to inconsistent drawings. The production teams were working with older drawings while the design team had updated them during reviews.
- Changes in site conditions leading to delays & errors during construction.
Having done this a large number of times, I created a simple yet powerful framework to help me think through this 3-step process. I have created this simple spreadsheet where I write down the 3 steps mentioned above in the form of a 5-column table as shown below:
Once I had the list of key challenges from the shipbuilder, I went ahead and listed these reasons in the first column of the table, as shown below. We then thought about & listed the challenges with the specific process. For example, physical inspections were time consuming, required travel and various design errors were missed during inspection. We then started thinking about ways in which we could streamline the process with a digital workflow (column 3). For example, is there a way we could involve the client during the design stage & seek approvals digitally. Clearly, this would allow us to identify various issues early in the project and we will be able to avoid expensive rework later. However, this opened up other questions like “would the client be able to appreciate digital design data”, “what kind of a review tool will be intuitive for the client”, etc. We went ahead and listed these questions as requirements for the success of this new process in column 4. Now that we had clarity on the requirements, identifying the next steps and delegating to the various team members was relatively easy. For example, search for digital collaborative design review tools, setting up a conducive environment for client collaboration, etc.
You might also have one or more of the same challenges in your projects that result in painful delays & expensive rework. If so, feel free to use the above list to get started with your digital transformation roadmap! If not, the key takeaway for you is to learn about the approach you need to take when thinking about Digital Transformation and how to go about creating a roadmap for success.
Having done the above exercise over the years with a large number of shipbuilding & other complex projects, I have created a set of best practices for Digital Transformation. These best practices have constantly been successful in reducing rework & project delays, while improving customer experience & satisfaction for a large number of organizations.
3 BEST PRACTICES FOR DIGITAL TRANSFORMATION IN SHIPBUILDING
After having worked on multiple projects and working on the challenges being faced by shipyards, we were able to identify a few Best Practices for Digital Transformation in shipbuilding. We have been able to implement the same or similar approaches at multiple other shipyards to help them reduce rework & fast-track their projects.
The best practices for digital transformation in shipbuilding work with two underlying principles:
- Identifying issues during later phases of the project (production) is always more expensive than issues detected earlier (design)
- Critical need to plan & execute work in a manner that avoids the need for rework
The time & effort involved in planning & validation of design elements is very well worth it. The return on investment of rework reduction is extremely huge for the industry. If we do not work as per the above, we will constantly run into rework & project delays as a way of life in our projects.
“While there never seems to be enough time to do work right the first time, there’s always enough time to do it over again!”
With the above principles in mind, let’s look at the 3 Best Practices for Digital Transformation in shipbuilding as follows:
EARLY & CONTINUOUS STAKEHOLDER INVOLVEMENT
We need to Involve Stakeholders early & continuously during the project. In many projects, stakeholders including owners, operators & production team members get involved at a much later stage. Typical project RFPs include a detailed set of functional requirements that need to be followed. However, there is an extremely long list of non-functional requirements that might not be listed in the RFP but are critical nonetheless for the project’s success. Delayed involvement of stakeholders results in such requirements as well as design-related errors & omissions to be discovered at a much later stage in the project. Due to this, lots of changes are reported much later. We will discuss this in much more detail in a subsequent case study. However, two key actions to address this practice in my experience include:
- Providing an intuitive platform for stakeholder design reviews & validations
- Use of digital tools for design collaboration, comments & feedback
OPERABILITY ASSESSMENT & VALIDATION
Operability aspects of ships are extremely critical for the safety and comfort of the personnel responsible for operating the ship & onboard equipment. Being able to assess operability aspects early on prevents rework by ensuring that operational needs are adequately incorporated during the planning and design phases and not added via changes during ship construction. Ideally, key operating personnel should be assigned to the owner’s project management team to deal with changes and potential changes. Detailed operability assessment ensures that changes do not adversely impact operational needs of the vessel and thus avoid rework to deal with operability problems caused by changes during construction. More on this in a subsequent case study. Two key requirements to consider when coming up with a digital framework for operability assessment & validation system include:
- “Natural” user experience that allow human interaction to replicate
- Multi-user collaboration for assessment & feedback
DOWNSTREAM COMMUNICATION & SITE VALIDATIONS
The previous two best practices help address issues at the design stage itself. However, once production starts, new challenges surface that result in rework & further delays. It becomes paramount that the construction team have accurate information that’s easy to understand & updated with any recent design changes. Furthermore, it’s really important to be able to compare the design data with the current site condition. More on this in a subsequent article. Two key requirements to consider when coming up with a digital framework for downstream communications & site validations include:
- Server based technology with secure & 3D easy data publish mechanism
- “Field-level” easy-to-use applications that provide site-specific validation functionality in a portable rugged form factor
The above 3 are best practices for digital transformation that we have created & implemented over the years. We have been able to replicate them multiple times at multiple shipbuilding projects with revolutionary results. In my subsequent blog, I will try and pick real-world examples of these best practices put into action. In the meantime, feel free to connect with me, if you would like to have a conversation in this regard.
