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.
Robots are revolutionizing factories, warehouses, and distribution centers (DCs) around the world, thanks largely to heavy investments in the technology between 2019 and 2021. And although investment has slowed since then, the long-term outlook calls for steady growth over the next four years. According to data from research and consulting firm Interact Analysis, revenues from shipments of industrial robots are forecast to grow nearly 4% per year, on average, between 2024 and 2028 (see Exhibit 1).
EXHIBIT 1: Market forecast for industrial robots - revenuesInteract Analysis
Material handling is among the top applications for all those robots, accounting for one-third of overall robot market revenues in 2023, according to the research. That puts warehouses and DCs on the cutting edge of robotic innovation, with projects that are helping companies reduce costs, optimize labor, and improve productivity throughout their facilities. Here’s a look at two recent projects that demonstrate the kinds of gains companies have achieved by investing in robotic equipment.
FASTER, MORE ACCURATE CYCLE COUNTS
When leaders at MSI Surfaces wanted to get a better handle on their vast inventory of flooring, countertops, tile, and hardscape materials, they turned to warehouse inventory drone provider Corvus Robotics. The seven-year-old company offers a warehouse drone system, called Corvus One, that can be installed and deployed quickly—in what MSI leaders describe as a “plug and play” process. Corvus Robotics’ drones are fully autonomous—they require no external infrastructure, such as beacons or stickers for positioning and navigation, and no human operators. Essentially, all you need is the drone and a landing pad, and you’re in business.
The drones use computer vision and generative AI (artificial intelligence) to “understand” their environment, flying autonomously in both very narrow aisles—passageways as narrow as 50 inches—and in very wide aisles. The Corvus One system relies on obstacle detection to operate safely in warehouses and uses barcode scanning technology to count inventory; the advanced system can read any barcode symbol in any orientation placed anywhere on the front of a carton or pallet.
The system was the perfect answer to the inventory challenges MSI was facing. Its annual physical inventory counts required two to four dedicated warehouse associates, who would manually scan inventory to determine the amount of stock on hand. The process was both time-consuming and error-prone, and often led to inaccuracies. And it created a chain reaction of issues and problems. Fulfillment speed is one example: Lost or misplaced inventory would delay customer deliveries, resulting in dissatisfaction, returns, and unmet expectations. Productivity was also an issue: Workers were often pulled from fulfillment tasks to locate material, slowing overall operations.
MSI Surfaces began using the Corvus One system in 2021, deploying a small number of drones for daily inventory counts at its 300,000-square-foot distribution center (DC) in Orange, California. It quickly scaled up, adding more drones in Orange and expanding the system to three other DCs: in Houston; Savannah, Georgia; and Edison, New Jersey. The company plans to add more drones to the existing sites and expand the system to some of its smaller DCs as well, according to Corvus Robotics spokesperson Andrew Burer.
Those expansion plans are based on solid results: MSI’s inventory accuracy was about 80% prior to the drone implementation, but it quickly jumped to the high 90s—ultimately reaching 99%—after the company initiated the daily drone counts, according to Burer.
“We actually had an incident early on where one of the forklift drivers ran into the landing pad, rendering it inoperable for about a week while the Corvus team fixed it,” Burer recalls. “When we restarted the system, we noticed MSI’s inventory accuracy had dropped down to the 80s. But after flights resumed, accuracy quickly improved back to near perfect.” He adds that such collisions are rare as Corvus mounts landing pads high off the floor to avoid impacts but that accidents can still happen.
Overall, the system has helped speed warehouse operations in two key ways: First, the accuracy improvement means that associates no longer waste time searching for missing material in the warehouse. And second, the associates who used to conduct the physical inventory counts have been reallocated to picking and replenishment—creating a more efficient, and optimized, workforce.
A SAFER, MORE EFFICIENT WAREHOUSE
Robot maker Boston Dynamics is well-known for its Stretch and Spot industrial robots, both of which are at work in warehouses and DCs around the world. Earlier this year, Stretch made its debut in Europe, teaming up with Spot at a fulfillment center run by German retail company Otto Group. The deployment marks the first time Stretch and Spot are being used together—in a partnership designed to improve Otto Group’s warehousing operations by increasing efficiency and making warehouse work safer and more attractive to workers.
The partnership is part of a two-year project in which Boston Dynamics will deploy dozens of its warehouse robots in Otto Group’s European DCs. The first location is a fulfillment site operated by Hermes, the company’s parcel delivery subsidiary, in Haldensleben, Germany—a facility that handles as many as 40,000 cartons of goods on peak days.
At the site, Stretch—which is a mobile case-handling robot—autonomously unloads ocean containers and trailers, using its advanced perception system to pick and place boxes onto a telescoping conveyor inside the container or trailer. Spot—a quadruped robot—helps with predictive maintenance by collecting thermal data and performing acoustic and visual detection tasks throughout the facility to reduce unplanned downtime and energy costs. One of Spot’s jobs is to detect air leaks in the facility’s warehouse automation systems; future duties may include conveyor vibration detection, according to leaders at Otto Group.
Both Stretch and Spot will help the Haldensleben facility run more efficiently, especially during fall peak season when volume increases and work intensifies. The addition of Stretch addresses safety and comfort issues as well: Trailer unloading—a process that entails repeatedly lifting and moving heavy boxes inside a trailer, which can be dark, dirty, cold, and/or hot, depending on the weather—tends to be unappealing to workers. Along with reducing the amount of labor required, automating these tasks will have the added benefit for European facilities of helping them comply with EU (European Union) regulations limiting the amount of time workers can spend in those conditions.
Essentially, the robots are making life easier on the warehouse floor and for the company at large.
“Stretch is going to have a ton of benefits for customers here in the EU,” Andrew Brueckner, of Boston Dynamics, said in a recent case study on the project.
The trucking industry faces a range of challenges these days, particularly when it comes to load planning—a resource-intensive task that often results in suboptimal decisions, unnecessary empty miles, late deliveries, and inefficient asset utilization. What’s more, delays in decision-making due to a lack of real-time insights can hinder operational efficiency, making cost management a constant struggle.
Truckload carrier Paper Transport Inc. (PTI) experienced this firsthand when the company sought to expand its over the-road (OTR), intermodal, and brokerage offerings to include dedicated fleet services for high-volume shippers—adding a layer of complexity to the business. The additional personnel required for such a move would be extremely costly, leading PTI to investigate technology solutions that could help close the gap.
Enter Freight Science and its intelligent decision-recommendation and automation platform.
PTI implemented Freight Science’s artificial intelligence (AI)-driven load planning optimization solution earlier this year, giving the carrier a high-tech advantage as it launched the new service.
“As PTI tried to diversify … we found that we needed a technological solution that would allow us to process [information] faster,” explains Jared Stedl, chief commercial officer for PTI, emphasizing the high volume of outbound shipments and unique freight characteristics of its targeted dedicated-fleet customers.
The Freight Science platform allowed PTI to apply its signature high-quality service to those needs, all while handling the daily challenges of managing drivers and navigating route disruptions.
STREAMLINING PROCESSES
Dedicated fleets face challenges that evolve from day to day and minute to minute, including truck breakdowns, drivers calling in sick, and rescheduled appointment times. PTI needed a tool that allowed for a real-time view of the fleet, ultimately enabling its team to adjust truck and driver allocation to meet those challenges.
The Freight Science solution filled the bill. The platform uses advanced analytics and algorithms to give carriers better visibility into operations while automating the decision-making process. By combining streaming data, a carrier’s transportation management system (TMS), machine learning, and decision science, the solution allows carriers to deploy their fleets more efficiently while accurately forecasting future needs, according to Freight Science.
In PTI’s case, Freight Science’s software integrates with the carrier’s TMS, real-time electronic logging device (ELD) data, and other external data, feeding an AI model that generates an optimized load plan for the planner.
“We’re an integrated data analytics company for trucking companies,” explains Matt Foster, Freight Science’s president and CEO. “We’re talking about AI.”
The benefits of the real-time data are difficult to overstate.
“We’ve been able to execute in the toughest of situations because we’ve got real, live data on how long each event is actually going to take and a system to aid and even automate the decision-making process,” says Chad Borley, PTI’s operations manager. “From what traffic patterns we are battling in the morning and evening with rush hour and things like that, to the impact of additional miles to a route, or even location-specific dwell times, it’s been a huge differentiator for us.”
REALIZING RESULTS
A case in point: the collapse of Baltimore’s Francis Scott Key Bridge in March. PTI was scheduled to go live with a new dedicated account in the area just days after the collapse, which would mean rerouting and the potential for longer transit times. Instead of recalculating based on assumptions or latent data, PTI was able to reroute freight based on real-time information and analytics to give the customer timely updates.
“With the bridge going out, that changed our ability to make as many turns a day as the customer would expect,” Stedl explains. “But one of the things Freight Science could do [was to] quickly [assess] how much of an impact that traffic would have [and] what the turns [would] be based on what’s happening on the ground.
“So we were able to go back to the customer and readjust expectations in a real way that made sense, using data. Now expectations can be reset¾we’re not asking for forgiveness when there’s no reason for it.”
The system’s advanced algorithms make load planning more cost-effective and scalable as well. The platform allows PTI to monitor trucks, trailers, and driver hours in real time, recommending additional loads with remaining driver hours that would otherwise be wasted.
And they’re doing it all with much less. Stedl says tasks that used to require five people and hours of work can now be accomplished by one person in mere minutes, improving productivity and profitability while reducing labor and operational costs.
Terms of the deal were not disclosed, but Aptean said the move will add new capabilities to its warehouse management and supply chain management offerings for manufacturers, wholesalers, distributors, retailers, and 3PLs. Aptean currently provides enterprise resource planning (ERP), transportation management systems (TMS), and product lifecycle management (PLM) platforms.
Founded in 1980 and headquartered in Durham, U.K., Indigo Software provides software designed for mid-market organizations, giving users real-time visibility and management from the initial receipt of stock all the way through to final dispatch of the finished product. That enables organizations to optimize an array of warehouse operations including receiving, storage, picking, packing, and shipping, the firm says.
Specific sectors served by Indigo Software include the food and beverage, fashion and apparel, fast moving consumer goods, automotive, manufacturing, 3PL, chemicals, and wholesale / distribution verticals.
Online merchants should consider seven key factors about American consumers in order to optimize their sales and operations this holiday season, according to a report from DHL eCommerce.
First, many of the most powerful sales platforms are marketplaces. With nearly universal appeal, 99% of U.S. shoppers buy from marketplaces, ranked in popularity from Amazon (92%) to Walmart (68%), eBay (47%), Temu (32%), Etsy (28%), and Shein (21%).
Second, they use them often, with 61% of American shoppers buying online at least once a week. Among the most popular items are online clothing and footwear (63%), followed by consumer electronics (33%) and health supplements (30%).
Third, delivery is a crucial aspect of making the sale. Fully 94% of U.S. shoppers say delivery options influence where they shop online, and 45% of consumers abandon their baskets if their preferred delivery option is not offered.
That finding meshes with another report released this week, as a white paper from FedEx Corp. and Morning Consult said that 75% of consumers prioritize free shipping over fast shipping. Over half of those surveyed (57%) prioritize free shipping when making an online purchase, even more than finding the best prices (54%). In fact, 81% of shoppers are willing to increase their spending to meet a retailer’s free shipping threshold, FedEx said.
In additional findings from DHL, the Weston, Florida-based company found:
43% of Americans have an online shopping subscription, with pet food subscriptions being particularly popular (44% compared to 25% globally). Social Media Influence:
61% of shoppers use social media for shopping inspiration, and 26% have made a purchase directly on a social platform.
37% of Americans buy from online retailers in other countries, with 70% doing so at least once a month. Of the 49% of Americans who buy from abroad, most shop from China (64%), followed by the U.K. (29%), France (23%), Canada (15%), and Germany (13%).
While 58% of shoppers say sustainability is important, they are not necessarily willing to pay more for sustainable delivery options.
Schneider says its FreightPower platform now offers owner-operators significantly more access to Schneider’s range of freight options. That can help drivers to generate revenue and strengthen their business through: increased access to freight, high drop and hook rates of over 95% of loads, and a trip planning feature that calculates road miles.
“Collaborating with owner-operators is an important component in the success of our business and the reliable service we can provide customers, which is why the network has grown tremendously in the last 25 years,” Schneider Senior Vice President and General Manager of Truckload and Mexico John Bozec said in a release. "We want to invest in tools that support owner-operators in running and growing their businesses. With Schneider FreightPower, they gain access to better load management, increasing their productivity and revenue potential.”