Contributing Editor Toby Gooley is a writer and editor specializing in supply chain, logistics, and material handling, and a lecturer at MIT's Center for Transportation & Logistics. She previously was Senior Editor at DC VELOCITY and Editor of DCV's sister publication, CSCMP's Supply Chain Quarterly. Prior to joining AGiLE Business Media in 2007, she spent 20 years at Logistics Management magazine as Managing Editor and Senior Editor covering international trade and transportation. Prior to that she was an export traffic manager for 10 years. She holds a B.A. in Asian Studies from Cornell University.
If you've been keeping up with goings-on in Washington, then you're aware of policy changes implemented earlier this year that are affecting U.S. businesses. What you might not know is that two in particular—changes in tax law under the Tax Cuts and Jobs Act of 2017, and the imposition of tariffs on a wide range of products—could have a direct impact on companies that buy, sell, or manufacture forklift trucks and parts in the United States.
Here's a look at what the federal government's actions on taxes and trade could mean for forklift buyers and suppliers. This article is intended to provide general information; be sure to consult your tax and customs-compliance advisers for guidance on how these changes will affect your company.
FINDING TREASURE IN TAXES
By all accounts, 2018 is a good year to invest in capital equipment, including forklifts. The Tax Cuts and Jobs Act of 2017, passed by Congress in late December, included provisions that make it advantageous to buy equipment now.
One such provision allows many companies to write off capital equipment more quickly than in the past. Specifically, revisions to Section 179 of U.S. tax law allow qualified businesses to deduct more of the cost of new and used equipment, up to a specified limit, and fully deduct it in the same year the property is placed in service, rather than having to depreciate it over a number of years, explains Susan Rice, program manager for Raymond Leasing, a division of forklift maker The Raymond Corp. "Section 179 targets small to medium profitable corporations—you have to be profitable to get the benefit," she notes.
The new law also doubled the maximum deduction allowed under Section 179 to $1 million from $500,000 per year. In addition, it increased the phase-out threshold (the point after which the tax deduction is gradually reduced, or "phased out") for equipment that is eligible for Section 179 to $2.5 million from $2 million. (For more information, see forklift dealer Brodie ToyotaLift's article about Section 179 deductions. The post includes links to a tax-savings calculator published by Section179.org, an organization that promotes the provision's benefits for businesses.)
There's good news for businesses that spend more than $2.5 million per year on capital equipment too. All companies can apply "bonus depreciation" to amounts over the $2.5 million limit, according to Rice. Previously, bonus depreciation allowed buyers to write off 50 percent of the value of new equipment in its first year of service. That has doubled, to 100 percent for qualified equipment acquired and placed in service before Jan. 1, 2023. Bonus depreciation can also now be applied to used equipment. But some restrictions apply, as the saying goes. Most importantly, you must be the first owner of the used piece of equipment, Rice points out. For example, if you use a forklift under an operating lease (i.e., transfer of ownership is not included in the lease) and you buy the residual lease from the leasing company, you become the first owner of what is now used equipment and can write off 100 percent of that residual value in the first year of ownership.
In addition, changes to the U.S. generally accepted accounting principles (GAAP) may affect those who lease forklifts. As Rice explains it, capital leases—which depreciate over time, are counted as debt, and typically transfer ownership at the end of the term—are treated as an asset on the company balance sheet. By contrast, operating leases, which do not involve transfer of ownership, are currently treated as operating expenses on the income statement. But effective Jan. 1, 2019, that will change, as both operating and capital leases lasting more than 12 months will be treated as assets on balance sheets.
These changes in depreciation and accounting rules may cause some companies to revisit the lease vs. buy decision, Rice says, but there are still situations where leasing may be preferable. Much depends on individual circumstances, she says, adding, "We tell customers that every company should consult their tax adviser to understand what opportunities these changes may provide to their organizations."
TANGLING OVER TARIFFS
Both 2016 and 2017 set consecutive records for U.S. forklift sales. So far, 2018 appears to be on the same course. Sales are running higher than at this time last year, according to Brian Feehan, president of the Industrial Truck Association (ITA). "All the economic forecasts we've seen for 2019 are looking good as well," he says. "We're hoping there are no major disruptions."
The potential disruptions Feehan refers to could come from tariffs imposed earlier this year by the Trump administration and from possible changes to the North American Free Trade Agreement (NAFTA). A 25-percent tariff on steel from numerous countries, including the United States' biggest trading partners, that took effect June 1 has raised production costs for U.S.-made lift trucks and parts that include imported steel. Some observers expect prices for U.S.-made steel will also rise as tariffs on imports take some of the pricing pressure off U.S. steel producers.
That's just one of the ways tariffs could affect forklift buyers and suppliers. A second round of tariffs, which took effect early last month, will raise the costs of some forklifts imported from China. Previously, Chinese-made powered industrial trucks, like all foreign-manufactured forklifts, entered the U.S. duty-free. But the 25-percent tariffs on $34 billion of Chinese-manufactured goods that took effect July 6 apply to several categories of electric and nonelectric rider-type forklifts as well as some parts and components. According to U.S. Department of Commerce figures quoted by ITA, industrial trucks and parts worth approximately $538 million were imported from China in 2017; the 25-percent tariff would add an estimated $134 million to the cost of those items. Examples of Chinese-made forklifts sold in the United States include the Baoli, Liu Gong, Hangcha, Heli, Noblelift, and BYD brands. A few U.S.-based companies sell trucks manufactured in China under their own brands and/or include Chinese-made parts in forklifts they assemble here.
Currently, China imposes a 9-percent duty on U.S.-made industrial trucks. If it should decide to add a retaliatory 25-percent tariff on top of that, that would add $13 million in costs to the $53 million of U.S.-made equipment sold in that country in 2017, according to the Commerce Department and ITA. The organization's position is that all tariffs on lift trucks should be eliminated, Feehan says.
While the battle over tariffs has heated up, NAFTA negotiations are on hiatus. The biggest worry for lift truck makers is that the U.S. could make good on President Trump's threat to do away with the trade pact if he does not get the concessions he wants. The United States has also threatened to temporarily suspend the treaty until negotiations have concluded to its satisfaction.
U.S. lift truck makers agree that NAFTA needs modernization to reflect today's business climate, expand U.S. manufacturing, and make American products more competitive. But, Feehan cautions, "let's not lose sight of the fact that it's been very valuable to all three parties. From the forklift industry's perspective, NAFTA has been extremely effective."
The numbers make that crystal clear. The U.S. exports more than $900 million of powered industrial trucks annually to Canada and Mexico, with a combined trade surplus with those countries exceeding $460 million in 2016. Should NAFTA be eliminated or temporarily suspended, U.S.-made forklifts that are now exported duty-free to Canada and Mexico could be subject to duties. That could lead Canadian and Mexican buyers to buy more lift trucks from other countries, Feehan says, jeopardizing U.S. jobs and a thriving U.S. manufacturing industry.
RAYS OF HOPE
What does all this mean for forklift buyers? For some, higher prices may be on the horizon. With so many countries subject to the steel tariff, manufacturers' production costs will rise. If they purchase more expensive U.S.-made steel instead, production costs will still go up. Either way, those added costs could be passed on to customers. (U.S. manufacturers may apply to the Department of Commerce for exemption from the tariffs, but companies that have done so have reported a burdensome application process and glacially slow response from the government, if they received one at all.)
The impact of tariffs on Chinese forklifts and parts is less certain. To mitigate those added costs, manufacturers could shift some production from China to the U.S., or they could import equipment from factories located outside of China. But manufacturing can't turn on a dime, which means forklift makers that already have global production networks in place are best positioned to weather the tariff storm.
One of those is Kion North America, part of Kion Group, the world's second-largest provider of lift trucks. Kion Group, which owns the Linde, Baoli, Still, and Dematic brands, has manufacturing plants worldwide, including in the U.S. and China. "As a member of a global supply chain, Kion North America is certainly being affected by the recently imposed tariffs," said Vincent Halma, president and chief executive officer, in an e-mail to DC Velocity. "Changes within supply chains, including tariffs, are a regular occurrence and simply part of being a global company. However, because we are a global company, that also enables us to find a solution to ensure this is just a bump in the road. To minimize the effects on our distribution network and customers, the solution will be multifaceted, including, but not limited to, in-depth cost analysis on existing products and leveraging other areas of our global supply chain." The company will continue to monitor the situation closely and make adjustments as necessary, he said.
There's one ray of hope. It's possible that the considerable tax benefits afforded by the Tax Cuts and Jobs Act of 2017 could cancel out, or at least substantially mitigate, higher industrial truck prices. But that—like so much involving government policy these days—remains to be seen.
Progress in generative AI (GenAI) is poised to impact business procurement processes through advancements in three areas—agentic reasoning, multimodality, and AI agents—according to Gartner Inc.
Those functions will redefine how procurement operates and significantly impact the agendas of chief procurement officers (CPOs). And 72% of procurement leaders are already prioritizing the integration of GenAI into their strategies, thus highlighting the recognition of its potential to drive significant improvements in efficiency and effectiveness, Gartner found in a survey conducted in July, 2024, with 258 global respondents.
Gartner defined the new functions as follows:
Agentic reasoning in GenAI allows for advanced decision-making processes that mimic human-like cognition. This capability will enable procurement functions to leverage GenAI to analyze complex scenarios and make informed decisions with greater accuracy and speed.
Multimodality refers to the ability of GenAI to process and integrate multiple forms of data, such as text, images, and audio. This will make GenAI more intuitively consumable to users and enhance procurement's ability to gather and analyze diverse information sources, leading to more comprehensive insights and better-informed strategies.
AI agents are autonomous systems that can perform tasks and make decisions on behalf of human operators. In procurement, these agents will automate procurement tasks and activities, freeing up human resources to focus on strategic initiatives, complex problem-solving and edge cases.
As CPOs look to maximize the value of GenAI in procurement, the study recommended three starting points: double down on data governance, develop and incorporate privacy standards into contracts, and increase procurement thresholds.
“These advancements will usher procurement into an era where the distance between ideas, insights, and actions will shorten rapidly,” Ryan Polk, senior director analyst in Gartner’s Supply Chain practice, said in a release. "Procurement leaders who build their foundation now through a focus on data quality, privacy and risk management have the potential to reap new levels of productivity and strategic value from the technology."
Businesses are cautiously optimistic as peak holiday shipping season draws near, with many anticipating year-over-year sales increases as they continue to battle challenging supply chain conditions.
That’s according to the DHL 2024 Peak Season Shipping Survey, released today by express shipping service provider DHL Express U.S. The company surveyed small and medium-sized enterprises (SMEs) to gauge their holiday business outlook compared to last year and found that a mix of optimism and “strategic caution” prevail ahead of this year’s peak.
Nearly half (48%) of the SMEs surveyed said they expect higher holiday sales compared to 2023, while 44% said they expect sales to remain on par with last year, and just 8% said they foresee a decline. Respondents said the main challenges to hitting those goals are supply chain problems (35%), inflation and fluctuating consumer demand (34%), staffing (16%), and inventory challenges (14%).
But respondents said they have strategies in place to tackle those issues. Many said they began preparing for holiday season earlier this year—with 45% saying they started planning in Q2 or earlier, up from 39% last year. Other strategies include expanding into international markets (35%) and leveraging holiday discounts (32%).
Sixty percent of respondents said they will prioritize personalized customer service as a way to enhance customer interactions and loyalty this year. Still others said they will invest in enhanced web and mobile experiences (23%) and eco-friendly practices (13%) to draw customers this holiday season.
That challenge is one of the reasons that fewer shoppers overall are satisfied with their shopping experiences lately, Lincolnshire, Illinois-based Zebra said in its “17th Annual Global Shopper Study.”th Annual Global Shopper Study.” While 85% of shoppers last year were satisfied with both the in-store and online experiences, only 81% in 2024 are satisfied with the in-store experience and just 79% with online shopping.
In response, most retailers (78%) say they are investing in technology tools that can help both frontline workers and those watching operations from behind the scenes to minimize theft and loss, Zebra said.
Just 38% of retailers currently use AI-based prescriptive analytics for loss prevention, but a much larger 50% say they plan to use it in the next 1-3 years. That was followed by self-checkout cameras and sensors (45%), computer vision (46%), and RFID tags and readers (42%) that are planned for use within the next three years, specifically for loss prevention.
Those strategies could help improve the brick and mortar shopping experience, since 78% of shoppers say it’s annoying when products are locked up or secured within cases. Adding to that frustration is that it’s hard to find an associate while shopping in stores these days, according to 70% of consumers. In response, some just walk out; one in five shoppers has left a store without getting what they needed because a retail associate wasn’t available to help, an increase over the past two years.
The survey also identified additional frustrations faced by retailers and associates:
challenges with offering easy options for click-and-collect or returns, despite high shopper demand for them
the struggle to confirm current inventory and pricing
lingering labor shortages and increasing loss incidents, even as shoppers return to stores
“Many retailers are laying the groundwork to build a modern store experience,” Matt Guiste, Global Retail Technology Strategist, Zebra Technologies, said in a release. “They are investing in mobile and intelligent automation technologies to help inform operational decisions and enable associates to do the things that keep shoppers happy.”
The survey was administered online by Azure Knowledge Corporation and included 4,200 adult shoppers (age 18+), decision-makers, and associates, who replied to questions about the topics of shopper experience, device and technology usage, and delivery and fulfillment in store and online.
An eight-year veteran of the Georgia company, Hakala will begin his new role on January 1, when the current CEO, Tero Peltomäki, will retire after a long and noteworthy career, continuing as a member of the board of directors, Cimcorp said.
According to Hakala, automation is an inevitable course in Cimcorp’s core sectors, and the company’s end-to-end capabilities will be crucial for clients’ success. In the past, both the tire and grocery retail industries have automated individual machines and parts of their operations. In recent years, automation has spread throughout the facilities, as companies want to be able to see their entire operation with one look, utilize analytics, optimize processes, and lead with data.
“Cimcorp has always grown by starting small in the new business segments. We’ve created one solution first, and as we’ve gained more knowledge of our clients’ challenges, we have been able to expand,” Hakala said in a release. “In every phase, we aim to bring our experience to the table and even challenge the client’s initial perspective. We are interested in what our client does and how it could be done better and more efficiently.”
Although many shoppers will
return to physical stores this holiday season, online shopping remains a driving force behind peak-season shipping challenges, especially when it comes to the last mile. Consumers still want fast, free shipping if they can get it—without any delays or disruptions to their holiday deliveries.
One disruptor that gets a lot of headlines this time of year is package theft—committed by so-called “porch pirates.” These are thieves who snatch parcels from front stairs, side porches, and driveways in neighborhoods across the country. The problem adds up to billions of dollars in stolen merchandise each year—not to mention headaches for shippers, parcel delivery companies, and, of course, consumers.
Given the scope of the problem, it’s no wonder online shoppers are worried about it—especially during holiday season. In its annual report on package theft trends, released in October, the
security-focused research and product review firm Security.org found that:
17% of Americans had a package stolen in the past three months, with the typical stolen parcel worth about $50. Some 44% said they’d had a package taken at some point in their life.
Package thieves poached more than $8 billion in merchandise over the past year.
18% of adults said they’d had a package stolen that contained a gift for someone else.
Ahead of the holiday season, 88% of adults said they were worried about theft of online purchases, with more than a quarter saying they were “extremely” or “very” concerned.
But it doesn’t have to be that way. There are some low-tech steps consumers can take to help guard against porch piracy along with some high-tech logistics-focused innovations in the pipeline that can protect deliveries in the last mile. First, some common-sense advice on avoiding package theft from the Security.org research:
Install a doorbell camera, which is a relatively low-cost deterrent.
Bring packages inside promptly or arrange to have them delivered to a secure location if no one will be at home.
Consider using click-and-collect options when possible.
If the retailer allows you to specify delivery-time windows, consider doing so to avoid having packages sit outside for extended periods.
These steps may sound basic, but they are by no means a given: Fewer than half of Americans consider the timing of deliveries, less than a third have a doorbell camera, and nearly one-fifth take no precautions to prevent package theft, according to the research.
Tech vendors are stepping up to help. One example is
Arrive AI, which develops smart mailboxes for last-mile delivery and pickup. The company says its Mailbox-as-a-Service (MaaS) platform will revolutionize the last mile by building a network of parcel-storage boxes that can be accessed by people, drones, or robots. In a nutshell: Packages are placed into a weatherproof box via drone, robot, driverless carrier, or traditional delivery method—and no one other than the rightful owner can access it.
Although the platform is still in development, the company already offers solutions for business clients looking to secure high-value deliveries and sensitive shipments. The health-care industry is one example: Arrive AI offers secure drone delivery of medical supplies, prescriptions, lab samples, and the like to hospitals and other health-care facilities. The platform provides real-time tracking, chain-of-custody controls, and theft-prevention features. Arrive is conducting short-term deployments between logistics companies and health-care partners now, according to a company spokesperson.
The MaaS solution has a pretty high cool factor. And the common-sense best practices just seem like solid advice. Maybe combining both is the key to a more secure last mile—during peak shipping season and throughout the year as well.