Summit Maritime: Facility Location and Layout Design Custom Case Solution & Analysis

1. Evidence Brief

Financial Metrics

Current annual facility expenditure: 1.2 million dollars.
Site A lease cost: 55000 dollars monthly with 3 percent annual escalation.
Site B lease cost: 42000 dollars monthly with fixed 5 year pricing.
Estimated relocation capital expenditure: 2.8 million dollars including equipment upgrades.
Target internal rate of return for facility investment: 15 percent.
Projected revenue increase from expanded capacity: 22 percent within year two.

Operational Facts

Current facility size: 25000 square feet with 82 percent utilization.
Site A specifications: 40000 square feet, 5 miles from the primary deep water port.
Site B specifications: 55000 square feet, 18 miles from the primary deep water port.
Current average repair turnaround time: 14 days.
Workforce composition: 65 certified marine welders and 20 support staff.
Material handling constitutes 35 percent of total labor hours in the current layout.

Stakeholder Positions

CEO: Prioritizes market share growth and proximity to major shipping lines.
Chief Operating Officer: Focuses on reducing material handling bottlenecks and improving safety scores.
CFO: Expresses concern regarding the debt service coverage ratio if relocation costs exceed 3 million dollars.
Lead Technicians: Prefer Site B due to better parking and newer local amenities.

Information Gaps

Specific zoning restrictions for hazardous waste disposal at Site B are not detailed.
Competitor expansion plans in the vicinity of Site A remain unconfirmed.
Detailed breakdown of utility cost variances between the two locations is missing.

2. Strategic Analysis

Core Strategic Question

Should Summit Maritime prioritize geographic proximity to customers to minimize service lead times or maximize internal floor space to optimize long-term throughput and cost?

Structural Analysis

Location Factor Rating indicates that proximity to the port is the primary driver of competitive advantage. While Site B offers more space at a lower price point, the 18-mile distance introduces significant logistics costs for transporting heavy ship components. Systematic Layout Planning reveals that the current facility suffers from a functional layout that forces redundant movement. A cellular layout at a new site would reduce travel distance for parts by 40 percent.

Strategic Options

Preliminary Recommendation

Summit Maritime should secure Site A. The proximity to the port is a non-negotiable requirement for high-value emergency repairs which carry the highest margins. The space at Site A is sufficient to implement a U-shaped flow layout that addresses current operational bottlenecks without the transit penalties inherent in Site B.

3. Implementation Roadmap

Critical Path

Month 1: Finalize lease for Site A and secure environmental permits for maritime industrial work.
Month 2: Finalize the detailed floor plan using Systematic Layout Planning principles to minimize cross-traffic.
Month 3: Procure new overhead cranes and specialized welding bays.
Month 4 to 5: Phased relocation of departments, starting with low-volume engine components to ensure zero total downtime.
Month 6: Full operational transition and decommissioning of the old facility.

Key Constraints

Labor Retention: The move may increase commute times for 30 percent of the technical staff, risking attrition of certified welders.
Permit Timing: Local regulatory approval for heavy industrial operations can take longer than the projected 30 days.
Equipment Lead Times: Custom overhead cranes currently have a 16-week delivery window.

Risk-Adjusted Implementation Strategy

The plan assumes a 20 percent buffer in the relocation budget to account for unforeseen structural reinforcements at Site A. To mitigate labor risk, the company will implement a temporary commute subsidy for the first 12 months. Production will run 24/7 during the peak move month to build a 15-day inventory of repaired parts, shielding customers from transition delays.

4. Executive Review and BLUF

BLUF

Relocate Summit Maritime operations to Site A immediately. Proximity to the port is the decisive factor for maintaining premium service levels. The move will reduce turnaround times by 15 percent and increase throughput by 25 percent through a corrected facility layout. The higher lease cost is offset by the elimination of 200000 dollars in annual external logistics expenses. This transition secures the market position against emerging regional competitors.

Dangerous Assumption

The analysis assumes that the current 14-day turnaround time is limited by space rather than labor availability. If the bottleneck is actually the number of certified technicians, expanding the facility will increase fixed costs without generating the projected revenue growth.

Unaddressed Risks

Market Risk: A downturn in global shipping volumes could leave the company with 40000 square feet of expensive, underutilized space.
Financial Risk: The 3 percent annual rent escalation at Site A may outpace repair price increases over a 10-year horizon.

Unconsidered Alternative

The team did not evaluate a short-term lease of mobile repair units that operate directly on-site at the port. This asset-light model could expand capacity during peak periods without the long-term liability of a fixed facility lease.

Verdict

APPROVED FOR LEADERSHIP REVIEW

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Write

Option	Rationale	Trade-offs	Resources
Site A: Proximity Model	Minimizes transport time and maintains high visibility with port authorities.	Higher rent and limited future expansion beyond 40000 square feet.	High initial capital for specialized compact machinery.
Site B: Scale Model	Provides maximum capacity for large scale engine overhauls.	Increased fuel and labor costs for transit to and from the port.	Investment in a dedicated heavy transport fleet.
Hybrid Optimization	Retain current site for small repairs and lease a small warehouse for storage.	Does not solve the fundamental layout inefficiency.	Minimal capital but higher management complexity.