Question 1: Total Marks: 20 Marks

Karachi Shipyard and Engineering Works (KSEW)

Karachi Shipyard and Engineering Works (KSEW) is the only national entity engaged in Ship Construction, Maintenance and Repair activities. KSEW can rightly be called the major heavy mechanical engineering industry of Pakistan. Although Karachi Shipyard is mainly designed for shipbuilding, however, its role in support of industry and developmental engineering is prominent. It has a long record of service to industry and during slump in the shipbuilding industry, has promoted further diversification of its general engineering activities. KSEW was established in mid-fifties as a project of Pakistan Industrial Development Corporation (PIDC) and incorporated as a public limited company in 1957, managed by a Board of Directors with Managing Director as the Chief Executive. KSEW is situated at West Wharf Karachi and spread over an area of 71 acres. It has a large shipbuilding hall, two block fabrication areas, three shipbuilding berths, two dry docks, a well-equipped machine shop and a large grit blasting and painting facility with modern machinery for paint application under controlled environment as per international standards. A ship lift and transfer system with a lifting capacity of 7881 tons and 13 number parking stations is being installed which is planned to be completed soon. KSEW is the only shipyard and oldest heavy engineering establishment of Pakistan, catering for shipbuilding, ship repair and general heavy engineering. It has played a historical role in transferring of technologies and broadening the industrial base of country.

Recently KSEW has received a huge order of around US $500 million for the construction of four Ships. This order is also crucial from project management perspective as it requires a major up-gradation of existing facilities (including the procurement of specialized equipment) and construction of some including stores before the commencement of work. KSEW has already awarded contracts to the leading construction companies in this regard. It is important to note here that majority of ship construction material is planned to be imported from different countries (no local procurement). Things were going as per schedule till February 2020 when China announced the lockdown due to COVID-19. Afterwards, due to its rapid spread WHO has declared COVID-19 as a global pandemic. This has also affected the project progress as almost all partnering suppliers have invoked Force Majeure clause according to which inability to perform contractual activities shall not make the contractor liable to penalties or order cancellations. Not only that, local contractors have also shown their inability to carry out tasks as their working staff was either quarantined of moved to their native towns. Situation has now become even worse as when the global market is opening, cases of COVID-19 are all time high. KSEW has taken strict measures to ensure the health of all its employees and workers. KSEW has also issued SOPs to all the contractors working inside the premises. Though up-gradation work has been resumed, yet its lagging behind the schedule by quite a large margin.

Recently one of the suppliers based in China has intimated that the consignment of Steel plates is ready to be shipped. This intimation comes as an unpleasant surprise for the management as facilities are far from complete. Storage requirements of steel plates are; 300 square meters of area with max temperature of 45 degrees Celsius and humidity not more than 85%. This steel cannot be placed outside for more than 3 months. Then comes paint and welding material which requires extra precautions as they are highly flammable and demands specialized storage facility with the state of art fire extinguishing system. This material cannot be left on port once it is arrived as it will cost KSEW in form of heavy demurrage / Wharfage charges.

KSEW has to make prompt decision in this regard as other orders are also in queue that are scheduled to be started after the construction of these ships. Inability to initiate these orders on-time may result in serious financial consequences as customers will impose heavy penalty / fine for the non-conformance / delays.

Requirement:

As a supply chain manager, you are asked to propose your detailed decision regarding:

1. Resolution of issue pertaining to storage of steel plates. (05)
2. What objectives are to be planned to address the delays in up-gradation of facilities? (07)
3. How to manage orders those are queued for which it is confirmed that they will be delayed and penalty is inevitable? (05)