Improving the yard start-up process at Damen Shipyards

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the Netherlands

Phone +31 (0)15-2782889

Fax +31 (0)15-2781397

www.mtt.tudelft.nl

FACULTY OF TECHNOLGY, POLICY & MANAGEMENT Department of Transportation and Logistics Jaffalaan 5

2628BX Delft The Netherlands

Specialization Transport Infrastructure & Logistics (TIL) Course: TIL 5060

Assignment type: Master Thesis Credit points (EC): 30

Report Number: 2013.TIL.7790 Confidential: Yes until 01.01.2018

Title: Improving the yard start-up process at Damen Shipyards Author: J.T.F. Huls (Jonathan)

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Thesis Report Jonathan Huls Page ii Student Data

Name J.T.F.Huls (Jonathan)

Mail addresses: Jonathanhuls@gmail.com

Phone: +31 (0) 6 41273136

University: Delft University of Technology

Graduation Committee TU Delft:

Chairman: Prof.ir. J.C. Rijsenbrij J.C.Rijsenbrij@tudelft.nl Committee Member: (3ME) Dr.ir. H.P.M.Veeke H.P.M.Veeke@tudelft.nl Committee Member: (TPM) Dr. J.C. van Ham J.C.vanHam@tudelft.nl

Damen Shipyards:

External Committee Members NDSQ: Director Production

H. Slings hslings@ndsq.com.qa

NDSQ: Manager Production Support

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Thesis Report Jonathan Huls Page iii

Figure 17: The ownership position of the joint venture and its operational relations. 23 Figure 18: Involved parties in the development process of the yard. 24 Figure 19: Policy development cycle when managing uncertainty by (Walker, 2003) 25 Figure 20: The Innovation model according to (In't Veld, 1999) 27 Figure 21: Support structure during Startup of NDSQ provided in preparative phase

management presentation. 27

Figure 22: initial milestone planning of NDSQ. 28

Figure 23: Schematic example of how two start-up teams can work complementary 30 Figure 24: This Timeline shows an example of how issues and achievement milestones are spread out over time during the startup phase of the yard NDSQ in Qatar. 31

Figure 25: First the LOR Barge, then Tugs, Naval corvettes and later Private yachts demand a dynamic production organization and support structure. 32

Figure 26: NDSQ visualized as an adaptive organization. The figure comes from a

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Thesis Report Jonathan Huls Page vii Figure 27: Project planning of the first operational production years of NDSQ. 34 Figure 28: The Department Production Support formulated a consistent structure to divide the production activities. All steps as a whole lead to a finished vessel. 35

Figure 29: Example of the yard cost level method currently used to manage the yard order books in terms of production hours demand and related production costs . 40

Figure 30: The first series of vessels estimated versus actual production hours. 41 Figure 31: Aggregate optimal shipbuilding production cost structure for new Tanker

vessels calculated by Fjafandjel. 42

Figure 32: Impression of general Qatar production guest laborer accommodation.

Source: Google earth screenshot 25-5-2012. 47

Figure 33: There is much information needed on vertical en horizontal HR flows and

salary scales by the HR department. 49

Figure 34: An example story-line for development of a shipyard based on observations

of NDSQ in this research. 54

Figure 35: The Innovation model according to (In't Veld, 1999) 55 Figure 36: Formulated NDSQ objects in the Joint venture agreement contract. 64 Figure 37: Initial formulated Key Performance Indicators for NDSQ according to ISO

conform Quality Management system. 65

Figure 38: Estimated performances sensitivity of the envisioned shipyard calculated by

First Marine Feasibility report 2007. 66

Figure 39: Qatar National Vision and supporting middle term execution plans. 70 Figure 40: Sources of uncertainty during the yard startup process and the steady state

production. 71

Figure 41: Issues that need structural solutions within the business environment.

(Jan-Wim Dekkers) 72

Figure 42: Main Functional Positions NDSQ in 2012. 74

Figure 43: Example Spool Drawing 75

Figure 44: Relation Project management – Production 75

Figure 45: Production progress measurement report example for NDSQ. 76 Figure 46: Cooperation complexity (Twynstra Gudde) of the yard start-up process. It shows how many factors play a role when designing, developing and operating a shipyard. 78

Figure 47: Function model for organization-structure research by (Lekkerkerk, 2012). 84 Figure 48: Matrix organization Adopted from Damen Shipyards Gorinchem Quality Assurance and Environmental management manual. Last review date: 28 April 2011

Document Version: 0.802 84

Figure 49: Steady state model. 85

Figure 50: The innovation model by (In't Veld, 1999) 86

Figure 51: Concept generic yard control model for Damen (Bronsing, 2012) 87 Figure 52: A generic control model that overarches the organization on a low level of

detail. 88

Figure 53: The functional production structure on the operational level is complex.

Taken from the Project Organization Structure Manual 89

Figure 54: The process part of the Yard System model: The ship production process of

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Thesis Report Jonathan Huls Page viii

List of definitions

Innovation

Entails the project based development and realization of technical and organizational or so-cial novelties and the policy based control of that.

Improvement

Is something everyone should always do and is sometimes renewing but the execution is not project based, stays within a department and doesn’t require formal approval.

Implementation

Is the realization of an application, or execution of a plan, idea, model, design, specification, standard, algorithm, or policy.

Strategy

What do we want to achieve and how are we going to do that. Shipyard

Place where marine vessels (ships) are manufactured and assembled. Shipyard development process

The process over time in which a shipyard is realized from idea to actual operational shipyard in cooperation with partners and stakeholders.

Damen Yard Startup

The efforts done by Damen employees to contribute to a shipyard development process with the aim to initiate operational production of that shipyard according to requirements.

System modeling

The interdisciplinary study of the use of models to conceptualize and construct systems. Function model,

Also called an activity model or process model, is a graphical representation of an enter-prise's function within a defined scope. The purposes of the function model are to describe the functions and processes, assist with discovery of information needs, help identify oppor-tunities, and establish a basis for determining product and service costs.

Engineering

Is the application of scientific, economic, social, and practical knowledge, in order to design, build, and maintain structures, machines, devices, systems, materials and processes.

Knowledge management

A range of strategies and practices used in an organization to identify, create, represent, dis-tribute, and enable adoption of insights and experiences. Such insights and experiences com-prise knowledge, either embodied in individuals or embedded in organizations as processes or practices.

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Thesis Report Jonathan Huls Page ix List of abbreviations DSGr NDSQ DSGa DSGo DSXx QP NKOM JVA KPI CGT ERP HR QA&E IDK ERP (I)

Damen Shipyards Group Nakilat Damen Shipyard Qatar Damen Shipyards Galatz

Damen Shipyards Gorinchem (entire organization including building yards) The collection or one unidentified building yard owned by Damen Shipyards. Qatar Petroleum

Nakilat Keppel Offshore Marine Joint Venture Agreement Key Performance Indicators Compensated Gross Tonnage Enterprise Resource Planning Human Resources

Quality Assurance & Enhancement

Integraal Dekkende Kostprijs (Dutch for Integral Tender) Enterprise resource planning

ERP (II) Enterprise resource planning with expanded functionality

Preface

This report is the product of a final research to conclude my Transport Infrastructure and Logistics (TIL) master education program at Delft University of Technology. It has been a challenging and very educative task to prepare myself for the professional working environ-ment. I am grateful for the chance Damen Shipyards has given me to see how setting up a large scale project in reality looks like and what differences there are with the steady work environment of college classes. I would also like to thank my thesis commission for their provision of educational feedback and their strong support to continue and finalize the as-signment. Without them I would not have been able to complete this work. Last but not least I would like to thank my family who has always been supportive. I find this inspiring to continue enabling younger generations to educate themselves to gain greater insight into our world as it develops.

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Thesis Report Jonathan Huls Page xi

Summary

Background and research question

To finalize the master of Transport, Infrastructure and Logistics, a 30 ECTS research project was done by exploring a complex problem in this field. This document re-ports on the research executed by Jonathan Huls with the aim to “Make recommen-dations to improve the yard start-up process at Damen Shipyards”. The research in-cludes observations and an analysis of the yard startup process of one of the most recent and largest yard development projects in which Damen is involved in Qatar. It included an internship on the yard location to be able to observe the actual rapid de-velopment of the shipyard NDSQ.

The research has tried to answer the question:

“What can be learned from NDSQ’s yard start-up to improve the next new Damen yard start-up?”

Observed problems

To answer this question the main problems during the startup of NDSQ where identified using a systems thinking approach. The shipyard was viewed as a system which has certain functions like the production of completed vessels according to requirements with a prescribed process.

The following four problems were found to be most important:

 The unclear intended business model, starting point and end result of Damen related

to the development of a shipyard. If this information lacks it cannot be used to design and control the yard development process and its intermediate deliverables.

 The lack of a formal method to control the yard development process in cooperation

with external and internal stakeholders. This yard start-up process consisted of a cha-otic problem solving process with un-transparent goals and performance measures. This has given room for political behavior of stakeholders and blurred accountability for the quality of the final system.

 The absence of a detailed shared model of the shipbuilding process to show the new

production organization how it is supposed to function.

 The lack of a large amount of information that the project team needed to make

consistent policy and informed decisions during the design and set-up of the new production organization.

Considering the expressed ambition to double turnover it seems the Damen company currently prioritizes growth over organizational learning and improvement. The focus on opportunistic growth goes at the cost of organizational improvement and can cre-ate risks for the executing social systems during new projects based on poor funda-mental methods.

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Thesis Report Jonathan Huls Page xii

Solutions proposed to reduce the problems.

The use of clear fundamental work methods can help to minimize the identified risks and improve the results. To work on solutions and avoid these problems in a next yard start-up process it is advised to the Damen company to:

 Structure the yard development process towards the desired yard system design and

base this on a consistent company vision on the functions of the new yard.

 Control the yard development process regarded as an innovation-process and form

durable sets of agreements between parties that are accountable for quality of the re-sult.

 Model the shipbuilding process including flows of information and material as the

central process in the yard system model.

 Recognize the specified fundamental internal company problems that complicate the

start-up of new yards and provide a yard policy as recommended on a number of sub-jects.

Conclusions and recommendations.

The report includes observations of important aspects and phases of the development process of the NDSQ shipyard as a system. To conclude it was advised to further develop and implement a cohesive start-up approach for new yards. The observations have been used to create the basic framework of such a proposed approach that exists of the solutions and a possible method to implement this. The implementation can have significant advantages such as improved risk- and cost management and im-provement of experienced stress levels of employees during a yard-startup. Consider-ing the potential benefits it seems such an approach may create overall return on in-vestment Further research on the implementation of promising parts of this approach is therefore recommended. In the appendix several reference models and tables are added that give overview by reducing complexity which may provide a basis to con-tinue the research. In addition this serves as gathering of key variables and documents that have played a role during the development of NDSQ. This makes the report a possible source of information for a project team that wants to design and prepare a new yard start-up for the Damen Shipyard Group.

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Thesis Report Jonathan Huls Page 1 This chapter describes what can be read in the report, how this came into being and what is important to know about the content of the document.

1.1 Content and objective of the report

This report is produced to support the internal debate on yard-startup improvement within Damen. It was produced as a graduation assignment for TU Delft based on an internship at Damen Shipyards. The goal is to contribute to the quality of future yard startups of Damen. This is done by observing the shipyard as an industrial system which function is to execute the shipbuilding process. Above the observed Nakilat-Damen Shipyard in Qatar is displayed with the process that should fulfill this function displayed on top.

As shown in the picture the yard should be able to produce a wide mix of products which requires diverse facilities, disciplines, knowledge and suppliers. The shipyard is de-pendent on good input from external suppliers and internal suppliers like the sales, engineer-ing, purchasing and logistics departments. The latter are located mostly in Holland and there-fore the shipyard needs to cooperate with many stakeholders. This makes a good control and support system vital to deal with possible irregularities during the knowledge intensive execu-tion of the shipbuilding process. In the report recommendaexecu-tions are made to design, inno-vate, set-up and manage such an executing process and the support structure around it.

The report exists of seven chapters and an appendix. Chapter one to four give the intro-duction and explanation of the research. Chapter five contains the core of the report as here the problem analysis is displayed. It discusses the observations of the research and relates this to theories and other observations in recent shipbuilding industry research. From this con-clusions and recommendations are derived and formulated in chapters six and seven. In the appendix reference models are given to provide more insight into the complexity of the sys-tem. Also some design documents of NDSQ and experienced sources of uncertainty during the start-up process are gathered. Finally references are given to be able to trace the facts and look up possible authors for further research. Overall the report should provide a basis for healthy internal debate on how to improve the next shipyard-startup of the Damen Shipyards Group.

Figure 1: A shipyard is seen as a system which serves goals by performing its function: Executing the shipbuilding process according to requirements.

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Thesis Report Jonathan Huls Page 2 Overall the responsibility for the content of the report unless noted otherwise lies solely with the author who has limited his personal opinion only to the recommendations. The used terms and abbreviations are clarified in the appendix in a list of used definitions. This is done because it can be very specific what is meant and many different perceived meanings may be understood in general terms like “Damen” or “the shipyard”. Where the subject was seem-ingly not confusing the freedom was kept to vary with the used terms to keep the text attrac-tive to readers. Not all figures have a figure notation with a number. The important figures are numbered but exceptions are made because the Word-file keeps giving errors in some cases of inserted layers. The literature references are noted in the APA Sixth notation which is automated Word. This automatically determines the notation method in the text which can vary from time to time for no apparent reason. The report contains a few figures from Dutch textbooks but these are simple to visually understand in combination with the main text which is in American English. In case of questions about the content of the report the au-thor is willing to answer them to support further research. The complete research and report have been produced for education purposes only. No rights can be deducted by readers based on the contend of this report.

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Thesis Report Jonathan Huls Page 3

Figure 2:

A picture of the Hardinxveld yard taken in 1969 shows series production of Pushy Cat workboats

2 The Damen Shipyards Group

This chapter describes the history, main characteristics and current developments of the Damen shipyards group.

2.1 History

The First Damen Shipyard was founded by the brothers Jan and Rien Damen in 1927 and locat-ed in Hardinxveld. By 1939 yard number 100 was constructed. The crafts built were small tugs, workboats, lifeboats and other vessels for use on the Dutch inland waterways. By 1974 Damen Shipyards were building 100 vessels per year and acquired a large site named Avelingen-west industrial estate at Gorinchem. This became the new Headquarters of the Damen Shipyards Group which has been expanding its global pres-ence ever since.

From the period 1977 until now the Damen Shipyards Group product portfolio has grown strongly encompassing whole new ranges of vessels. A number of shipyards around Holland were acquired, each with its own specialty in shipbuilding and repair. The produc-tion of hulls and major steelwork was often subcontracted to shipyards abroad where labor costs showed a substantial saving, but with most of the outfitting being carried out in Hol-land. Many of these yards, in Eastern Europe, the Far East and elsewhere have been acquired and are now part of the Damen Shipyards Group and contribute a great deal to the total production volume.

Since 1969 the Damen Ship-yards Group has delivered more than 5.000 vessels to its customers in nearly every country in the world. In shipbuilding Damen has become a global leader in a few niche markets with its self-developed and standard-ized products and services. In ship repair Damen is also expanding the business activities, its geographical presence and yards capacity is in-creasing.

Figure 3:

The Damen Shipyards Group Headquarters and Outfitting yard based in Gorinchem, The Netherlands.

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2.2 Mission, Vision and Goals

The Damen Shipyards Group (DSGr) is known for its en-trepreneurial spirit; “We operate in every niche market where we see an opportunity to improve, innovate or in-vest. In everything we develop, we always aim for what our customers need and what they wish for. That counts for our building activities as well as our services” (Damen Shipyards Group, 2012). The company doesn’t communi-cate an explicit mission and vision and goals throughout the organization. This is regretted by the program manager Joost Mathot because it can stimulate the use of universal work methods however this may be done in the future.

Damen Shipyards builds customer well proven innova-tive vessels for competiinnova-tive prices (Kommer Damen, 2011). It is a market driven company that, by the years, has used about all the forms of make, buy or ally (Davids, 2008). This is done by working with a standardized design concept which offers many advantages from the producer as well as the client aspect. By engaging in long term cooperation’s with affiliates and investing in new yards Damen’s global presence and capacity is rapidly increasing. The aim is to keep ahead of technological developments in the maritime industry by continuing to expand the Damen Shipyards Group knowledge base.

The Damen Shipyard Group has clear ambitions to fortify and expand its position as global leader of small to medium sized high value vessels within the various niche markets it produces for. The company’s goal is to double the turnover of about 1.6 billion (2011) in coming years (de Vries, 2012).

This growth can be realized in various ways; expansion on current shipyards, acquiring more existing shipyards, or by setting up new yards. For instance in 2012 Damen has taken over the existing Sobrena Brest Shiprepair yard in France and Oskarshamnsvarvet Shiprepair yards in Sweden. In Vinashin Vietnam a new outfitting yard is constructed and in the U.A.E a new building and repair yard is realized in Sharjah. Vinashin is Vietnam’s national shipbuilding as-sociation with whom the DSGr constructed an outfitting yard on a greenfield situation for a portfolio of tugs, ten-ders, naval patrol and offshore vessels. It was planned to complete about 9 ships each year and triple capacity within the first 5 years (J.F.J. Pruyn, 2008 May). The new yard in

The Netherlands

Damen Shipyards Gorinchem Damen Marine Services Damen Trading

Damen Schelde Naval Shipbuilding Damen Schelde Gears

Damen Schelde Marine Services Vlissingen Amels

Bodewes Binnenvaart Millingen Damen Dredging Equipment Damen Marine Components Damen Shiprepair Rotterdam Damen Anchor & Chain Factory Damen Shipyards Bergum Damen Shipyards Hardinxveld Maaskant Shipyards Stellendam Oranjewerf

Scheldepoort Van Brink Rotterdam Visser Den Helder Poland

Damen Shipyards Gdynia Damen Shipyards Kozle

Damen Marine Components Gdansk

United Kingdom

Brixham Marine Services

Romania

Damen Shipyards Galati

Sweden

Götaverken Cityvarvet South Africa

Damen Shipyards Cape Town

Cuba

Damex*

Brazil

Wilson, Sons**

U.A.E.

Albwardy Marine Engineering* Damen Shipyards Sharjah (FZE)*

Qatar

Nakilat Damen Shipyards Qatar* China

Damen Marine Components Suzhou Damen Trading Suzhou

Damen Yichang Shipyard* Damen Shipyards Changde Afai Southern Shipyard**

Vietnam

Damen Vinashin Shipyard* Song Cam Shipyard** Song Thu Shipyard** 189 Shipyard**

Singapore

Damen Shipyards Singapore

Damen Schelde Marine Services Singapore

Indonesia

PT Dumas**

* Joint venture ** Business cooperation Adopted from Damen Shipyards Group Brochure 2011

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Thesis Report Jonathan Huls Page 5 Sharjah is built to relocate nearby activities from Albwardy Marine Engineering with whom the DSGr forms a joint venture. This new yard will house new building as well as ship repair facilities and will also be the Damen’s services hub for the Middle East region. These are examples that prove the willingness of the DSGr to invest in growth and gain enough critical mass to stay a true global player on these markets and fulfill their growth goals. The question remains what the effects of this growth is on the organization and how it will improve the organizations position.

2.3 Markets and Organization structure

2.3.1 Markets

The Damen Shipyards Group with its growing business activities tries to make use of the availa-ble knowledge and recourses to serve various markets. With its growing product portfolio the Damen Group has been recently described as an Analyzer (Beelen, 2012). This means Damen of-fers a stabile portfolio for existing markets and a flexible portfolio for new markets. This double focus can make it hard to be an analyzer for this may form conflicting interests within the company processes and departments (Treacy, 1995). It cre-ates stress between focusing on Research, Perfor-mance or Flexibility. This has implication on the need for knowledge management within the

com-pany. As a whole it is tried to balance Operational excellence, Customer intimacy and Inno-vation (see figure 4) to appeal to different markets with different needs. By doing this Damen tries to keep its current position on the market and also develop new products, techniques and markets for the future.

2.3.2 Organizational structure

Historically grown, the company exists of many different yards and business units with their own structure, rules and culture (Silos). The diverse shipyards and business units within the Damen group cooperate more than others according to perceived possibilities for synergy. At the headquarters in Gorinchem a matrix structure (see appendix Figure 48: Matrix organi-zation Adopted from Damen Shipyards Gorinchem Quality Assurance and Environmental management manual. Last review date: 28 April 2011 Document Version: 0.802) is used to allocate the functional skills and recourses within the company optimally to the diverse range of product groups. This structure is known for its suitability in knowledge intensive organizations and stimulates the sharing of knowledge and innovation (Beelen, 2012). These functions such as sales, engineering, procurement, warehousing and logistics are

Figure 4:

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Thesis Report Jonathan Huls Page 6 mainly preceding and supporting the production process and can be shared by different product production groups. Other parts of the business process of the DSGr as production yard for example show more characteristics of a line organization with a management team and a network organization around it. NDSQ as production location is organized as a line organization with a management team. The departments work subsequently on the product that follows a structured line as it moves in stages through the shipyard to finalization. The management layer above is responsible for facilitation of the production organization and the quality of the end products. This is also illustrated in figure 53 in the appendix. NDSQ in its turn is surrounded with a group of suppliers and partners. On the highest level the structure is a network in which the sub-elements have a different structure and thus behavior (see fig-ure 5).

Three Important organization dimensions are centralization, formalization and complexity (Fredrickson, 1986). Centralization here means to what extend decision authority is concen-trated in the top management or delegated to lower levels. The organization authorizes de-centralizes decision-making to a large extend. Formalization is the degree in which the organ-ization uses rules procedures and prescriptive methods. NDSQ does not use many prescrip-tive methods and procedures in relation to other companies. The dimension complexity is composed of horizontal, vertical and spatial dispersion. Damen is under these definitions with many layers of hierarchy, a wide span of control and many locations is therefore a com-plex organization. The yard and organization NDSQ are developing quite autonomous on a number of aspects. “Control is to a large extent on a basis of trust like in many network or-ganizations. This enables fast decision-making however sometimes at the cost of transparen-cy and overview” (Konstantinos Antonopoulos, director Yachts NDSQ). During the growth process the organization is shaping its structure to behave in harmony with the local operat-ing environment. This is needed for the organization to perform its function (Bots & Jansen, 2005). Below an overview is given of the complex structure of Shipyards and cooperating

partners that together form the larger organization. The historical strong growth has created a complex, partly-decentralized and quite informal organization which has particular strength and weaknesses like all organizations. The more insight is gained in this structure the better shipyards can cooperate and new yards can be designed and improved. Therefore it is im-portant to keep an up to date documentation of the business process to support this business process and make flows of information and material traceable. In the appendix additional information is given on the interaction between organization structures and the use and transferring of knowledge. This is Appendix III Knowledge enablers & barriers

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Thesis Report Jonathan Huls Page 7 This figure is self-made and illustrates how large, decentralized and complex the organiza-tion is. The ?-mark points to the fact that there is no central knowledge strategy in place while knowledge is an important production factor for the company.

Figure 5:

Structure overview of Shipyards and cooperating partners that together form the larger shipbuilding organization as described in paragraph 2.3.2. Huls (2013)

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3 Damen Shipyards in Qatar

This chapter describes the history, motivation and development of the business activities of Damen in Qatar.

3.1 Qatar: maritime needs

The State of Qatar is a small peninsula in the Persian Gulf which is ruled by the Emir Sheik Hamad bin Khalifa Al Thani. The emirate is exporting oil and gas products since 1949 which has brought the country great wealth. Qatar is estimated to own about 14% of the worlds discovered exportable natural gas reserves. The majority of this reserve is in the North Field which is connected to Iran's South Pars field. The Qatari GDP was 130 Billion dollars in 2010 (Fischer, 2011). This strong growth of industrial activities to facilitate eco-nomic wealth has sparked strong immigration and has determined the appearance of the current social structure in Qatar. Only 20% of the population of about 1,5 million inhabit-ants is Qatari of which the vast majority is religious Sunni Muslim. Immigrinhabit-ants mainly come from other Arab countries as well as, India, The Philippines, Iran, Pakistan, and the United Kingdom.

To facilitate its oil and gas activities Qatar has always been dependent on import of technology and knowledge of foreign companies. The resultant loss of business to Qatari industry and depend-ency on other countries was significant, and major opportunities to develop the country’s industrial base were not being exploited. To address this situation, The Emir instructed the state companies Qa-tar Nakilat Gas Transport and QaQa-tar Petroleum (QP) to develop and imple-ment a long-term strategy to establish state-of-the-art facilities for the construc-tion and maintenance of a wide range of marine and offshore structures. QP manages Qatar’s interests in substantially all oil, gas, petrochemical and refining enterprises in Qatar and abroad and is involved through joint ventures or as the

agent of the State of Qatar in all the gas supply projects in Qatar. Nakilat serves as is an inte-gral component of the supply chain of energy projects in the world undertaken by Qatar Petro-leum, Qatar Gas, Ras Gas and their joint venture partners for the State of Qatar. Nakilat is the world’s largest transporter of liquefied natural gas

Figure 6: Qatar located in the middle of Arabian Gulf Figure 7: Qatar located in the middle of Arabian Gulf

Figure 6: The inauguration of Erhama Bin Jaber Al Jalahma Shipyard with the Emir Sheik Hamad bin Khalifa Al-Thani and Nakilat’s managing director Mr. Muhammad Ghannam

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Thesis Report Jonathan Huls Page 9 by its owned fleet of 54 LNG tanker vessels.

This instruction is in accordance with the execution of the Qatar National vision for 2030 which formulates Qatari goals to become less dependent of foreign industry and tech-nology, to diversify its local economy and to create suitable employment for the original Qa-tari population (Al-Thani, 2007). To realize these facilities a project taskforce of international companies was assembled. This project cooperation has resulted in the he Erhama Bin Jaber Al Jalahma Shipyard (Nakilat, 2010).

3.2 Nakilat: maritime developments

In February 2007 Qatar Petroleum (QP) invested about 2 billion Euro’s and appointed Nakilat to manage the design and con-struction of the Erhama Bin Jaber Al Jalahma Shipyard

Facili-ties. The Shipyard is embodied by a large maritime complex built on some 110 hectares of reclaimed land along the southern breakwater of the expanded Port of Ras Laffan industrial city. It consists of multiple facilities to fulfill different functions for the construction and maintenance of a wide range of marine and offshore structures. Nakilat manages the facilities by cooperating with strategic partners in joint ventures who bring the knowledge to operate different business activities called phases. The joint ventures rent their fixed production facil-ities from the investor QP and share some key high cost facilfacil-ities with the whole shipyard complex to maximize overall economic performance by intended synergy of business activi-ties.

Nakilat created a Project Task Force (PTF) to manage development of the Shipyard, with team members from Nakilat, QP, and with Nakilat’s joint venture partners. The PTF worked with international consultants on Market Assessments and Feasibility Studies for the phases. All Shipyard facilities have been designed in accordance with international practices and standards. By the end of 2010, the PTF comprised 48 employees and construction of different “phases” was subcontracted to international companies and in progress.

The initial defined phases consisted of:  Phase 1 Repair and Conversion of Very

Large Ships (e.g. LNGCs, VLCCs).

 Phase 2 Repair of Medium-Sized Ships (e.g. 20,000 dwt. to 80,000 dwt.).

 Phase 2A Addition of a Q-Max sized floating dock for ship repair.

 Phase 3 Fabrication and Maintenance of Offshore Structures.

 Phase 4 Construction of High Value Small Ships (< 120m length).

 Phase 4A Addition of a hall for finishing and re-fit of "super yachts" and military vessels.

 Phase 5 Repair of small ships (< 20,000

Figure 8: Erhama Bin Jaber Al Jalahma Shipyard which houses; Nakilat Damen Shipyards Qatar, Nakilat Keppel Offshore Marine and Nakilat Svitzer Qatar.

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Thesis Report Jonathan Huls Page 10 dwt.).

 Phase 6 Construction of FRP boats for the commercial and leisure markets.

In the initial plan the whole Shipyard would be operated by one joint venture between Nakilat and Keppel Offshore Marine called NKOM. In a later stage it was acknowledged, that some of the phases required other specialized companies and strategic partners to be more successful. For the construction of new small high value vessels (phase 4/4A) The Damen Shipyards Group was contracted to create a joint venture with Nakilat named Naki-lat Damen Shipyard Qatar (NDSQ). This joint venture is now commencing the yard in the startup-phase and is growing to its designed full capacity.

3.3 Nakilat and the Damen Shipyards Group

The goal of Erhama Bin Jaber Al Jalahma Shipyard of which NDSQ was to gain independ-ence of the construction and maintenance of marine and offshore structures for Qatar. This is to secure the supply chain of energy products to the world. This goes via offshore explora-tion, onshore refinery and shipping of final products to customers overseas from Qatar. This primary source of income is supported by the functions the Erhama Bin Jaber Al Jalahma Shipyard houses.

In 2007 the construction of the maritime facilities such as dry-docks and building halls started on the already reclaimed land. In 2010 the joint venture between Nakilat and Damen (NDSQ) took entry into their new facilities and started expansion of the organization with the mission to build high value small ships on phase 4 and 4a.

The first shipbuilding object was a 140 meter one-off Load Out and Recovery (LOR) Barge. It was planned to complete in 0.9 million effective building hours by the new recruit-ed workforce. It was designrecruit-ed as part of the Shipyard facility and therefore an internal pro-ject. In 2011 NDSQ’s first commercial production project has started which consists of 19 vessels of the Damen Shipyards Group harbor & terminal product family and was budgeted to be built in 1.2 million hours. At the moment of writing construction of these vessels is well underway and the first scheduled deliveries for 2012 have been finalized. In April 2012 H E Dr. Mohammed bin Saleh

Al Sada, the Qatari Minister of Energy and Industry and Chair-man and Managing Director of Qatar Petroleum, was given a tour on the fully operated facili-ties. He said that Erhama Bin Jaber Al Jalahma Shipyard has brought world-class ship repair and shipbuilding facilities to Qa-tar. This confirms the contribu-tion NDSQ has brought in just two years to the development of the Qatari maritime industry by starting the shipyards operation.

Figure 9: In the middle Qatari Minister of Energy and Industry

Mohammed bin Saleh Al Sada, Nakilat’s Managing Director Muhammad Ghannam and NDSQ’s Managing Director Jan Wim Dekker who is named by Damen Shipyards Group to lead management and the joint venture startup phase of NDSQ.

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3.4 Business opportunity

The choice made by the Qatari state companies to contract the Damen Shipyard Group for the operation and development of phases 4 and 4A of the Erhama Bin Jaber Al Jalahma Shipyard is supported by many arguments. The young Qatari maritime industry needs knowledge. In general the state of Qatar has a good relation with the Netherlands (Groffen, 2011). Qatar has been importing goods, services and knowledge from the Netherlands for many years. The Damen Shipyard Group in its turn has had first contact since 2002 about cooperating in shipbuilding projects for and in the state of Qatar. The wide range of vessels Damen can produce with their standardized design concept together with a large knowledgebase and strong brand name forms an attractive strategic partner for Nakilat in realizing their given mission for the shipyard. The Damen Shipyard Group has also acknowl-edged the shipbuilding potential of the strong Qatari market demand for small high value ships and shipbuilding knowledge. Damen had four main arguments to step into this joint venture.

 It was the only way to get to the Qatari market.

 It managed to negotiate a low risk and high potential profit contract.

 This business activity would also create sourcing and spin-off orders to the Dutch Damen yards which were in need of work.

 Damen had a one-time opportunity to step in where competition would have stepped in otherwise.

The joint venture agreement was signed on January 2010 and designed to form a long-term cooperation between the companies. This signifies another step in the growth of the Damen Shipyards Group and has resulted in much positive business development since. On the new NDSQ logo beneath it can be clearly seen that both original company brand name styles have been respected and integrated.

Figure 10: Kommer Damen who acts as chairman of the Damen Shipyards Group.

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4 Research Question

This chapter describes the line of reasoning of the research and its goals and scope.

4.1 Research objective

The objective of this research is to contribute to quality of new yard startup master plans and future Damen yards startup processes. By evaluating key aspects of the yard startup of NDSQ the research tries to facilitate organizational learning.

The challenge is therefore to:

 Map the developments based on empirical observations.  Identify central concepts, problems and conditions.  Evaluate the observations.

 Make recommendations on how to improve the next shipyard startup process.

4.2 Problem statement

The yard start-up process of NDSQ has been a special project under special conditions. Dur-ing the development process of the NDSQ yard the startup team was confronted with di-verse structural issues for which no standard policy was present to implement. It required improvisation and innovation to solve the problems that were faced.

The initial problem can be formulated as:

It is not clear what a desired new Damen yard should look like and how the startup process has to be structured in this respect.

This led to a feeling of discontent about some parts of the yard startup. It raised ques-tions how a yard startup could be done more thorough and systematically. To be able to benefit from these valuable experiences in the future this startup needed further investigation and the research question was stated by the management;

“What can be learned from NDSQ’s yard start-up to improve a next Damen yard start-up?”.

In the next paragraph it is described how these questions are answered and which in-termediate steps are taken to come to a conclusion and recommendations.

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4.3 Research question and approach

The formulated research question is:

“What can be learned from NDSQ’s yard start-up to improve a next Damen yard start-up?”

This main question holds in itself underlying questions which are asked in the order: 1 Normative, desired (Soll) situation2 Current (Ist) situation 3 Future situation.  1a What is the function of Shipyards for the Damen company?

 1b What should a new Damen yard and its startup process look like?  2a How is the current yard startup process organized?

 2b What perceived problems are encountered and what are their root causes?  3 What should be done to solve these problems and come to the desired situation?

Below the research approach is illustrated. The shipyard is viewed as a system in the re-garded consecutive yard start-up phases on a high aggregation level. The analysis is done from outside inwards. In other words first the environment of the yard is explored and then the analysis zooms in to the yard as a system and the details of its aspects, phase- and sub-systems.

Figure 11: The Yard viewed as a production system, is decomposed in aspects, subsystems and phases in this research. Scource: (Huls, 2013)

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Thesis Report Jonathan Huls Page 14 The analysis is done using a systems thinking theory. Systems’ thinking is the process of understanding how things influence one another within a whole. An improvement in one area of a system can adversely affect another area of the system. Therefore it promotes or-ganizational communication at all levels in order to avoid that information silos limit the overall productivity.

To represent the yard as a system the Delft Systems Approach (DSA) is used. This is an approach to analyze and design industrial systems . This approach has recently been applied to analyze the overall Damen yard control method. In a showcase the integration and coop-eration between main office Gorinchem and a large and steady state functioning production yard of Damen in Galatz was tested. In the research it has been shown that the steady state model is suitable to develop an overarching generic control model for Damen yards. The lack hereof was a root cause of current problems within the organization (Bronsing, 2012).

The yard of NDSQ is currently being set up in a learning process and not in a steady state yet. Therefore the steady state model is expanded by adding the “innovation model” to control the startup process of a new yard. This method is theoretical connected with the steady state model but not as straight forward. The innovation model describes the functions needed to determine the right objective(s) and to correctly implement the processes to achieve it. These processes should be in place during the non-steady state to bring the pro-duction system in a desired steady state. This model therefore provides methods to recog-nize, avoid and solve tensions during the startup of the production system. It is a method to guide the innovation process of the new system. The seconds set of research questions relate to this innovation model to analyze the yard realization process. More information about the used models can be found in appendix IV.

4.4 Research Scope

When looking to the shipyard as a system the amount of available information differs per aspect. This research has focused on the, informational, technical, spatial, social and political aspects.

Little information was available of the financial and economical aspect of Damen and NDSQ and therefore this has been left out of the scope. Because of late involvement of Damen in NDSQ the physical facility was already designed and constructed. Therefore this research does not focus on the design of shipyard facilities but more on the design of a ship-building organization which operates these facilities. Overall the focus is on the development process of the shipyard and its organization including the phases design, preparation for production, start of ship production and improvement.

The research is executed in stages; first scientific related articles are explored to come to the research proposal. In the second stage information is gathered and analyzed in a field study on the current ongoing startup of NDSQ. Here internal company documents, memos, datasheets and Interviews are used as input. In the third stage the information of preceding stages is combined (synthesis) to complete the research on the problem by comparing theory versus practice. The focus is set to gain insight on the subject from a policy and organiza-tional perspective to create policy to guide the next yard development process in the future.

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5 Problem Analysis

This chapter contains the analysis of the research. First the yards as a system is viewed form a global perspective to place it into its context. Secondary more detailed local aspects of the yard and the elements it interacts with are described to eventually come to the core of the regarded aspects of the system.

5.1 Business environment exploration

In order to function, a yard organization needs to be structured in harmony with its envi-ronment (Bots & Jansen, 2005). The planning of goals can only be done after exploration of the present and future of the operating environment. This is illustrated in the organization function model for structure research and diagnoses (Lekkerkerk, 2012) in the appendix fig-ure 47 Function model for organization-structfig-ure research. The exploration of the environ-ment therefore deserves a great deal of attention before a proper yard design can be designed and realized.

This figure by (Oirschot van, 2003) shows different layers of the environment that influence the organi-zation. Three layers are identified; con-text, transaction and knowledge. The factors in the context are: Technology, Demographics, Sociologies Econom-ics, Politics and Ecology. The factors in the transactional environment are Employees, Clients, Suppliers, Part-ners, Shareholders and Competitors. The central factor connecting them is the knowledge environment.

By understanding how the environment interacts with the yard regarded as a system more understanding is gained how the yard can function and should be controlled. This gives therefore important information on how it can be set-up in the future. The yard is seen as a system which facilitates the execution of a ship-building process and the control hereof within the en-vironment. Figure 12 by (De Leeuw, 1974) shows these interactions visually.

Important identified developments in the global context environment of the Damen yards that interact with the execution process and control are described below. This gives clear requirements for the transac-tional environment and the knowledge environment which will be discussed subsequently. After that the local environment of Qatar itself is explored in more detail.

Figure 12: The control paradigm from (De Leeuw, 1974).

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5.1.1 Continuing growth of ownership needs new approaches.

Growing ownership by the Damen group of total yards and production volumes has in-creased the requirements on internal cooperation. Now the company needs to produce ac-cording to standards and also manage cost effective capacity usage between yards and physi-cally separated departments. In history less ownership gave the possibility to outsource or-ders without being responsible for the round time capacity usage of these yards. The need for continuous process stability has therefore increased and demands more information to align all stakeholders in the supply chain. However the operational processes of the building yards are not integrated in the current control model. This limits the control and leaves room for undesired distortions during the production processes. In a recent research report some import problems which are related to the fast growth of the company where identified (Bronsing, 2012).

Named causes of instability are:

 The competition between building yards

 The act of selling a vessel, (prices and conditions)  The manner project managers control projects  The approach of allocating finite vs. infinite capacity  The inconsistent use of levels.

Figure 13: No alignment between DSGo and DSXx: on operational level picture provided by (Bronsing, 2012)

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Thesis Report Jonathan Huls Page 17 Reflecting on these problems it was concluded there is a discrepancy between actual and desired culture and business model within Damen Shipyards. These problems cause stresses in the organization until they are mitigated; “The problem manifests itself in more ways on operational level as miscommunications, incorrect drawings, late deliveries, inefficiencies, etcetera. They are often repetitive and no one is able to solve these problems because they cannot be overseen anymore, a familiar phenomenon in large –fast growing– organizations”. (Bronsing, 2012)

To solve this problem and create the desired business model and company culture a set of recommendations were made to implement a generic control model and develop towards a learning organization.

1. Fix a general collection of assets and workshops, available on every building yard and underlying IT systems.

2. Make (minimal) reorganizations in building yards for alignment 3. Develop a standardized production planning, and KPIs

4. Develop trainings, workshops and manuals with the goal to train operational depart-ments how to work in the new environment.

5. Implement standardized production planning on building yards

6. Implement a standardized method for control and introduce standard KPIs.

7. Couple material purchasing and warehousing to the standardized production planning 8. Couple engineering deliverables to the standardized production planning

9. Convince leaders in the organization for commitment to the importance of learning and clearly communicates that learning is critical to long term organizational success. 10. Perform further studies focused on the manifestation of stresses; positives and

nega-tives, and how the learning organization can enhance positive, and diminish negative manifestations.

11. Create awareness amongst personnel, starting with DSGo followed by the building yards.

12. Develop trainings and workshop with the goal to persuade personnel with the essence of the learning organization; and how to use it during work. Let them experience it. 13. Set up information systems, which enable learning opportunities. e.g. open source

tech-nology to make tacit knowledge available to others.

14. Organize meetings or conferences focused on bringing Damen Shipyards, building yards and suppliers together, sharing ideas and knowledge.

This raises the question if the setup of a new yard would be wise at all under these con-ditions. Maybe it would be wise to wait until the existing yards have integrated and aligned more and clarity is reached on the requirements of these future yards. Here a priority dilem-ma plays as the opportunities to grow by participating in undertakings of new yards are not always present. It seems that currently the company prioritizes opportunistic growth over organizational learning as the focus is still on growth under these conditions.

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5.1.2 Increasing number of involved parties scattered around the globe.

It is expected that the number of parties involved in the shipbuilding process will keep in-creasing because of the changing role of the yard and its suppliers. Only some thirty years ago most of the shipbuilding work was carried out at the shipyards themselves. Since then however an increasing trend can be observed towards outsourcing and subcontracting of activities. Nowadays it is assessed that 50-70% of

the value added comes from external subcontrac-tors and suppliers, whereas for more complex ships this can be as high as 70-80%. It is ex-pected that this trend will continue in the future (ECOTEC, 2006) as the modern shipyard is be-coming a final assembly facility and logistics co-coordinator with increasing elements of the “out-fitting” being contracted out. This means an agile and clear planning and control method will be-come even more important in the future as yards should be able to connect and disconnect to

supplementary companies in the network around them as fast as possible.

5.1.3 Increased production speed, flexibility and use of IT

Because production speed and flexibility are becoming more important departments are not working sequential but concurrent. Different departments work at the same time on one product (concurrent engineering) to save time and be able to develop the product while pro-duction is already some preparation steps ahead. The aim is to shorten the delivery time of prod-ucts by reducing the transfer and wait times

between departments. This can implicate different departments are working on different parts of the product at the same time on the design and on the physical production. Also different parts can be in different completion stages at one time. This complex structure asks for much planning, coordination between departments and control to avoid conflicts like work on the same time and area of the ship or costly rework. This asks for increased infor-mation flow thru the use of Inforinfor-mation technology like Enterprise Resource Planning, CAD/ CAM, 3D Model Sharing etc.

5.1.4 Fragmented Information Storage

Many diverse databases are present within Damen Yards but they are not compatible and standardized. This can cause information island (silos) which limit the overall productivity. Damen Scheldt Naval Shipyards for example uses an information database called “cyber query” to find internal information. This knowledge however is not accessible by other yards which limits the internal validation and verification of information in the system (Probst G. , 1999). By standardizing the information this knowledge can be made accessible and efficient

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Thesis Report Jonathan Huls Page 19 in its use and processing. The standardizing process of information however does take a lot of effort to align the working methods and forms. This means everyone has to cooperate in joining knowledge databases and may implicate much new work and strategy to align all in-ternal yards and stakeholders. (Jianjun, 2008)

5.1.5 More low cost labor force in production abroad

In Holland the current skilled shipbuilding workforce is aging and in general demand for new young educated production workers is higher than the supply. A majority of the Dutch top professionals at this moment sees the shortage of talent, knowledge and capable workers in the Netherlands as the largest threat to realize growth (PriceWaterhouseCoopers, 2011). Therefore Dutch shipbuilding companies are facing difficulties filling their position with rightly skilled employees. Within the Damen organization it is clearly said that the intention is to move more production to low wage countries and improve cost effectiveness by facilitat-ing the production yards optimally (Riet, 2012). In general more production work is located from Holland to Eastern Europe and the Far East. This trend is also visible in the total hour’s volume of production orders of Damen Shipyards (Degroote, 2010). Reasons can be cost efficiency but also the client’s desire to build local and improve the regional shipbuilding industry like the example of Qatar. This low cost workforce of guest laborers is hired from India, Philippines, Bangladesh, Romania etc. for production. Native laborers of this kind are locally not present in Qatar and many western employees are not willing to work under these conditions because they are used to higher standards. A complicating factor of working with lower educated workers is that they tend to transfer les knowledge to each other. The more busy employees are with satisfying primary needs the les knowledge they tend to share (Maslow, 1943).

5.1.6 More explicit knowledge needed to increase performance

Most ships Damen produces need a substantial amount of complex manual labor in produc-tion and are to a certain degree customized on design and producproduc-tion aspects for the end client. There is a difference in the average level education and experience per production yard. Gorinchem in Holland employs mainly higher educated production workers who often have experience on multiple types of vessels and with different production processes. These workers are experienced and have much tacit knowledge which they use during the jobs. Therefore employees can work quite independent on multiple vessels and make decisions and improvisations based on experience without compromising on quality. This can be of high value to the production efficiency in terms of hours. For example the execution of an outfitting job of a vessel in the yard in Gorinchem can have a learning curve of 30% time save on the 2nd_{vessel in a row due to the learning effect (Silvius, 2008).}

To compensate for the usual lower education level and responsibility feeling for work of the low cost workers it is tried to gain efficiency by decreasing job complexity and using more control mechanisms. To sustain a reliable product quality these workers need to have a high level of production information (explicit knowledge) which is provided in production manuals and drawings. To enable the production department working with lower educated employees they need to simplify jobs and therefore need a more advanced production cess. A comparable thought was formulated: ‘Simple tasks, though, demand complex

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pro-Thesis Report Jonathan Huls Page 20 cesses to knit them all together” (Champy.J, 1994). This is an important factor to take into account when redesigning the yard of the future and its processes and information flows. It implies much documentation like manuals, drawings and control forms are needed to give the needed explicit knowledge and instructions for the shipbuilding process to the workers.

5.1.7 Increased importance of knowledge handling

Knowledge is increasingly becoming more important in the competition between companies (Andersen, 1997). Therefore the interaction between internal present company knowledge and the knowledge which is newly created in the fixed busi-ness systems and flexible project teams must be managed. The fact that the Damen Shipyards Group can benefit from the useful experience that was gained during the startup phase of NDSQ forms an opportunity in itself. Transferring local gained new knowledge from joint ventures to the mother or-ganization is proven to be an important step in oror-ganizational learning. However the effectiveness can be limited when the mother organization has a rigid set of managerial beliefs as-sociated with an unwillingness to cast off or unlearn past practices (Inkpen, 2007). This knowledge use is described to

be optimal when the barriers for knowledge sharing and cooperation are minimized (Weggeman M. , 1997). This asks for an alignment of the Damen Shipyards Group members in terms of mission, vision, goals, strategy, culture, structure, management style, employees

and systems. The strong and fast growth of the Damen group has left many of these

ele-ments unaligned and forming barriers for the flow of knowledge within the company. This is due to its historic grown structure and this still limits the possibility’s to effectively use knowledge.

The value of knowledge someone possesses at a given moment and place is a multiplica-tion of the present Informamultiplica-tion, experience, skills and attitude (Weggeman M. , 2000). The use of more low wage workers means less experience, less skills and a les desired and pre-dictable attitude. This greatly increases the importance of the information factor in the knowledge management of Damen. This is also pointed out in the paragraph about explicit knowledge. This formula can therefore help to quantify and optimize the parameters of the yard to maximize the value of the present knowledge by steering on the factors in the formu-la. Mathematically it is a bit strange but it is just meant to show the interaction between the

factors and the importance to balance all four of them to gain optimum value of knowledge.

This formula shows how the factors of Information, Experience, Skills and Attitude together form a factor which is the value of knowledge. To optimize this value these factors need to be in proportions according to the formula.

Figure 14: The integral organizational model by Weggeman.

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Thesis Report Jonathan Huls Page 21 This is an important tool to use when starting up a shipyard because it shows the need for quantitative approaches on knowledge and intangible aspects like information, experi-ence, skills and attitude.

This images shows how the factors of the knowledge formula of Weggeman look in practice on a shipyard. It gives a clear image of how the total value of knowledge must be managed by optimizing the individual factors in suitable proportion to each other.

The above factors of influence in the environment of shipyards point to the importance of information and increased process complexity of the shipbuilding at yards. However in the plans and approaches of the Damen company this is not something what receives allot attention until now. These possible barriers should therefore be addressed in startup plans to be able to deal with them. The preparation stage should therefore include more elaborate plans on an operational overarching control model, IT strategies and concurrent engineering, Information storage and knowledge management. It seems therefore logical to give more attention to the “Yard of the future” according to the vision of Damen and how these ele-ments play a role in that.