Dry dockings lag behind other asset-intensive operations

Dry dockings lag behind other asset-intensive operations

Industry benchmarking and assessment firm AP-Networks looks at dry docking practice and performance trends.

Asset Performance Networks has announced the results of the 2015 Dry Docking Performance Benchmarking Study. Looking at dry dockings executed in 2015, the study involved a diverse array of ship management and owner organizations based in Southeast Asia and Europe. Participants provided detailed data on dry docking planning and preparation, execution, and performance outcomes.

AP-Networks initiated the Dry Docking Performance Benchmarking Study to give participants an idea of where they stand in relation to their peers. The collected data, combined with the firm’s industry experience, allowed AP-Networks to take the pulse of the dry docking practice area and place it in context with other asset-intensive practice areas worldwide, such as offshore shutdowns and petrochemical turnarounds. Overall, AP-Networks found the dry docking practice area to be lagging behind similar global practice areas, but with the potential to make substantial gains through the implementation of comprehensive planning practices.

Dry dockings lack direction

Formal approval of the cost estimate is one of the most critical milestones in any asset-intensive operation. Allocating the budget provides direction for the entire event. The maritime industry average for this milestone is 3.5 weeks prior to dry docking. Study participants faired significantly better, approving the cost estimate at 12 weeks prior to dry docking. However, both of these averages are well under the recommended best practice of at least 20 weeks prior to the event.

One would expect that an approved budget is based on a set, or ‘frozen’, scope of work.

Nevertheless, the maritime industry as a whole, and the 2015 study participants in particular, freeze scope very close to the start of dry docking, achieving an average scope freeze date of 3.5 weeks prior to the event.

With these metrics in mind, it’s not hard to understand why study participants were found to be lacking on cost predictability and cost competitiveness, achieving bottom quartile results for both. Participants significantly underran their budgets, yet still ended with non-competitive final costs.

This is a direct result of inadequate cost estimation and target setting.

Another contributor to poor cost performance was the use of inadequate cost contingency practices. AP-Networks found that most participants based their cost contingency allowances only on historical figures and experience. As a best case scenario, some took the age of the ship and its current reliability into consideration.

In-depth cost studies conducted by AP-Networks have consistently shown that organisations that define, manage, and monitor three different cost contingency allowances—emerging work, discovery work, and estimation errors—exhibit stronger cost predictability.

Conservative scope estimates endanger competitive yard schedules

One major issue AP-Networks uncovered was an overestimation of hull work. The maritime industry as a whole overestimates hull work by 17%. Study participants were even more conservative, estimating 59 percent more hull work than was actually required. For those cases where hull work is the critical path, overestimation directly impacts the schedule.

Throughout a diverse array of industries, AP-Networks has consistently found that it is extremely difficult to realise schedule benefits from a reduction in scope. Once the schedule is set, it is not typically underrun—regardless of scope reduction. A better strategy, therefore, is to develop a greater understanding of hull work requirements, and to set a more competitive schedule from the outset.

It all comes down to planning

Participants took a long time to perform dry dockings, and spent a lot of money in the process. Reducing schedule duration and dry docking costs will require a concerted effort from both ship owners and managers, and a more comprehensive approach to planning and preparation.

These changes are well within the capability of the maritime industry, as organisations are well-positioned to make large strides given the depth of employee experience. This is an evolution AP-Networks has witnessed in other industries, especially when executives embrace the need for change. For the maritime industry, the immediate path forward is clear:

  • First, planning and preparation need to begin earlier, with a greater emphasis placed on cost and schedule competitiveness. This will help to avoid the expensive decision making that inevitably occurs amid pressure from the yard contractor.
  • Second, a greater emphasis must be placed on improving the scope selection process. By formalizing scope criteria, as well as scope addition and deletion processes, and by instituting a hard scope freeze date, organizations can develop a robust scope selection process. Instituting a formal Risk Based Scope Review process, based on the formalised scope criteria, will help strengthen this scope selection process.

A mature industry is defined by the use of institutionalised work processes. By emphasizing process adherence and performance measurement (e.g. external benchmarking), organisations can refine their methodology, track their results, and build a repository of knowledge and experience. With a significant amount of money at stake, this is a path maritime executives should embrace.

AP-Networks’ full industry report can be obtained by clicking here.

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2 Comments

  1. Andrew Craig-Bennett
    August 2, 2016 at 4:33 pm

    Now that’s a remarkably useful study!

    Unfortunately, most superintendents retain the bottom drawer in their desks… the idea of benchmarking a dry docking is anathema to them.

    1. Leon van Hout
      August 3, 2016 at 9:07 am

      Thanks Andrew.

      The companies participating in the study received a much more detail report on their dockings, with clear actionable recommendation to improve their Dry Docking performance.

      As these got presented to the top management of these organization I have better hopes for staying out of the bottom drawer.

      If you would like to know more, just contact me.