Baderman Island Shingle Replacement
Replacing the roof of the Baderman Island Visitors Center needs to be accomplished quickly to ensure the highly profitable catering and events business are not impacted by the replacement, yet must also be done to ensure years of trouble-free operations. As the climate in the region is extreme, from humidity and the rainy season to exceptionally hot summers, the roof needs to be constructed of a material than is resilient enough to withstand weather extremes yet affordable enough to be within the boundaries of cost. As it costs $10,000 in lost rental revenue per week for the convention center to be closed, the materials and installation process needs to be expedient. The intent of this analysis is to evaluate which of the three alternatives is the optimal one for Baderman Island’s Convention Center.
Analysis of Options
Maintenance management is most effective when it is part of a broader strategic initiative and program to better manage costs of operation, asset replacement and lifecycle management (Bullock, 1979). In the case of the Convention Center, the long-term implications of upgrading the roof need to be balanced against the Return on Invested Capital (ROIC) that any capital expense will generate over time. As the Convention Center is a highly desired location for company meetings, social events and is one of the main reasons for corporations choosing to have their annual events on the Island, its functional value needs to be matching with aesthetics as well. Managing facilities is as much about the continual improvement of physical assets as it is about promoting and propagating the brand of the enterprise as well (Engebretson, Skokan, 1997). For Baderman Island, facilities and their appearance, reliability and performance over time are just as critical as the functional systems keeping the resort running. From this vantage point of making a decision about the roof replacement, a more customer-centric view can be attained. Balancing the purely utilitarian, functional, and customer-specific requirements of a facility can deliver significantly higher levels of ROIC over the lifetime of an enterprise (Rowley, 2000).
With these criterion defined of the aesthetics, contributions to brand, and the potential to augment and strengthen the financial performance of the resort, the following three options are analyzed. Option 1, the Asphalt Shingles, while the least costly from a total installation perspective at $12,000 and the lowest cost-per-year of amortization at $600 over its useful life, is not acceptable on the dimensions of reliability and customer experience. A tropical storm, hurricane or tornado could quickly rip shingles from the roof. Aesthetically and from a brand perspective, asphalt shingles appear more utilitarian would detract from the brand of the Island as being upscale. Finally the shingles would require yearly tar treatments and the cost of these could easily push the total cost into the range of the 3rd option, which is composite tile. Shingles also have a high variation in the quality levels by batch produced as they are considered the commodity of roofing materials. Due to these factors and the Total Cost of Ownership (TCO) associated with yearly maintenance, Option 1, Asphalt Shingles, is rejected.
The second option of using tiles fits with the requirements of having roofing materials that are aesthetically consistent with the ambience, look and customer experience the entire resort is attempting to accomplish. Advances in title-production have also made customization an option in tiles that are at the high-end of the market (House Building, 2007). Roof tiles are also known for their sustainability or environmentally friendly characteristics and low cost of ownership (TCO) over time (House Building, 2007). In addition to all of these attributes, tiles are known for being self-cleaning and having a very high resiliency to weather extremes.
The second option fo installing premium tiles at $50 per square foot meets with the aesthetic, branding and customer service requirements for the roof replacement. The opportunity cost of the installed however is very high at 3 weeks or $30,000 yet the tile is prospected to last 40 years. There is also an $875 per year amortization cost to this option assuming there is no incremental maintenance to be done. At $35,000 this is also the priciest option there is and needs to be re-evaluated based on costs alone.
The third option is using Composite Tile, which is tile comprised from a variety of materials including concrete and shock-resistant materials (House Building, 2007). Composite tile is comparable to the higher-end tile materials in Option 2, yet the TCO is extremely low given its resilient finish. It is consistent with the overall aesthetics of the Island report and can be tailored to specific color needs at a relatively low cost compared to the more premium tiles as well (House Building, 2007). Composite tiles also have an exceptionally low replacement rate given the combination of elements used to create them (House Building, 2007). With a total cost of $23,500 and an amortization cost of $783.33 per year, and the fact that composite tiles can be special ordered for no charge from many vendors (House Building, 2007) this alternative is recommended. The following table provides an analysis of all three alternatives.
The replacement of the Convention Center roof is a critical decision in the long-term lifecycle of that asset. The preventative maintenance aspects of this decision and the selection fo Composite Tiles will significantly reduce TCO while also causing the minimum amount of disruption to the Convention Center’s availability. Tiles are also the best approach to minimizing reactive maintenance, which would have been the case with asphalt shingles for example. Tiles will also stay consistent with the aesthetics and overall appearance of the property making it more marketable in the years ahead. All of these factors need to be taken into account in choosing a preventative and predictive maintenance strategy over the long-term for the roof replacement.
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