W11_DI_LOST OPPORTUNITY RE-MACHINING STERNTUBE BUSH

1.       Problem recognition, definition and evaluation

In the previous blog posting decided that re-machining sterntube bush was the best choice with fastest delivery time. Other important factor must be considered is lost opportunity with re-machining decision. This blog will talk about potential lost opportunity using re-machining bush if bush fail in operation.

2.       Development of the feasible alternatives

Some scenario to calculate lost opportunities if re-machining fail are:

i.                     Keep using re-machine bush up to the age of the vessel ends (approximately 5 years).

ii.                   Using genuine part bush from maker.

For first option the possible lost opportunity is bush broken in the middle of ship operations, then for re-new bush lost opportunity is delay for delivery spare part. Considering that this part is for 32 years old tanker, so the spare part is very rare and main possibility is maker will fabricate custom ones.

3.       Development of the outcomes

In this case potential lost opportunities can be time loss and money loss using NPV method.

4.       Acceptable criteria.

We use NPV method to calculate the best alternative for this vessel, by considering revenue, operating cost, repair cost, and income. Net Present Value (NPV) is a formula used to determine the present value of an investment by the discounted sum of all cash flows received from the project. The formula for the discounted sum of all cash flows can be rewritten as:

5.       Analysis and comparison of the alternatives

Detail Data:

Calculation:

Revenue is vessel charter rate multiplied by commission days.

(Element not include in calculation are Intermediate and Special Survey docking, off hire assumption per year are 5 days)

Repair Costs are cost to repair sterntube bush with re-machine and also re-new.

Operating Costs are all operational expenses of vessel include: manning, services, spare part, lubricant, management fee, overhead, & maintenance.  

Income: Revenue – (Operating Cost + Repair Cost)

6.       Selection of the preferred alternative

The biggest NPV is in option to re-new bush with total USD 1,801,421.31. Lost opportunity of option 2 is just delay in delivery spare part. In other hand option to re-machining bush is more risky, not only vessel need repair in dock yard but also with delivery delay.

7.       Performance Monitoring & Post Evaluation of Result

If we consider at lost opportunity, both option are need order new bush spares from maker. Whereas for order new bush spare part is very unpredictable, because this engine is 30 years old engine and maker no longer have spares stock.

So if we consider at the success of main project (Engine restore project) and consider with operational vessel after docking, other option to using re-machining bush to perform engine commissioning but also order new bushing from maker.

Reference: 

         i.      Irawan, D. (2013). Blog W10_DI_ Sterntube Bush Repair Scheduling. retrieved from  http://aacemahakam.blogspot.com/

       ii.      Net Present Value, retrieved from: 

http://www.financeformulas.net/Net_Present_Value.html

      iii.      William G. Sullivan, Elin M. Wicks, and C. Patrick Koelling (2011), Engineering Economy (15^th Edition), Chapter 6