Sustainable Manufacturing in the US Shipbuilding Industry through Outsourcing

Abstract

This paper discusses the issues facing global outsourcing in the US shipbuilding industry. These issues include the benefits and risks that accompany outsourcing in general and global outsourcing, or offshoring, in particular. Shipbuilding in the United States has historically been considered a strategic industry, supporting both military and commercial interests. Even though the US shipbuilding enjoys competitiveness in market share and high-tech capability but most often it suffers cost overruns. The opportunity to reduce costs by taking advantage of lower labor rates around the globe is the primary reason for shipyards to consider offshoring. Both outsourcing and offshoring can be used to help offset fluctuations in labor requirements and maintain a stable workforce. Currently, outsourcing activities are in place at most shipyards around the globe, but larger shipyards tend to be vertically integrated to a point where significant outsourcing is unnecessary. For offshoring of shipbuilding activities in the United States, the risks and barriers sometimes outweigh the benefits. A loss of control over production processes can lead to quality and schedule problems if not closely monitored. The stability of the country in which the subcontractor is located is a major factor in the outsourcing decision. Changes in labor and exchange rates can cause significant increases to the cost of the outsourced product. Technology transfer issue is another impediment to global offshoring. The absence of a static design and the needs of national security prevent the outsourcing of naval warship construction. However, for commercial ships, offshoring can be a viable option for producing higher quality ships at a lower cost. One of the few areas that may be a candidate for offshoring of U.S. warships is habitability spaces. This paper discusses unique factors affecting the shipbuilding industry and proposes possible solutions.