Indonesian shipbuilding industry is a labor intensive business. There are several stages and activities in shipbuilding that needs process efficiency and cost reduction. In this study, we implement the lean management to eliminate waste and create value. We start by identifying the critical wastes in the traditional shipbuilding industry. Subsequently, we prioritize the waste using analytical hierarchy process and investigate the source and reason by fishbone diagram. The result showed that the process of dropping the ship into the sea that causes the bottom of the ship breaking down is the most critical waste. Several root causes are analyzed by fishbone diagram, such as: men, material, method, and environment. Based on the results of the Risk Priority Number assessment, it can be inferred the highest priority of broken-down vessel that is the rocky environmental conditions when the ship drops to sea. The lowest priority is the limitation of equipment, which causes the process of dropping ships to sea not straight. Furthermore, all the main causes are given an improvement proposal in order to minimize the risk of the bottom of the ship breaking down during the process of dropping ship to sea.

Keywords: Lean management, shipbuilding industry, Analytical Hierarchy Process, Indonesia