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Fleet Management: Do You Know the Real Cost of Your Forklift Fleet?

February 10, 2012

The acquisition cost of a forklift is only one factor in the overall cost of ownership. The majority of costs involve operating and maintenance expenses. While fleet management is widely known in the trucking industry, it is also a big advantage to companies using it for their forklifts and other material handling assets. Oftentimes, implementing a fleet management program results in a significant cost savings and longer equipment life cycle.

Fleet management is not a small project. Without a dedicated resource to manage the project, knowing the real cost of your forklift fleet is nearly impossible. While a vendor specializing in fleet management can be secured, understanding the program and justifying the costs can be daunting.

Below are questions a fleet management program can answer:

Do you operate the right equipment?
Equipment must be suited for the weight and size of the transported product as well as the available warehouse space and racking.

Is every forklift in use?
Based on the hour meter and the number of warehouse shifts, it is important to determine if every forklift is optimized. Every forklift will be located in the warehouse and analyzed for how often it is operated. A forklift used in a lower usage area may be periodically swapped with a forklift used in a high production area.

Do you have too many or too few units?
After determining the usage of each forklift, it will be decided if the size of your fleet is appropriate for your production.

Are forklift operators driving safely?
Unsafe operation results in damage and needed repairs of the equipment. Incidents found to be abuse are not covered under warranty, generating unexpected maintenance costs. Regular forklift training classes and consistent safety messages can be implemented to decrease the amount of incidents.

Are repair and maintenance invoices consistent and accurate?
Determining the budget for repair and maintenance can be difficult. Many administrative hours can be spent processing purchases orders and invoices for the equipment. A thorough review of each invoice for consistency and accuracy will answer if your company spends additional dollars for a lift having the same repair as another lift at a different cost. Analysis of the planned maintenance (PM) frequency can also point to inefficiencies and additional cost. Planned maintenance done too frequently or not often enough can both have negative cost implications.

Do you know why downtime occurs?
Research of downtime may show how the issue originated. Reviewing trends by department, operator and type of equipment can point to areas of opportunity.

When is it time to replace equipment?
Understanding the true cost of ownership is the key to determining whether it is in the best financial interests of the organization to keep or replace existing equipment. A fleet management program will help track the cost per hour of existing equipment while simultaneously running a comparison of the costs associated with acquiring a new unit with comparable specifications. The guess work is eliminated and replaced with concrete data to aid in the decision making process.

Learn more details about ProLift’s fleet management program. Contact us today to speak to a consultant.

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Electric Forklifts versus IC Forklifts

January 20, 2012

The great debate … electric forklifts versus IC (internal combustion) forklifts. This decision is not only for new companies. Established companies may also weigh the advantages and disadvantages of each fuel, especially if there is a shift of priorities to “go green.”

Electric Forklifts
The forklift industry has experienced a shift in sales, with electric forklifts now counting for 60% of the market’s purchases.

Electric forklift advantages might include:

Better for the environment – Electric forklifts have zero emissions, which eliminate an employee’s exposure to contaminated air and the need for warehouse ventilation. They use no disposal waste (i.e. engine and transmission fluid) and a high percentage of battery lead is recycled.
Operator ergonomics – Less noise and vibration is generated by the electric forklift, reducing operator fatigue.
Decreased repair costs – Electric forklifts have less moving parts to maintain and repair. AC motor technology further eliminates brushes to create no spark hazard and better speed control.
Lower fuel costs – Batteries for the electric forklift can be recharged.

With these advantages come other factors to consider. Although electric forklifts have lower lifetime fuel costs, the initial cost is higher. In addition to the cost of the battery, an area for charging, watering and cleaning must be arranged. Electric forklifts are at a disadvantage when using the forklift in an outdoor application, especially if the environment is wet. Downtime can also be experienced if the battery is not charged or equalized properly.

IC Forklifts
The market is still strong for IC forklifts. They account for about 40% of the market and are dominant in outdoor, around-the-clock or high throughput applications.

IC forklift advantages might include:

Flexible application – IC forklifts are good indoors and outdoors. They operate well in rain and other inclement weather.
When throughput requirements are high – The fuel savings associated with electric trucks is greatly diminished or negated when multiple batteries are required to keep an operation running. Furthermore, electric trucks have slower travel speeds and acceleration which may necessitate additional equipment and personnel to move the same amount of product.
Lower initial cost – Only the investment of propane tanks and their storage area is needed to operate the forklift.
Easy to refuel – IC forklifts running out of fuel do not require a lengthy charging period. An operator can easily replace the propane tank in 5 minutes and then continue production. This is especially important with a multi-shift operation.

Other factors to consider when purchasing an IC forklift include providing ventilation in the warehouse due to emissions, operator fatigue due to noise and vibration and the physical requirements of changing propane tanks. Finally, if the operation does not require an IC forklift you should consider the lifetime costs of maintenance, repairs and fuel cost when compared to an electric forklift.

To compare electric forklifts versus IC forklifts for your company, email ProLift at info@proliftequipment.com to request a Costs Summary spreadsheet.

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Is It Time To Upgrade Your Forklift?

January 12, 2012

As service invoices stack up for your used forklift, it may be time to consider the replacement of the forklift. To determine if the service costs are reasonable and easily explained, follow these best practices.

Cost per hour
Many companies struggle to justify the purchase of a new forklift because the current one is paid in full. However, when a repair is needed, it can often drive the cost per hour well above industry averages. Your best indicator of forklift replacement is the utilization and cost per hour according to the unit’s maintenance history. It’s best to have at least 12 months of maintenance history; however, using several years of data is beneficial to ensure accuracy (i.e. production may peak during a specific season or your company had a short-term project affecting forklift usage).

Number of hours
Typically, an internal combustion (IC) forklift with over 10,000 hours or an electric forklift with over 12,000 hours is due for replacement. Forklifts with high hours will experience failures with major components such as mast chains, carriage and mast rollers, shimming and transmission or drive train work. Electric forklifts will also need battery replacement.

Hidden costs
There are hidden costs of keeping dated equipment as related to safety, ergonomics, emissions and efficiency. An aging truck lags in efficiency, making it harder for you to keep the same production pace. Newer equipment will have technology improvements. For example, forklifts built prior to 2006 protect your warehouse from harmful emissions.

If your company experiences a significant change in product or application, using the wrong forklift can result in additional costs. Examples of poorly applied equipment would be: operating electric forklifts outside, utilizing reach trucks for unloading trailers, using non-freezer package forklifts in a freezer or lifting loads heavier than the capacity of the forklift.

Getting Started
To stay aware of your forklift’s maintenance history, create a separate expense category for forklift maintenance. The most effective forklift maintenance tracking systems also include categories for expenses. Examples might include: tires, planned maintenance, damage and breakdown. This can be accomplished in-house or by contracting with a company for Fleet Management services. Create a check and balance system for hitting expenses against the right asset. On the completed invoice, capture whether the repair was due to abuse. Hour meter readings are also critical input.

If you would like more information on ProLift and its Fleet Management services, contact us today to speak to your consultant.

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Forklift Purchasers May Have Tax Credits and Assistance Available

July 12, 2011

Thanks to the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 signed by President Obama on December 17, 2010, forklift purchasers may see tax refunds for the purchase of new equipment and the use of alternative fuels such as propane. The California Air Resources Board is also offering $5 million dollars in assistance to small businesses for the replacement, repowering or retrofitting of off-road diesel vehicles.

Summary

1. This new tax law allows 100% of the cost of new equipment to be written off in 2011. (See http://www.section179.org)

2. The legislation makes available a 50-cent per gallon tax credit on alternative fuels such as propane. The credit is eligible through December 31, 2011 and has been made retroactive to 2010. The Act has been extended several times by Congress since 2006.

*Forklift Propane tax credit. For more information about these tax credits, please consult your tax attorney. Relevant IRS forms may be viewed and downloaded by going to www.irs.gov/formspubs/index.html.

3. For California users: The Air Resources Board is offering $5M from the federal government’s American Recovery and Reinvestment Act to assist California small businesses replace, repower or retrofit their off-road diesel vehicles. This would include all Toyota diesel forklifts, diesel tow tractors and AICHI boom lifts to qualified applicants. For more information on this off-road vehicle loan program, go to http://www.arb.ca.gov/msprog/ordiesel/documents/calcap_ag_off_road.pdf or call 1-866-6DIESEL or email 8666diesel@arb.ca.gov.

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Four Ways To Keep A Forklift Purchase In Your Budget

June 15, 2011

The purchase of a forklift is a major investment for any company. Depending on options and fuel type, new lifts may range from $18,000 – $28,000. With the pressure of the economy and the need to increase the company’s bottom line, replacing or adding to your current forklift fleet may seem impossible. However, four common options can offer a solution.

Lease & Finance Options

There are many products through lending institutions that offer custom designed lease products for your individual business needs. Some of these options include:

Skipping a lease payment, which is beneficial for seasonal business when revenue is not generated monthly.
Two term leases, which gives the ability to walk away at the end of the first period or significantly reduce the payment during the second term.
Accelerated or decelerated payments, which is a fixed term with payments increasing or decreasing over the term. This option can help decrease your interest expense or reduce your current payment until business improves.

Buy Used

If your equipment runs less than 4 hours each day, buying used may work for your application. Many used trucks arrive in the fleet when they are turned in for trade or off-lease. In addition to the initial cost savings, most units have been reconditioned by the dealer. Upgrades may include paint, tires and safety features. Warranties are often included or available for upgrade.

Consider an Electric Pallet Truck

The electric pallet truck (EPT) is often overlooked, but will save thousands of dollars on the purchase. For applications requiring only a horizontal movement of product, you should consider an EPT.

Rental or Rental Purchase Option (RPO)

If you have a forklift need but do not have the money in the capital budget, try renting. Companies will consider discounting rental rates for long-term commitments depending on the application and usage.

A twist on renting equipment is a rental purchase option (RPO). Just as the name suggests, a new or used truck can be rented for a predetermined period and you have the option to purchase that truck while applying a portion of the rental payments. The key to RPOs is determining your long-term needs and the decision to own the truck.

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Fleet Management: Do You Know the Real Cost of Your Forklift Fleet?

Electric Forklifts versus IC Forklifts

Is It Time To Upgrade Your Forklift?

Forklift Purchasers May Have Tax Credits and Assistance Available

Four Ways To Keep A Forklift Purchase In Your Budget