Lowering Your Total Cost Of Operation Of Your Forklift Fleet

Sometimes it comes down to a guess and that guess can dramatically affect your total cost of operating a forklift fleet.

The truth is, many companies that lease their forklifts are often charged overtime at the end of the lease or may have to keep equipment that has escalating maintenance costs because of improper structuring of finance contracts.

Forklift fleet.
(Courtesy: USS George Washington on flickr.com)

Why does this happen? To get the right estimate of how you use your forklifts depends on cooperation between the Operations Department and the Finance Department. Understandably, the two departments have different agendas. Still the Total Cost of Operation (TCO) of a forklift fleet depends on cooperation and a continuous dialogue between the two departments. For example, the two departments need to cooperate when determining the “health” of the fleet, which is important in determining when to replace. To have a true understanding of this, the financial department needs to provide financial information concerning use data and maintenance records to the Operations Department. If both departments analyze the data together, they can have a better handle on a fleet’s TCO.

Many companies depend on guessing when it comes to estimating expected annual use of the fleet. Analysis of meter readings at the end of a lease term points out that use estimations are wrong 89% of the time. What this means is that nine times out of 10, forklift fleet use is either over-utilized or underutilized as far as the lease allowance is concerned.

When the forklift fleet is underutilized, the monthly payment is higher than it should be. And when it is over-utilized, it is susceptible to heavy-duty overtime charges at the end of the lease.

There are things you should do prior to negotiating the lease terms on your forklift fleet. They include:

· Pulling quarterly or annual meter reads to monitor the utilization of the fleet.
· Regularly compare actual use data with the lease contract allowances.
· Base decisions of when to return equipment on the condition of the asset and not the expiration date of the lease.

Consider this hypothetical. A fleet of forklifts is leased for five years on an estimated use of 2,000 hours per year (10,000 contract hours). Halfway through the contract your data analysis discovers that some forklifts have been used 4,000 hours per year, while other have been used only 1,000 hours. Knowing this, the Operations Department and the Finance Department to shorten the terms of the over-utilized assets to avoid overtime charges and escalated maintenance costs. You can also consider extending the term of the underutilized forklifts at a lower monthly payment that matches the actual use. Taking steps like this can save a company hundreds of thousands of dollars in overtime, maintenance and overpayment costs.

To make certain that your Operations and Finance Departments are on the same page as far as TCO, consider following these tips.

· Hold workshops between Operations, Finance, and fleet personnel so that they understand the Total Cost of Ownership model. Then hold regular meetings where the players discuss the status of the fleet.
· If your company doesn’t have a web application or platform that permits you to store TCO-related data, then create a spreadsheet that includes operational, finance and maintenance data related to each asset in the fleet. Update the data quarterly to identify issues and better manage them as soon as they occur.
· If none of these are possible, then consider getting software that can store this information or find a fleet-centric financing partner who can supply these tools along with the fleet you lease from them.