SHIPBUILDING PROJECTS FROM A SHIPYARD'S PERSPECTIVE AND THE ROLE OF THE BANK IN THE PROJECT LIFETIME

Abstract

The history of maritime navigation and sea trade relates to the very beginning of human civilisation. On the one hand, the ship as a means of transport, given its size (dimensions and capacity) as well as its technical and technological characteristics, and on the other hand, the sea as a shipping route, represent the cheapest transportation of large amounts of goods, connecting different harbours all over the world. The shipbuilding industry is an economic and industrial activity that includes shipbuilding, ship equipping and ship repairing. It is also a project driven enterprise because it exercises multiproject business i.e. it carries out multiple projects in a determined time period. Shipping projects are realised under the supervision of the head of projects or project manager. The phases of launching, realisation and guarantee of shipping projects take place during what in the shipbuilding industry is called project lifetime (or time cycle). Project lifetime can be defined as a period during which the project produces profits and creates costs. From a shipyard's perspective, a quality project lifetime demands a project approach. This kind of an approach guarantees that the project will be realised within a given time period and with the use of given resources, thus achieving the objective and the purpose of the project. [PUBLICATION ABSTRACT]

Headnote

The history of maritime navigation and sea trade relates to the very beginning of human civilisation. On the one hand, the ship as a means of transport, given its size (dimensions and capacity) as well as its technical and technological characteristics, and on the other hand, the sea as a shipping route, represent the cheapest transportation of large amounts of goods, connecting different harbours all over the world. The shipbuilding industry is an economic and industrial activity that includes shipbuilding, ship equipping and ship repairing. It is also a project driven enterprise because it exercises multiproject business i.e. it carries out multiple projects in a determined time period. Shipping projects are realised under the supervision of the head of projects or project manager. The phases of launching, realisation and guarantee of shipping projects take place during what in the shipbuilding industry is called project lifetime (or time cycle). Project lifetime can be defined as a period during which the project produces profits and creates costs. From a shipyard's perspective, a quality project lifetime demands a project approach. This kind of an approach guarantees that the project will be realised within a given time period and with the use of given resources, thus achieving the objective and the purpose of the project.

1. INTRODUCTION

When considered from the contractor's perspective, that is to say from the perspective of shipyards or project production or engineering companies, shipping projects are complex. The purpose of this paper is to describe shipping projects from the shipyard's perspective, i.e. the perspective of a company with a project driven production. The paper also aims at explaining the importance of the project lifetime, as well as the influence of the bank on different project phases.

2. HISTORICAL DEVELOPMENT OF SHIPBUILDING

The history of maritime navigation and trade relates to the very beginning of human civilisation. Archaeological excavations in Egypt show that between 4000 and 3000 BC on the river Nile there were boats made of papyrus, reed and wood which were moved by oars and sails and were big enough to be considered ships. Egyptian shipbuilding was inherited by the Phoenicians and then Greeks and Romans. In the ancient world, the centre of shipbuilding was situated in the Mediterranean because of the favourable climate conditions, whereas in the Middle Ages, the Northern European region takes over the primacy. Until the 8th century, shipbuilding consists mostly of rowing and sailing boats.

Revolutionary changes in shipbuilding take place at the beginning of the 8th century and at the end of the 9th century thanks to the shift from the wooden to the steel ship hull and the use of steam power. The following improvement of ship engines enabled an increase in ship dimensions and speed and it allowed the ships to become specialised for different purposes (Tehnicka enciklopedija, 1976). As a consequence of this kind of development course (Dundovic, 2003): in 1807, the first steam boat is constructed by Robert Fulton with the help of James Watt. Steam boat "Clermont" was also the first mechanically powered means of transport; in 1819, the first sail and steam boat "Savannah" crossed the Atlantic Ocean; in 1887, the first ship powered by a steam-turbine was constructed; in 1912, the first diesel-powered ship was constructed; in 1951, the first ship powered by a gas-turbine was constructed and in 1955, the first nuclear-powered vessel was constructed - it was the submarine "Nautilus".

3. THE IMPORTANCE OF SHIPPING AND SHIPBUILDING

The sea (covers 70.8% of the total Earth's surface) is not only a large but also a free transport route that does not demand expensive infrastructure investments. This characteristic makes maritime transport highly economic. In maritime shipping, shipowners bear most activities. The term shipowner, used to determine an independant economic organization in sea transport, has been taken from the maritime law in which it defines a phisical or a legal person who uses a ship as a means of maritime transport of people and goods (Dundovic. 2003).

On the one hand, the ship as a means of transport, given its size (dimensions and capacity) as well as its technical and technological characteristics, and on the other hand, the sea as a shipping route, represent the cheapest transportation of large amounts of goods, connecting different harbours all over the world. This is why today the shipping business plays a significant role not only in the transport of different raw materials, semi-finished products, products and in passenger transport, but it also enhances the standard of living (cruise shipping). The shipbuilding industry is an economic and industrial activity that includes shipbuilding, ship equipping and ship repairing. Without shipbuilding there would be no ships, without ships there would be no global maritime transport and without maritime transport there would be no harbours and no international exchange of goods which is the very basis of the economic and social development of human civilization. The main characteristic of the shipbuilding industry lies in the fact that a ship is, in fact, a synthesis of a variety of products, semi-finished products and raw materials that are produced by several different industries. The shipyard's task is to process the obtained raw materials and semi-finished products, or in certain cases, put finishing touches or assemble the pieces together or just install them in order to create the final product - the ship (Tehnicka enciklopedija, 1976). There are very few industrial branches that affect, directly or indirectly, the living conditions in a way shipbuilding does (Ceric & Turina, 1973).

Shipbuilding as a subsystem of the maritime and industrial system has a significant part that can be seen from the following facts (Mrnjavac, 1998):

* it supplies the world trade fleet with new means of transport,

* it supplies the navy with new vessels,

* it builds business facilities and thus enables the development of maritime business activities and business important for maritime transport,

* it affects the supply and demand of cargo holds and the freight transportation prices,

* it affects world prices of ships, standard delivery deadlines and terms of payment,

* it benefits the development of the metallurgical industry and other industrial branches,

* it builds floating units, fishing fleet vessels, sea and sub sea research vessels, yachts, speed boats and other vessels,

* it affects the national balance of payments through the exports of ships and imports of reproduction material,

* it contracts and subcontracts a large number of workers in shipyards,

* it affects international bilateral agreements, etc.

4. SHIPPING PROJECTS AND EXTERNAL SURROUNDINGS

There are multiple interests and connections between economic subjects and societies on the one hand, and shipping projects on the other, as shown in Figure 1.

5. DETERMINING SHIPPING PROJECT OBJECTIVES

When determining shipping project objectives, the aspects represented by Figure 2 are to be taken into consideration. These aspects are considered in the process of determining and realization of shipping projects as well as when setting the objectives. The purpose of the project determines the priority of one or several aspects when deciding the objectives.

Therefore, in the process of realization, an optimum must be reached among other aspects (for instance, in the construction of gas tankers, the ecological factor has the priority although there are also other important technical, technological and economic aspects).

6. TYPES OF SHIPPING PROJECTS AND SHIPYARDS

Shipping is a means of business that is used for: goods and passenger transport, military operations at sea, special work carried out at sea and rivers, and different navigation related tasks. References show different classifications of ships. In order to understand better the problems regarding projects discussed in this paper, we opted for a purpose-based classification. According to purpose, the merchant ships can be classified into several categories: (a) freighters - for solid cargo, i.e. tramp ships used for ore transportation, etc.; for liquid cargo, i.e. tankers used for the transport of oil and petroleum derivates, wine, salad-oil, drinking water, chemicals, liquefied gas, etc.; for special cargo - refrigerator ships used for transporting meat and fruit, live stock, etc.; (b) passenger ships and (c) passenger-freight ships. The classification of other shipping projects also includes (Enciklopedija leksikografskog zavoda, 1996) warships (i.e. battle ships, including aircraft carriers, cruisers, destroyers, mine-layers, mine-sweepers, submarines, patrol boats, torpedo boats, landing crafts, etc. and support ships, such as the supply ships, factory ships, hospital ships, training ships, troopships, etc.) and ships for special purposes (ice breakers, cable layers, lighthouse suppliers, research, meteorology, pilot boats, fishing, light-houses, dredgers, etc.).

Shipbuilding is a project driven enterprise because it exercises multiproject business. It carries out several shipping projects in a determined time period; for instance, in one business year as shown in Figure 3. Shipping projects are carried out under the supervision of the head of project or project manager. He is assisted by the project office, i.e. support team that performs specific tasks for all project managers. This kind of a production demands optimum planning and distribution of performance possibilities such as workers, subcontractors, slipways, machinery, transportation, financing, payment, etc.

7. SHIPPING PROJECT

A shipping project is a single programme defined project, considering the fact that it is found in certain shipyards' and purchasers' development programmes. Final purpose and object aims are already determined in the phase of project launching, before the realization itself. The purpose is to reach tactical objectives of the shipyard's development programme through the project object realization as well as to reach the purchaser's objectives through the realization of the project object exploitation purpose.

8. PHASES OF A SHIPPING PROJECT FROM A SHIPYARD'S PERSPECTIVE

From a shipyard's perspective, i.e. the perspective of a project driven company, shipping projects consist of the launching phase (offer procedure), the project realization phase (laying the keel of a new ship, launching of a vessel, equipment, test navigation, handover) and the guarantee phase.

Offer procedure consists of the following main phases: inquiry analysis - tender, decision to make an offer, preparations for offer elaboration, preparation of offer elements, preparation of option offer elements, first estimates and price of offer, offer merging, preparation of offer options, offer delivery, coordination in case of close selection, final offer, signing of a contract (Hauc 2002), accepted realization study1. Realization consists of: signed offer, preparations for project realization, beginning of project realization preparations, launching of project realization, monitoring of project sub-phases, project conclusion and launching of guarantee phase (Hauc 2002). Guarantee includes: project conclusion, project realization analysis and guarantee conditions preparation, accepting guarantee conditions and conclusion of guarantee (this is also the conclusion of the overall project).

9. SHIPPING PROJECT LIFETIME FROM A SHIPYARD'S PERSPECTIVE

From a shipyard's perspective, i.e. the perspective of a project driven production company, the launching, realization and guarantee phase of a shipping project all take place during a determined period that is called shipping project lifetime (or time cycle). Shipping project lifetime could be defined as a period of time during which the shipping project produces profits and creates costs. From a shipyard's perspective, shipping project lifetime can be seen as a project having direct economic effects as shown in Figure 4. Once project launching preparations, elaboration and acceptance of the realization study take place, shipping project realization may commence. The significant milestones within shipping project lifetime are:

* During the launching of the shipping project tpp, costs Sp are created in a determined point TN1 and objective Cpp is reached - launching of the project and profit making through advanced payment received from the purchaser of the shipping project (after the signed contract comes into force),

* In the subphase during which the keel of a new ship is laid - shipping project realization phase tpk costs Spk are created in the point TN2 and objective Cpk is reached - the keel is laid and planned profit is achieved (after the first verification),

* During the subphase of vessel launching - shipping project realization phase tpr costs Spr are created in the point TN3 and objective Cpr is reached - the vessel is launched and planned profit is achieved (after the second verification),

* During the subphase of vessel equipping - shipping project realization phase tob costs Sob are created in the point TN4 and objective Cob is reached - after a successful test drive, planned profits are achieved (following the overtaking of the ship). At this point, from the shipyard's perspective, a project driven production perspective, the shipping project has achieved its object aim,

* During the guarantee phase tg, costs Sg are created in the point TZP - conclusion of the shipping project - and the objective CZP and the planned profits are reached - after the fulfillment of guarantee conditions. At this point, from the shipyard's perspective - a project driven production perspective - the project has achieved its purpose aim.

Shipping project realization time is, thus, as follows:

ti = tpk + tpr + tob,

tpk = laying of the keel of a new ship,

tpr = launching of a vessel,

tob = ship equipping.

Shipping project lifetime (time cycle) equals:

Tp = tpp + ti + tg,

tpp = shipping project launching time,

ti = shipping project realization time,

tg = shipping project guarantee time

Duration of the shipping project lifetime can be affected by a number of factors and those most common are:

* duration of project output demand - restricting project lifetime is fundamental since economic effectiveness demands only the production of the output requested by the consumers,

* speed of technical-technological progress - the greater the speed, the shorter the project lifetime, in order for the company to introduce more productive technologies through new projects and thus reinforce its market competitiveness,

* possibility of input acquisition - can restrict project lifetime,

* possibility of investing capital in alternative projects - company (ship-owner) may decide to shorten the project lifetime because of the often changes in the type of production in order to consistently exceed the average profits.

From a shipyard's perspective, a quality defined shipping project lifetime demands a project approach. This kind of an approach guarantees that the project will be realized within a given time period and with the use of given resources, thus achieving the objective and purpose aims of the project. In this way, the shipyard gains competitive advantage, economic stability and development prospect.

10. ROLE OF THE BANK IN THE SHIPPING PROJECT

The bank is an independent financial organization in which the founders invest funds in the founding fund of the bank to achieve shared interests and ensure financial means for the realization, expansion and improvement of their activities, for the achievement of other shared interests, as well as for carrying out financial, credit and other banking activities (Bistricic, 1996). The bank primarily exercises an economic and financial influence on the shipping project.

* Within the shipping project launching phase, it:

* assesses the shipyard's solvency and credit rating,

* analyses the contract and suggests possible ways of financing a shipyard during the shipping project lifetime,

* evaluates the realization study from an economic and financial aspect,

* mortgages a ship under construction.

* Within the shipping project launching and realization phase, it:

* grants credits, guarantees, letters of credit, executes payments on the shipyard's request, etc.,

* compares achieved effects with those planned in the realization study (or annual plan).

* Within the shipping project guarantee phase, it:

* approves guarantees, letters of credit, executes payments, etc. on the shipyard's request.

Besides the above-cited shipping projects, the bank also oversees shipyard investment projects, repair projects, etc.

The bank monitors shipping projects and other projects carried out in shipyards in order to enhance its financial potential as well as to lay the foundations for the financial monitoring of the realization of the most important projects for its customers and projects for its future business system as shown in Figure 5. Funds invested in these projects are repaid in time, thus having multiple effects on deposit and credit and other bank activities.

11. CONCLUSION

Shipping projects are complex projects when considered from a technical, technological, organizational, economic, ecological and legal aspect. This is why, from a shipyard's perspective, i.e. perspective of a project driven production company, a quality project lifetime calls for a project approach. This kind of an approach guarantees that the project will be realized within a given time period and with the use of given resources, thus achieving the objective and purpose aims of the project. The bank is to timely fulfill its financial obligations within different phases of the project lifetime.

Sidebar

BRODOGRAÐEVNI PROJEKTI IZ PERSPEKTIVE BRODOGRADILISTA I ULOGA BANKE U ZIVOTNOM VIJEKU PROJEKTA

Sazetak

Povijest pomorske navigacije i pomorske trgovine se veze uz same pocetke ljudske civilizacije. S jedne strane se nalazi brod kao transportno sredstvo, uz svoju velicinu (dimenzije i kapacitet), tehnicke i tehnoloske karakteristike, dok se, s druge strane, pojavljuje more kao spedicijski put, koji predstavlja najjeftiniji nacin transporta velikih kolicina dobara, spajanjem razlicitih luka cijeloga svijeta. Brodogradnja je ekonomska i industrijska aktivnost koja ukljucuje gradnju, opremanje i popravljanje brodova. To je kompanija koja funkcionira na principu projekata zato sto je to multiprojektan posao tj. provodi vise projekata u odreðenom vremenskom periodu. Projekti brodske izgradnje se realiziraju pod nadzorom projektnog menadzera. Faze lansiranja, realizacije i garantiranja projekta brodske izgradnje, koje se odvijaju u brodograðevnoj industriji, nazivaju se zivotnim vijekom projekta (ili vremenskim ciklusom). zivotni vijek projekta definira se kao vijek projekta tokom kojeg projekt stvara profit i troskove. Iz perspektive brodogradilista, kvalitetan zivotni vijek projekta zahtijeva projektni pristup. Takav pristup garantira da ce projekt biti realiziran u danom vremenskom periodu, te da ce, uz koristenje danih resursa, se ispuniti ciljevi i svrha projekta.

Footnote

1Realization study is a document that contains analytical-documentary basis for the most acceptable way to realize a shipping project.

References

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