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For fleet managers, 'smart' means no surprises


Monday, 12 Oct 2009 ( #432 )
News Story
Metrics are key to identifying opportunities for improvement. PHOTO: SHUTTERSTOCK
By Tom Andel, contributing editor

The worst part of any manager’s job is surprises. In many cases, a surprise is the result of poor management. That’s why after the big surprise of the 2008/9 recession, managers responsible for forklift fleets are seeing more value in heading off surprises with better information.

Forkliftaction.com News’s ongoing conversation with members of the Material Handling Equipment Distributors Association (MHEDA) and the Industrial Truck Association (ITA) this week probes what smart customers are doing with their forklifts to improve efficiency and productivity.

Most respondents not only told us of companies improving their information management skills, but they also described how this new priority is helping forklift dealers solidify their own survival strategies—built around helping customers survive.

No more parking

One strategy that has only served companies as a temporary measure and has only hurt dealers has been the tendency to park surplus vehicles. Mark Milovich, president of Lift Atlanta, Inc., says his best (and, unfortunately, some of his largest) customers are in the building materials industry. At the height of the building boom in Atlanta (early to mid-2000s), these companies were constantly upgrading and adding equipment. That changed with the sharp and very quick decline of the housing market. That resulted in these customers having more forklifts than they needed.

"When one goes down, they simply park it and use a machine that has often been transferred from a closed location," Milovich adds. "Not much in the way of improving efficiency or productivity with this large part of our customer base."

However, while Jerry Weidmann, president of Wisconsin Lift Truck Corp., describes a similar downturn in his customers’ capacity, the smartest among them did a bit more than park the unused forklifts. They, in fact, took several steps:

1. They eliminated all rental equipment;
2. They idled their most expensive-to-operate equipment as business levels declined;
3. They transferred materials handling work to their lowest-hour, most cost-effective equipment; and
4. They maintained the equipment that was kept in service to ensure the lowest total lifecycle cost.

"If equipment needed to be replaced after all of these steps, they replaced it," Weidemann explains. But again, the ideal situation involves reducing total lifecycle costs—or total cost of ownership.

Value, not price

Brett Wood, president of Toyota Material Handling USA, says the smartest fleet managers understand that the purchase price is a small component of a forklift’s true cost. The total cost of ownership is comprised of all the costs associated with a forklift, including purchase price, uptime vs. downtime, service, parts and rental costs during downtime.

In some cases, the right solution may no longer be a forklift. It might be automated guided vehicles, or even a turn-key solution, like outsourced fleet management. These may be seen as costly up front, but value is what pays the bills.

"In any industry, low prices are gaining attention," Wood says. "In our business, the best value is often tied to providing an outstanding dealer network, service coverage, preventative maintenance plans, warranty and more."

Tim Hilton, chief executive officer of Carolina Handling, LLC, agrees, saying his smartest customers are concentrating on long-term cost reduction, focused on building efficiencies into their business, improving productivity and eliminating redundant costs and non-value-added expenses.

"Fleet management is focused on data and their key metrics," he maintains.

What metrics are those?

Jim Malvaso, president and CEO of The Raymond Corporation, identifies key metrics as those tied to forklift and operator utilisation. Those help managers get beyond truck acquisition costs and to understand the cost of operations, including the operator, maintenance and energy. Metrics are also key to identifying opportunities for improvement, including truck utilisation, travel paths and lifting versus transport efficiencies.

"This information will help warehouse operations in their layouts, slotting and pick routes," Malvaso explains.

Indeed, several dealers responding to Forkliftaction.com News’s survey indicated that they are now partnering with customers in consultative relationships.

"Through Yale Fleet Management, we have done a much better job in cost accounting for our customers and brought large efficiencies," says Kenneth MacDonald, president of M&G Materials Handling Co. in East Providence, RI. "Most have enjoyed an average of 15% reduction in their fleet operating cost."

Bill Rowan, president of Sunbelt Industrial Trucks in Dallas, TX, adds that fixing their costs and making them more predictable is another valid strategy.

"With the costs of their equipment and maintenance fixed for a number of years, they do not have to make decisions that might jeopardize the safety of the equipment in order to cut corners," he explains. "Even if you are adding or replacing in this market, it makes sense to only pay for utilisation and to lock in maintenance costs over the period of the lease."

Keeping an eye on energy

Right-sizing fleets and using technology to manage them better are major feats, but the best managers also keep the big picture in mind. They work on what’s best for their entire company. Energy costs are one of those common denominators and these days, energy management is a major component of fleet management.

Dave Griffith, president and CEO of Bristol, PA-based Modern Group Ltd., is seeing a number of creative energy solutions, including generating power off the grid with standby power.

"New regulations will drive off-grid power generation," he believes. "We’re also seeing a shift to electric in non-traditional applications as folks look at their total cost of operations."

Meanwhile, Bruce Pelynio, president and CEO of Memphis-based Heli Americas, which represents a major line of Chinese-made forklifts in the States, emphasises cost over carbon as the main driver of alternative energy options. He points to Class 4 internal combustion engine models as an example, citing what’s happening as California tries to regulate emissions.

"California will lead the carbon footprint effort," he says. "The over-the-road-truck guys get that this January. All the truck manufacturers are saying you can figure on adding USD9,000-USD11,000 per tractor to meet the current standard. If you downsize that to a forklift, you’ll probably be looking at USD3,000 for additional cost on diesel. Unless things are subsidised, I don’t see green taking off a lot because people won’t be willing in a recovering economy to spend the exponentially higher cost for the green footprint unless forced to."

What about fuel cells? Long before we see fuel cells take off, Pelynio predicts, we’ll see a move to opportunity charging and fast charging.

No more lip service

Those are the kinds of opportunities the smartest fleet managers are considering—with input from their forklift dealers and OEMs. The security that comes from these kinds of relationships has resulted in a change in fleet management best practices.

In fact, the very notion of best practice has gone beyond the "lip service" many managers have given it in the past. Duncan Murphy, president of Riekes Equipment Company in Sioux Falls, SD, says his best customers now review their fleet mix and make sure they are right-sized and on a standard spec as much as possible.

"Continuous improvement" was always a popular management buzz phrase, but Jim Moran, executive vice president of Crown Equipment Corp., concludes that not only is it getting real, but it’s being merged with safety. "Years ago, those two things weren’t always hooked up," he says. "Our customers are asking, what can I do to be more efficient and keep my cost of operation down?" Safety pays.

Next week, Part 3 in Forkliftaction.com News’s survey report examines trends in the lease vs. buy decision.
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