Manufacturing Strategy for Austal Ships Pty Limited

Table of Contents

KEY 2

MANUFACTURING STRATEGY DOCUMENT

STRATEGIC BUSINESS UNIT - AUSTAL SHIPS PTY LTD
AL'S PROFILE
ASPL ’ S PROFILE
MARKET TRENDS AND COMPETITORS
ASPL'S PRODUCTS
ASPL'S CURRENT STRATEGY

AUSTAL SHIPS PTY LTD'S MANUFACTURING STRATEGY
COMPANY OBJECTIVES ANDMARKETING STRATEGY
ORDER WINNERS AND ORDER QUALIFIERS
MANUFACTURING STRATEGY

PROCESS CHOICE

INFRASTRUCTURE

COMPARISON BETWEEN PRESENT AND PROPOSED STRATEGIES

IMPLEMENTATION/COMMUNICATION ISSUES

STRATEGY EVALUATION MEASURES

STRATEGY TO IMPLEMENT IN CHANGING ENVIRONMENT

REFERENCES

KEY

AL - Austal Limited, ASPL - Austal Ships Pty Limited, AULLC - Austal USA Limited Liability Company, APPL - Austal Philippines Pty Limited, MSE - Manufacturing Systems Engineering, QAC - Quality Assurance and Control, MPCS - Manufacturing, Planning and Control Systems, CAE - Computer Aided Engineering, CAM - Computer Aided Manufacturing, CAD - Computer Aided Design, OHSMS - Organisational Health and Safety Management Systems, QMS - Quality Management System, EMS - Environmental Management System, OW - Order Winner, OQ - Order Qualifier, PDCA - Plan Do Check Act, ROI - Return on Investment, KPI - Key Performance Indicators, THM - Terry Hill Model, MSD - Manufacturing Strategy Document, ROCE - Return on Capital Employed, OHSAS - Occupational Health and Safety Advisory Services, FY - Financial Year, R&D - Research and Development, JIT - Just In Time, SBU - Strategy Business Unit, USA - United States of America

MANUFACTURING STRATEGY DOCUMENT

Austal Ships Pty Limited (ASPL) is a manufacturing company based in Henderson, Western Australia in Australia. It is a subsidiary of Austal Limited (AL) that happens to be the largest defence contractor in Australia and one of the largest worldwide. It is one of the shipbuilding and repairing sites. It has estimated staff strength of 519 employees, according to EBSCO company information.

In this report, the corporate objectives of Austal Limited and ASPL’s strategy are evaluated according to their position in the market, the product range, sector trends, company’s competition and its customers. ASPL’s order winners and order qualifiers are identified and used to drive the manufacturing strategy. The proposed manufacturing strategy would be designed using the Terry Hill framework, showing decisions made on the process choice and infrastructure, as shown in table. 1.

The proposed manufacturing strategy will later be compared to the deduced existing strategy of ASPL to indicate the benefits of the former over the latter. The implementation and communication issues of the proposed manufacturing strategy are addressed with relevant evaluation measure indicators proposed and discussed. Last, the analyses on the methods and tools to be used to ensure that the proposed strategy remains current within a dynamic environment.

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STRATEGIC BUSINESS UNIT - AUSTAL SHIPS PTY LTD

AL'S PROFILE

Austal Limited who is a global ship builder, defence prime contractor and maritime technology partner of choice: designing, constructing and supporting revolutionary defence and commercial vessels for the world’s leading operators, (Austal.com, 2016). John Rothwell incorporated AL in 1987 with ship building operations commencing in 1988 at Henderson, Australia. In 1992, second ship building site on the Jervoise Bay Waterfront was acquired with expansions of operations in mid - 1990s to the Mediterranean and Asia - Pacific. Austal became public traded on the Australian Stock Exchange in 1998 with great successes through the acquisitions of Image Marine and Oceanfast and the establishment of Austal USA LLC. AL boasts of a number of subsidiaries cut across various businesses with the important ones indicated below:

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Fig. 1: Structure of Austal Limited with SBU

CEO Andrew Bellamy said these results reflected how Austal had evolved in recent years to deliver major defence vessel programmes also benefitted from a weakening Australian dollar. Austal performed well on US Joint High Speed Vessel contract, and were able to generate strong earnings from Australian operations through efficiency improvements on the Cape Class Patrol Boat programme. This offset, the anticipated margin pressure on Littoral Combat Ship 6, which was the result of the lack of design maturity on first vessel as prime contractor, (Reynolds, 2015).

The strategic initiatives according to the same report are as follows:

- Sustain the business by securing further contracts for existing ship designs.
- Strengthen the business through cost and productivity levers.
- Diversify the business by increasing annuity style revenues from sustainment work.
- Scale the business by pursuing industry consolidation in Australia

From the initiatives discussed above, with the main objective of increasing the shareholders return on every dollar invested, increased marginal growth, revenue and cash flow hence better results for the investors. This growth in revenue through reduction in operational costs and increased efficiency, cash would be generated to invest in other works needed to be carried out by the company such as acquisitions which would increase revenue through sale and would help in growing margin due to low or no rivalry in services rendered.

ASPL’S PROFILE

ASPL is shipbuilding and repairing site that started operation in 1988 at Henderson, Australia. It contributed 15% approximately of the total AL’s revenue in 2015, which was due to stronger shipbuilding margins in Australia and one-off non-cash foreign exchange gains, (Investor.austal.com, 2015). The company attributed its rising fortunes to multiple vessel programmes, including major navy defence and patrol boat programmes. Although the growth industry in border controls combatting people smuggling in Australia was also a factor. It also had an increase in EBIT of 90.4% in FY2015 from FY2014. This is a strategic element towards achieving the company’s objective due to the amount of money raised through sales. This case study would focus on the ship building aspect, once that ASPL, a manufacturing site of aluminium vessels sited in Henderson, Australia, with an estimated 519 employees, (EBSCO, 2016) would be analysed.

Austal’s sales team engaged with potential customers early, working with them to develop a thorough understanding of their unique needs and requirements. They convert capability requirements, as well as intuitions they develop in the process, into a 200-page specification accompanied by a General Arrangement (GA). A GA is a computer-aided drawing by a naval architect. Beyond hull, deck and superstructure design, the GA defines space allocation to ensure that engineering and customer requirements are recognized. If a customer were to order the vessel, another set of engineers would then produce a drawing plan that was used on the shop floor, which would based on the specification and GA. The entire process requires an eight-stage gate process, and as each stage progressed, more investment and design would be put in.

MARKET TRENDS AND COMPETITORS

The existence of global companies who had been in shipbuilding before ASPL came into being brought in eminent competition. The delivery statistics for several shipbuilding between years 1997 to 2001 are as shown below:

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Fig. 2: Market Share Statistics of Austal and competitors, (Shih, Pierson and Lau, 2013).

According to competitors’ review by sector and similarity in the geographic area, the main competitiveness with ASPL is in the aftermarket segment in the Defence Industry in USA for Damen Shipyards Group and in Patrol Vessels for INCAT in Australia. From the official website of Austal, some major competitors present include NQEA Pty Ltd., Richardson Devine Marine Constructions Pty Ltd and Strategic Marine Pty Ltd which is as a result of emerging markets through substantial market demand of ships.

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Fig. 3: Different ship hull designs as used by various ship building companies,

(Shih, Pierson and Lau, 2013).

Austal’s design capabilities, especially the “seakeeping” qualities of its boats, the knowledge and capabilities of its sales force in translating customer needs into product realizations, and the inherent advantages that aluminium vessels possessed when serving high volume point-to-point routes, (Shih, Pierson and Lau, 2013). This was what drove Austal right to the top in the shipbuilding sector.

ASPL'S PRODUCTS

ASPL deals with the design and construction of Naval Vessels and Patrol Boats and repairs, (EBSCO, 2016). With the manufacture plan used as make to order, the customer whoever it may be decides the shape, size and accessories the vessel would possess. ASPL ensures it adheres to require building standards. Below are examples of projects completed:

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