Offshoring Strategies in Norwegian Ship Production

Abstract

For the past several decades, Norwegian shipyards have focused on innovative, customized, and technologically advanced ships, often serving the offshore oil and gas industry. Usually, a significant part of the ship production is off shored, especially steel-related tasks. That is, such tasks are carried out in a country with lower factor costs. The Norwegian yards focus on the more advanced outfitting tasks, such as the installation and commissioning of machinery and deck equipment, electrical systems, and accommodation. Nevertheless, the amount of work performed abroad before the Norwegian yard takes over and continues production differs among various yards; some only offshore block construction, others construction of the entire hull. Yet others finish the ship to such a degree abroad that it does not need to be recovered from the water in Norway and all the remaining work can be done from the quayside. This paper introduces a typology of shipbuilding strategies that differ in how much of the steel and outfitting work is performed in a country with lower cost levels. The strategies are discussed and compared in terms of relevant build strategic elements, such as preoutfitting, concurrent execution of engineering and production, yard capabilities, and vertical integration. The strategies' likely effect on performance is also addressed, in terms of costs, quality, delivery dependability, delivery time, and flexibility. The results are based on a qualitative study of Norwegian yards and their offshoring strategies. 1. Introduction Throughout history, Norway has played a central role in the design and production of ships and marine constructions. Until some decades ago, yards along the entire coast built various types of ships, such as tankers, bulkers, ferries, roll-on/roll-offs, and fishing boats of different sizes. During the 1970s, the competition from Eastern Asia rose, benefitting from significantly lower labor costs. The larger yards in Norway could not adapt and scale down, and they eventually closed down and their properties were adapted for other, typically urban purposes. In the 1990s, mainly the smaller yards on the West coast managed to survive, focusing on ship conversions and repairs as well as an increasing specialization toward ships serving the offshore oil and gas exploration and extraction industry. Since then, a big portion of all larger ships delivered from Norwegian yards has been made up of such customized, technologically advanced offshore support vessels (OSVs). Other types of customized, advanced ships, such as fishing vessels, live fish carriers, research vessels, cruise ships, mega yachts, and naval ships, have also been relevant market segments. Though of far less historic significance over the last 20 years, they have helped counteract crises in the offshore segment over the years.