Rediscovering The Classics, Volume VIII: Forklift Utilization

Time is money and in a warehouse the forklift is a time saver and a money guzzler. Companies that pay attention to how they use and maintain their fleets can lift economy and efficiency to new heights.

In warehouse and distribution facilities, it doesn’t get more basic than using forklifts to move product around. All the economies and efficiencies state-of-the-art sortation and racking equipment, high-speed conveyors, and warehouse management systems bring to the warehouse floor are futile if companies don’t manage their forklift fleets properly.

Scaling materials handling assets to seasonal demands requires a thoughtful plan for optimizing forklift fleets without wasting resources or expending capital beyond what is necessary. Businesses need to consider the types of lift trucks that are best suited to meet their unique warehouse needs as well as the best financing strategies for budgeting investment.

Creating the foundation for a well-run distribution or warehouse operation begins at the pallet level—the domain of the forklift.

Operationally, effective and efficient facility throughput rests on the yoke of well-machined lift trucks. Conversely, poorly managed or abused fleets can have a considerable impact on labor utilization, customer service, and total warehouse costs.

“Getting product in and breaking pallets down is basic warehousing. If you take the forklift out of the equation you have a problem,” says Michael Gary, vice president, sales and customer service, for LTM Services, a Manorville, N.Y., fleet cost management consulting firm.

Optimization begins with marrying the types of forklifts companies use with how a facility is tasked for distributing product. Lift trucks come in a variety of models, from counterbalanced units and low-lift walkies to swing reach turrets; with a variety of power options including electric, LPG, diesel, and gasoline; and for a number of different DC set-ups such as very narrow aisles (VNA) and wide-open cross-dock spaces.

Food distribution companies, for example, use staging areas to move palletized product, so they unload and load shipments with full-wheel machines. Consumer goods companies with smaller SKUs and more elaborate storage, retrieval, and racking systems may prefer reach trucks, turrets, and pallet jacks to deliver to aisle and pick locations.

When looking at new forklift options, it’s important for businesses to consider how they impact the overall design and execution of a warehouse facility.

Gary recalls one customer that redesigned a warehouse to use VNAs, and invested in lift trucks that could operate within these tight spaces. Eventually, the cost of maintaining more expensive equipment, with greater upkeep, became problematic for the company. But revamping the warehouse to accommodate a new fleet set-up also came at an extraordinary cost, so the company was forced to continue with the status quo.

“Businesses need to consider the variety of forklifts they want to use, and how it impacts cubage. Many original equipment manufacturers hire consultants to help customers optimally configure their distribution centers,” he says.

Beyond strategic planning, sourcing options vary, so businesses have to align their demand patterns to identify the best means for financing their fleets—from buying units outright, renting or leasing, or outsourcing fleet management to a third party.

“Most companies rent or lease their lift trucks. Dropping capital on equipment is not always the best option,” Gary explains. “Regardless of whether you lease or buy, you still pay for maintenance. When you rent, you don’t pay for upkeep but it generally is a more expensive option.”

Leasing is popular, but businesses need to be careful about their contractual arrangements. Many companies have to pay for overage (hours used) after the lease is up.

“A third-party lease company often will assess machine use every month,” says Gary. “During peak periods, warehouses will likely have overage hours. But if you look at use over the entire year, when there are months with less volume, there may not be overage hours. This is a negotiable coefficient, so businesses should look carefully at their lease arrangements and discuss these concerns at the beginning of the process.”

Seasonality also challenges warehouses with planning out their forklift needs, which can similarly impact how they finance and manage fleets.

“Renting units for three or four months to meet peak volumes might be one option,” adds Gary. “But it could be more economical to lease a machine for the year and keep it in the corner until demand dictates. You have to parse out your utilization needs.”

Alternatively, companies can lean on third-party logistics providers to manage asset requirements and maintenance issues.

As with any piece of logistics equipment, properly maintaining lift trucks and training employees to use them are important steps in reducing total operational costs. Maintenance and training go hand-in-hand. If warehouse workers take care of their equipment, trucks have a longer life span.

“Imagine 40 people driving 40 BMWs that belong to you. This scenario is a reality for our customers,” explains Gary. “Most of the forklifts used in warehousing are comparable in cost to a BMW 318i. Operators are loose in the warehouse and are expected to produce a certain volume of work each day. The race is on, but often at the expense of care for the machine.

“Operators need to be trained properly on all forklifts,” he adds. “Companies want to put drivers on a machine that they own to get better performance. This way they can track abuse and provide more driver training if necessary.”

Truck abuse can be a major economic drain, costing companies $100,000 annually in repairs. Companies have to let operators know the ramifications of abuse—especially because contractual agreements and warranties will not cover misuse such as battery destruction.

For warehouses that utilize electric lift trucks, maintenance is especially critical when it comes to managing details such as battery care. Given the fact that 95 percent of forklifts used today are electric, companies have to look at where to locate battery charging and swapping stations. At the very least, improperly charged batteries can reduce a truck’s lifespan; at worst, they can destroy equipment.

Beyond allocating resources to address battery usage, Gary recommends breaking out the total cost of the unit when soliciting forklift RFPs. “We break out the truck, battery, and charger because a lot of cost is involved in each,” he says. “Manufacturers will bundle these together as part of a package.”

Other details companies should consider when looking to reduce forklift costs and capture greater efficiencies inside the warehouse include:

• Pallet selection: Pallet housekeeping can keep lift trucks running longer. Composite pallets don’t break up like wood ones do. Pallet jacks often chip off shards of wood and if these get into equipment such as lift trucks, they can contribute to maintenance issues. If a company invests in more expensive pallets, it may consider cost savings attributed to less vehicle abuse.
• Parts replenishment: Companies need to plan for replenishing parts. Creating a maintenance program with a dealer, or partnering with a third-party logistics service provider, can help manage fleet upkeep.
• Invoice auditing: Every forklift carries a warranty for parts and labor, so warehouse operators should carefully audit invoices to identify when the manufacturer covers maintenance.
• Labor management: When optimizing fleet use, businesses should look at operator shifts and performance. Are they picking, stocking, or sorting? Can they be stocking and sorting at night to better utilize assets and be more productive?

Forklift management isn’t a one-time proposition. It requires continuous evaluation and planning to requisition and manage fleets efficiently and economically. Proper or improper utilization invariably carries over to materials handling and labor management functions.

“Businesses have to consider keeping enough machines to satisfy need,” says Gary. “If they operate 95 units, can they get away with using 65? This would reduce the asset cost as well as associated labor and maintenance.”

A forklift’s value to the warehouse is immeasurable. But taking a measured approach to dissecting performance metrics and breaking out maintenance and labor costs can help uncover countless economies from the floor on up.

“Even as technology increases the way some companies employ their forklift fleet, the bottom line is that product must be moved from trucks to racks and eventually back to trucks again,” says Gary. “The only tool that can accomplish this task is the forklift.”