Dutch-Chinese success story

More and more vessels are being built abroad, not only to save on labour costs, but also on costs of building materials. Clearly a production run of similar vessels offers economies, but the Netherlands is especially known for its complex and often custom-build vessels with a high focus on quality, which is more difficult to achieve abroad. Shipbuilder IHC Merwede, however, has found a way to successfully build complex vessels abroad, in cooperation with several Dutch supplying partners, including non-welded piping solutions provider GS-Hydro.

”About seven years ago, we started with our internationalisation”, says IHC Merwede president Govert Hamers. ”We had three reasons to do so: firstly, clients asked for it because of the costs. Also, between 2006 and 2009 we had a full order book and there was not enough building capacity as well as a shortage of people in the Netherlands, so we started to look abroad. Therefore we started our own factory in Guangzhou, China. The engineering is still done in the Netherlands and also the key equipment is shipped over from here, and an IHC employee supervises the building processes. Last but not least we were also driven by political reasons. In many countries, especially emerging countries, the local shipbuilding industry is protected by the government. One of the earliest examples is the Jones Act (part of the Merchant Marine Act of 1920, which deals with cabotage and requires that all goods transported by water between U.S. ports be carried in U.S.-flag ships, constructed in the United States, owned by U.S. citizens, and crewed by U.S. citizens and U.S. permanent residents, ed.), but also the strict import barriers in China or the fact that in Bangladesh, you get extra points in tenders if a lot of the build involves local content. We will continue this internationalisation strategy, but only with standarised vessels and copies of one-offs. One-offs and engineering will still be done in the Netherlands. We are specialised in niche vessels, otherwise it would be too expensive to build in the Netherlands anyway.”

All knowledge of building abroad comes together in the business unit IHC Global Production, with Fer Tummers as managing director. IHC Global Production, part of IHC Merwede, supports the Dredging, Mining and Offshore divisions and is able to mobilise and integrate the specialised knowledge of the various companies within the IHC Merwede group, providing consultancy and engineering, production and project management services globally. ”By now, we have a lot of experience of building in other countries, like Bangladesh, Bulgaria, India, the United States, Brazil, Egypt and Iran. You will find good yards and basic skills everywhere in the world; however, the organisational side, making sure everything is connected seamlessly, that is a different story and is something we want to do ourselves. I started in 2008 with the build of vessels in China, up until now we have built 32 cutters there”, says Tummers. ”One example of a success story is the sister trailing suction hopper dredgers Chang Jiang Kou 01 and 02, an order from Yangtze Estuary Waterway Administration Bureau MOT. Number one was built in the Netherlands and number two in China. It was a long process, as we first needed to find a decent shipyard, starting the selection process with 22 yards until we found the right yard: DaoDa Heavy Industry in Qidong, a relatively young yard with a knowledgeable management, who also has international working experience, and with good facilities, for example an own engineering bureau.”

Preparations

Tummers continues: ”My motto is ‘don’t have afterthoughts, have forethoughts’. Therefore we also did research to find out what materials were available in China, to make sure that our engineers only use materials that could be sourced there. The basic and detailed engineering was done in the Netherlands and the drawings had to be converted to Chinese and more detailed before we could start building. Everything was planned in all its detail: who is responsible for what, materials were delivered locally. Only three expats from the Netherlands were present during the build, they were supported by local supervisors. Also the set to work and commissioning was done by Dutch employees. To make sure the communication between the Dutch and the Chinese went well, we worked with an interpreter, although many higher Chinese employees spoke English. Before our Dutch expats went to China, they received a training at the Royal Tropical Institute in Amsterdam which prepared them for their assignment, cultural differences and doing business internationally. Also, they received the necessary support from the Netherlands while being abroad. Of course, this was difficult because of the time difference of seven hours, so we installed a kind of helpdesk manned by two to three people, who were available to our expats for questions and problems and also the coordination of the questions, making sure the questions reached the right people within IHC Merwede, for example the engineers, the purchasing department and other specialist, to answer them correctly and fast.”

Another difference with building abroad is the safety issue, according to Tummers: ”In China, there are different safety standards compared to the Netherlands. As we wanted everyone to work safely in a safe environment, we provided safety training for the staff in China and even flew over the Rotterdam fire department to give fire fighting and first aid training on site. Also, we bought life saving equipment and did crisis simulations to prepare everyone at the Chinese yard for possible emergencies. The planning and controlling of the project was done by IHC employees, which is a difficult game, as you do not want to withdraw the responsibilities from the yard, but on the other hand you cannot afford a problem. Therefore we also tried to transmit as much knowledge as possible.”

Cultural differences

The build took about two years and IHC Merwede planned ample time for the build to get the Chinese acquainted to building a complex dredger. In total, 150 containers with equipment were sent to China, which proved to be a huge logistical challenge. Hamers: ”The level of logistics, communication, planning, quality and knowledge is very high in the Netherlands and the Dutch will always communicate when something is going wrong instead of passively waiting for new instructions, as this is part of the Dutch culture.” In the Chinese culture, this is different, says Roland van de Ven, managing director of GS-Hydro Benelux: ”Working with Chinese is completely different from working with Dutch. Chinese employees need specific instructions, will not tell you when they disagree and take a lot less initiative. If they are instructed and audited well, they do a great job. However, audits are not enough, giving instructions and training beforehand is a must.” Tummers adds: ”Currently you will find in China a young generation of engineers though, who are very smart and who will make other suggestions if they think something is not correct.”

”China is currently catching up in the field of technology,” says Van de Ven, ”but in the field of product developing, engineering and organisation skills, the Netherlands is still ahead. However, it is something to watch out for. The dependence on our systems is critical which means we need personnel with state-of-the-art skills worldwide. Piping is not rocket science, as long as the engineering is right and with that we try to make a difference. The Chang Jiang Kou 01 and 02 were both delivered without any piping problems.” Hamers adds: ”The ChangJiangKou 02 was a real success story. The customer wanted two identical vessels, but did not have enough budget to build them both in the Netherlands. Therefore we came up with the solution to build the first vessel in the Netherlands and the second one in China, with the condition that both vessels would be identical. This also meant that our subcontractors needed to be contracted for both vessels. The vessel was delivered on time, something that hardly happens in China, let alone such an innovative vessel. You can almost call it a miracle, but it demonstrates the reliability of IHC Merwede and our partners regarding international production. Our customer was very satisfied and there are no noticeable differences between the vessel built in the Netherlands and the one built in China.”

GS-Hydro was one of the subcontractors of the two vessels. Van de Ven: ”We have been a supplier to IHC for a long time and are specialists in non-welded piping technology. We focus on hydraulic applications, but are able to provide all sorts of piping systems. With offices in 17 countries, GS-Hydro is one ofthe few companies in this field who are able to deliver local content worldwide. We started the order for the vessels in the Netherlands and four months later in China. After receiving the drawings, we started to prepare our order and as soon as a section was built, we could finalise the drawings. The scope was outlined in the Netherlands and later fine-tuned with IHC employees in China. ”

Local

Both companies concur that it is important to have local support when building abroad. Tummers: ”We have a purchasing office in China, which supported us logistically. When there is a problem, for example with customs, it is vital to find a local solution and therefore it is very important to have a local team to support you.” Van de Ven agrees: ”Every subsidiary of GS-Hydro worldwide has a Western managing director and one or two Western employees who are part of the local management. For this project we only sent Dutch project managers to China three times during the complete building period, all other issues were solved with our local representatives.” Hamers adds: ”The solution does not lie in flying over a huge amount of expats, but in working with locals. However, it is important to stay with our own quality standards, as these are higher than the Chinese standards. It is only when you engage in these kind of activities abroad that you realise how specialised the Dutch maritime industry is and how complex the vessels are that we build. It is not so simple to transfer that to a foreign country, we often underestimate that, especially with one-offs. What we do regarding complex shipbuilding in such a small country as the Netherlands is very special, we should be proud of that.”

Gail van den Hanenberg