Buying on price alone can lead to high operating costs
Elena Epatko Murphy -- Purchasing, 9/4/2003 2:00:00 AM
Buying lift trucks may no longer be the straightforward price comparison it once was. Rather, it's evolving into a science as companies track more data on usage and costs.
When it comes to buying lift trucks, companies usually assume what they have works best, says Robert Schafer, VP, national accounts, Hyster Co., Greenville, N.C. Companies often keep replacing the same types of lift trucks even when their needs change. Without accurate assessment, they may buy on price alone, which can lead to "high operating and maintenance costs," notes Alan Cseresznyak, VP, distribution, finance, and information technology, Toyota Material Handling USA, Irvine, Calif.
Data-tracking is valuable as it reveals how companies currently use their lift trucks. Companies often have a misconception that a lift truck can be depreciated over a 7-10 year period, says Mark Graber, manager, national accounts, Mitsubishi Caterpillar Forklift America, Houston, Texas. However, depending on the severity of the application and environment, the lift truck may need to be replaced in a much shorter period, he says. For instance, if lift trucks operate in high-moisture or corrosive environments, electrical components, and movable metal parts such as bearings will wear out faster, says Graber. Also, forklifts need to be replaced more often if they are used in high-cycle applications or in plants that run three shifts, seven days a week.
Companies also need to recognize how their plant operations have changed over time and adapt materials handling equipment to meet those needs, says Graber. He describes how a company that used to keep its plant's doors open during the manufacturing process, began closing them when it added air conditioning to the facility. As a result, the company switched from LPG (liquid propane gas) to electric lift trucks to reduce emissions. Another source says companies are "rotating lift trucks to lighter duty" to lengthen their life cycles.
Define and boost productivity
Overall, customers want reliability, high productivity, and the "lowest total operating costs over the life of the truck," says Graber. Defining and achieving these goals with lift trucks, however, is challenging. Productivity, for instance, is equated with minimal downtime, but many companies don't know if they are using their lift trucks efficiently or effectively, Graber notes.
Graber points out that companies often use lift trucks for fewer hours than they think, which can affect their calculations of lift trucks' life cycles, and ultimately productivity. He notes that measuring "actual run time against usable hours" gives a more accurate idea of how much the lift truck is working. For instance, in an eight-hour shift, operators may use a forklift only 5.5 hours when idle time is considered.
When companies track their hourly usage, they often find they can consolidate their fleets. Warren Eck, VP, Yale fleet and financial services, Yale Materials Handling, Greenville, N.C., says Dept. A at one customer's location used two lift trucks in the morning, while Dept. B used two other lift trucks in the afternoon. Until the company was ready to replace all four vehicles, no one recognized the company needed only half as many lift trucks.
Another issue that affects productivity is configuration of the manufacturing site or warehouse, says Eck. Companies can use narrow-aisle trucks to increase inventory available on the floor. In addition, he suggests using smaller trucks with lower lifting capability in loading areas. In the meantime, companies can use larger, more costly forklifts only in areas where they need to lift product much higher.
Without a detailed understanding of how to improve the productivity of their lift trucks, companies often keep too many. Often there are "just-in-case lift trucks," if companies need a quick replacement, says one producer. Also, there is the practice of keeping "Joe's truck" when one operator uses a particular forklift regardless of other factors.
Tracking costs pays off
Since use of lift trucks is complex, and changing, companies are beginning to track more costs associated with their forklift fleets. Comparing usage and costs enables companies to reduce their lift truck fleets, while raising productivity. However, often companies derail this process when they neglect to separate costs into categories that accurately show how the forklifts are being used.
The problem is that "ownership costs are a gray area," says one producer. In addition to the challenge of managing these costs under any conditions, he points out that data-gathering processes are often reduced or eliminated in a slower economy. Companies may know the cost to operate a forklift over a 12-month period, but nothing beyond that, he says.
There is plenty of software to track costs offered by lift truck producers and other sources. However, lift truck suppliers say companies committed to logging in data benefit the most. Dealers often track maintenance costs for customers, but there are additional costs that companies often overlook. Part of the challenge of documenting costs is that companies put processes in place, then "move on to other cost-saving projects," says Greg Meyer, director of dealer sales, Crown Equipment Corp., New Bremen, Ohio.
Replacement parts, for instance, are a key expenditure that companies monitor, and separating data on parts is critical to understanding their true cost. Meyer says one company had an inexpensive but heavy part sent to a location by air freight to minimize downtime. When the company logged the cost, there was no separation between the shipping costs and part price.
Another supplier says if companies source less expensive parts, they can check for correlations to how many times they need to replace the parts. He cites an electrical component that has a spring. A less expensive version has a smaller spring, which needs to be replaced sooner than a part that costs more but has a longer-lasting spring.
In addition to the parts themselves, maintenance costs can provide valuable data on usage—if companies isolate each type of expense. For example, Eck says companies are recognizing the cost of the time it takes to refill propane for LPG trucks, not just the price of the propane. Also, there is significant cost in renting a lift truck while another one is being repaired as well as the transportation cost of bringing a replacement forklift to a customer location, he notes.
How lift trucks are used can also drive up maintenance costs. For instance, MCFA's Graber points out that the costs of batteries and chargers could be tracked better. Operators may engage in "opportunity charging" where they use a truck for a few hours, then charge it for awhile, and use it again. This doesn't match the recommended cycle of eight hours of discharge, eight of charging, and eight to cool down after charging. Companies that don't charge batteries correctly can overheat the lift truck, which will shorten the life cycle of the battery.
Finding cost drivers sometimes yields surprising answers. Crown's Meyer describes a situation where a company found operators significantly affected lift truck costs. The company owned over twenty lift trucks. The two newest forklifts cost the company over $6.00/hour to operate, and parts were being replaced that didn't usually fail on such new trucks, says Meyer. The two lift trucks that were cheapest to operate cost $.49/hour and $.51/hour.
It was suggested to the customer to switch operators of the lift trucks that cost the most each hour with the drivers of the lift trucks that cost the least. Meyer says that cost pattern was immediately reversed, which identified the operators as the source of the problem, not the forklifts.
Sticker price is just the tip of cost
(Additive savings yield for fleet management program)
| *Includes administrative functions, inventory costs, and fleet size. SOURCE: YALE MATERIAL HANDLING |
|
| Acquisition: | 1-2% |
| Acquisition and use (including operator training): | 4-6% |
| Acquisition, use, and reengineering*: | 13-15% |
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