WHAT'S AHEAD IN 2000

Demand for marine services remains volatile

Donald "Boysie" Bollinger, Chairman and CEO, Bollinger Shipyards, Inc., and Chairman, National Ocean Industries Association

rom the energy industry perspective, 1999 has been a year of unfulfilled expectations and examination of the basic concepts on which the industry operates. Traditional wisdom would indicate that rising commodity prices should spark increased activity on the oil service side. That has not happened, though there are signs that activity levels, at least, are improving. If this does occur and is sustained, rates will follow.

Demand for newer technology and increased capacities and capabilities, will drive vessel operators to invest in new equipment, both on the shelf and in deep water. This will not be a one-for-one replacement, and there will be a shrinking of the fleet as attrition and obsolescence take their tolls. Successful operators will be the ones with the most capable assets responding to the needs of their customers, not necessarily the ones with the biggest fleets.

Fiscal 1999 was a mixed bag. During our strategic planning meetings last year, we at Bollinger Shipyards, Inc. were optimistic about a resurgence in Gulf of Mexico (GOM) shelf activity. Accordingly, we budgeted to include increased demand in our energy-oriented repair divisions. The activity never came to fruition, and those divisions had significant revenue erosion. In response, our managers reacted quickly and made necessary changes to keep margins at constant levels and still maintain profits within this group.

Our sales team, along with all managers, worked extremely hard pursuing work to increase our share of a shrinking market. In addition, they took advantage of this slow period to prepare for an inevitable resurgence in the offshore service vessel (OSV) market. We built and repaired major equipment, such as dry-docks, and performed facility maintenance and enhancements to increase several divisions’ capacities.

The repair group received a significant boost from our newest acquisition, Bollinger Amelia Repair, in Amelia, Louisiana. This operation introduced new companies to our already diverse customer base.

On the plus side, we experienced tremendous demand growth for brown-water / inland vessel repair services. Adding capacity to support services, such as electrical, propeller and machine shops, helped us handle the increased activity. Our customers’ commodity traffic along inland waterways remained strong throughout the year.

As a whole, our repair group experienced declining activity, but it was able to remain profitable and enhance capabilities in preparation for the expected upturn in GOM shelf activity.

Another pleasant surprise came from the strong performance of our new construction group. We had expected a steady year from these new divisions, based on the backlog going into 1999. However, we did have unsold capacity, with limited expectations for new work.

As the year progressed, we experienced increasing demand for commercial vessels, including specialty barges, OSVs, tugboats and towboats needed to fill the Amelia facility. In addition, our facilities worked through the current backlog at more-than-expected profit levels. The efficiency and learning curves made for favorable adjustments to all of our multi-vessel projects during 1999.

Integration / automation. Bollinger accomplished a major undertaking during 1999 by integrating and automating all facilities under one business system. After years of frustration and several failed attempts with previous software, the company went "live" on September 1 with a new, integrated ERP package.

A full suite of software products, including manufacturing, projects, project manufacturing, purchasing, inventory, H.R./payroll, financials and MRP, will enable our company to have all information under one system and shared throughout all divisions via a T-1, connected wide-area network. In addition, the software is browser-based and designed to operate over the Internet. This will drastically reduce the system’s maintenance costs. All updates, upgrades, system changes, maintenance and end-user changes are made locally on the centralized server, and not on the more-than-100 computers operated by the end users.

Once the system is fully operational, the company will realize dramatic efficiency changes, as in the amount of time required to produce information by all functional areas. This will increase the amount of time available to analyze information. The costs to produce and process purchase orders, pick lists, requisitions, invoices, A/P checks, payroll, H.R. requests and other functions will decrease substantially.

Project managers will have more accurate, timely information to make crucial, real-time decisions on the shop floor. Estimators will have more task-level information and history to assist them in projecting the cost of building vessels. Schedulers and shop floor managers will have automated maps of material and manpower requirements, thus increasing labor efficiency.

Inventory will be much more accurate and visible via the system. Purchasing will have the advantage of a master parts list that encompasses all divisions. This will facilitate our centralized purchasing initiative and allow us to capitalize on the buying power of our combined divisions. All levels of management will have more accurate, detailed financial / operational information to assist in running the business, as well as in planning for the future.

We have not identified current international opportunities that are equal to, or more attractive than, opportunities that exist domestically.

Donald T. "Boysie" Bollinger, Chairman and CEO of Bollinger Shipyards, Inc., Lockport, Louisiana, and chairman, National Ocean Industries Association (NOIA), earned a BS degree in business administration from the University of Southwestern Louisiana in 1971. His company is a full-service, marine construction and repair operation with worldwide marketing, and divisions in six areas of Louisiana. He is active on boards of the Port of New Orleans; the Louisiana Workers Compensation Corp.; BankOne LA, N.A.; and Tidewater Inc. He is, or has been, active – typically as chairman or vice chairman – in some 15 civic and professional groups, notably: NOIA, Shipbuilders Council of America, Coast Guard Foundation, Business Council of New Orleans, Offshore Marine Services Assoc. (OMSA), Nicholls College Foundation, Lockport Lions Club, United Way and Boy Scouts of America. Mr. Bollinger has received 11 awards for his business / civic contributions.

Copyright © 1999 World Oil
Copyright © 1999 Gulf Publishing Company