Rightsizing your forklift fleet in uncertain times
Demand volatility linked to the Covid-19 pandemic is severely testing warehouse operations. But there are ways to adjust your forklift fleet to deal with those ups and downs.
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.
Since February, the Covid-19 pandemic has caused unprecedented growth in demand for medical supplies, groceries, household goods, and e-commerce fulfillment and delivery, leaving some companies struggling to keep up with demand. Other businesses saw demand suddenly plummet, leading to layoffs, bankruptcies, and temporary or permanent closures.
This volatility has had a profound impact on warehouse and distribution center operations, including forklift fleets. “Some customers couldn’t get enough forklifts because their throughput tripled, while for others, demand nosedived and they had trucks sitting idle,” says Bill Byrd, senior manager of national accounts for Toyota Material Handling. “That threw a complete monkey wrench into their planning.”
Lift truck fleets generally remain fairly static year over year, so many were not prepared for a sudden change in circumstances. According to manufacturers and dealers, though, there are steps forklift fleet managers can take to not only respond to their current situation, but also to prepare for volatility they may confront in the future. The following are some of their suggestions.
Make more use of rentals. When demand went haywire, interest in forklift rentals shot up, mostly from fleets that needed to quickly add operators and trucks to handle increased volume. But interest has also come from those in the opposite predicament. “More people are looking at renting instead of buying or leasing because they don’t know what the next five years [will bring],” says Tom Duck, vice president and general manager of Clark forklift dealer Tri-Lift NC Inc. “They’re asking, how can I have flexibility so I can still afford to replace equipment when I need to, even if my business doesn’t hold where it’s at?
When considering rentals, says Dan Zinn, director of sales for Crown Equipment Corp., start by looking at what he calls the “core fleet.” “Even taking into account the ups and downs of seasonality ... what is the core business you can always count on? Use leasing to build the fleet to that need and meet fluctuating needs by supplementing with short- or long-term rentals,” he advises.
Having an appropriate balance of leasing and rentals will help to protect against unwanted costs if there’s another economic downturn, says Craig Brubaker, senior vice president of operations at Alta Equipment, a dealer of Hyster equipment and services. Leased equipment is locked in for the full term (usually three to five years), and there are steep penalties for returning trucks early. Long-term rentals have lower cancellation penalties and may offer more flexibility with respect to returns, while short-term rentals usually have no penalties. If business volumes are volatile, a mix of 60% fair-market–value leases supplemented with 20% long-term rentals (one to five years) and 20% short-term rentals (from one day to a few months) may be advantageous, he suggests. The level of volatility and/or the desired degree of flexibility will ultimately drive the ratio and mix of options, he adds.
Forklift dealers can offer their customers more rental options and flexibility than third parties can, Duck says. In addition to short-term rentals, his company, for example, offers terms of two to three years, with a lower rate and minimal penalties for turning in equipment early. The dealer also offers five-year rentals that are similar in length to a lease but come with discounted rates and allow for downsizing a fleet without penalties.
Take a fresh look at leasing options. Authorized dealers may be willing to negotiate flexible leasing arrangements with established customers, says Matt Stein, sales and iWarehouse manager at Arbor Material Handling, an authorized Raymond sales and service center. An example of this type of customer-specific program is a usage-based arrangement he characterizes as “a hybrid between a lease and a rental.” The program, which has gained popularity in the past few years, combines some long-term commitments with the flexibility to reallocate equipment if the vehicles meet certain criteria.
Brubaker, the Hyster dealer, mentions three additional lease types that offer flexibility. A “budget lease” allows fleets to take delivery of new equipment now and defer payments until 2021. “Power by the hour” leases charge customers based on actual equipment usage, rather than on projected use. He also points to Hyster’s Freedom Advantage lease, which is structured as two multiyear terms and permits the customer to end the lease after the first, longer term if business circumstances change.
Leasing equipment from an authorized dealer together with a fleet management system allows the vendor to utilize data to analyze operations and determine whether a different type of lease would make financial sense, says Tina Goodwin, director of fleet management for Yale Materials Handling Corp. For example, because Yale’s optional Fleet Optics program tracks and monitors users’ utilization and maintenance, “we can point out when [fleets] are over- or underutilizing the equipment” and suggest extending or shortening the lease in response, she says. “We can help customers save money by determining, for instance, that the optimal life of a lease may be three years instead of five years, because we can see that there will be more expenses in years four and five than expected because of changed circumstances.”
Use technology to optimize fleet deployment. In times of uncertainty, a fleet management program that includes telematics is a valuable tool. Fleet technology “helps customers see what they were not able to see before,” Arbor Material Handling’s Stein says. Because they measure utilization and how and when forklifts are being used, managers can make data-based decisions to reallocate equipment, either inside the current facility to balance utilization or to another facility where there’s a shortage. Since the pandemic began, “more customers have been looking for that kind of information, ... and we’re seeing increased demand for telematics systems,” he says.
Goodwin notes that during the pandemic, forklifts at some businesses have seen unusually heavy use as operators strive to keep up with unexpectedly high demand. Fleet management technology can help users save money by alerting them when trucks are likely to exceed the maximum weekly hours allowed under their lease; managers can then rotate equipment to even out usage and avoid being charged overtime, she says.
Pay extra attention to maintenance. Facilities that have experienced a spike in volume, especially those that are essential businesses, need to keep their trucks running as many hours as possible and, thus, are laser-focused on preventive maintenance and reactive repairs. Those that have experienced a downturn in business, meanwhile, are carefully watching their maintenance costs, says Yale’s Goodwin. She’s seeing more interest from the latter in flexible “time and material” programs, where customers pay for reactive repairs when required and have periodic maintenance done only when needed based on actual utilization, rather than on a more traditional fixed maintenance schedule.
Byrd says there’s a silver lining for fleets that find themselves with idle equipment because of the pandemic: Now is a good time to conduct a comprehensive review of the state of your fleet and to carry out both planned maintenance and preventive repairs. That way, equipment will be in optimal shape when business starts to recover. (Don’t forget to include power sources and related equipment, such as batteries and chargers, in your maintenance review, he adds.)
Limit specialized and customized equipment. The more specialized lift trucks in your fleet, the less flexibility you’ll have to meet unexpected demand with equipment that’s already on hand. For that reason, Crown’s Zinn recommends limiting the number of specialized assets that serve a single purpose and see little or irregular use. “When possible, try to configure equipment to handle multiple tasks and maybe make minor adjustments for special uses—for example, by using attachments,” he says. Choosing a slightly higher-capacity truck than you might otherwise specify can provide the flexibility to handle heavier loads than usual, he adds.
Another drawback to using a lot of specialized or customized lift trucks: “If you have somewhat unique specs, that can hold you back from using short-term rental assets when they’re needed,” Toyota’s Byrd observes. However, a dealer might be willing to invest in unique or specialized configurations for established customers who will regularly rent that equipment, such as during peak seasons.
ASK YOUR DEALER
Each expert we spoke with offered this recommendation: If your circumstances have changed or you have a challenge to overcome, explain the situation to your lift truck dealer. Ask what standard options are available and whether a more flexible arrangement might be possible. A well-capitalized, highly professional forklift dealer will have the knowledge and resources to set up flexible plans, including customized programs. “We work closely with customers to understand their business, and we know there isn’t a one-size-fits-all solution,” Alta Equipment’s Brubaker says. (How has the pandemic affected what fleet managers are asking lift truck dealers for? See the accompanying sidebar.)
Although there are fewer face-to-face meetings nowadays, the importance of open and frequent communication remains, says Stein. “We’ve changed how we connect and communicate, but that shouldn’t change what we can provide to clients,” he says.
Covid-19 changes the conversation
We asked forklift dealers and OEMs whether the Covid-19 pandemic has changed what their customers are asking for. Across the board, the answer was “yes.” Here are a few examples of the kinds of requests they’ve been fielding lately:
Off-site servicing: “Before the pandemic, we would go out and service most equipment on-site, but now we’re being asked to pick up the truck and do the work here more often. I’d say we’re doing only about 40% on-site now, which increases our transportation and handling costs,” says Tom Duck, vice president and general manager of Tri-Lift NC Inc., a Clark forklift dealer.
Payment flexibility: Some customers on fixed maintenance programs have asked for forgiveness or postponement of payments while they manage through fluctuations or a decline in their business, says Tina Goodwin, director of fleet management for Yale Materials Handling Corp. Like others we spoke with, she says her company is working with customers to find more flexible options.
Used vehicles: In addition to rentals, more customers are asking about previously owned equipment to supplement an existing fleet, according to Dan Zinn, director of sales for Crown Equipment Corp. Used equipment can help to fill short-term needs at a lower acquisition cost and without the longer leadtimes of new equipment, he says. It’s also an economical way to acquire backup trucks that can be called into service when needed.
Advice on battery care: When forklift batteries sit unused for a long time, their performance deteriorates. In light of that, facilities that have idled equipment are asking how to keep batteries in good shape, “so when they do need them, they’re in good condition and at the ready,” says Matt Stein, sales and iWarehouse manager at Arbor Material Handling, an authorized Raymond sales and service center.
Nearly one-third of American consumers have increased their secondhand purchases in the past year, revealing a jump in “recommerce” according to a buyer survey from ShipStation, a provider of web-based shipping and order fulfillment solutions.
The number comes from a survey of 500 U.S. consumers showing that nearly one in four (23%) Americans lack confidence in making purchases over $200 in the next six months. Due to economic uncertainty, savvy shoppers are looking for ways to save money without sacrificing quality or style, the research found.
Younger shoppers are leading the charge in that trend, with 59% of Gen Z and 48% of Millennials buying pre-owned items weekly or monthly. That rate makes Gen Z nearly twice as likely to buy second hand compared to older generations.
The primary reason that shoppers say they have increased their recommerce habits is lower prices (74%), followed by the thrill of finding unique or rare items (38%) and getting higher quality for a lower price (28%). Only 14% of Americans cite environmental concerns as a primary reason they shop second-hand.
Despite the challenge of adjusting to the new pattern, recommerce represents a strategic opportunity for businesses to capture today’s budget-minded shoppers and foster long-term loyalty, Austin, Texas-based ShipStation said.
For example, retailers don’t have to sell used goods to capitalize on the secondhand boom. Instead, they can offer trade-in programs swapping discounts or store credit for shoppers’ old items. And they can improve product discoverability to help customers—particularly older generations—find what they’re looking for.
Other ways for retailers to connect with recommerce shoppers are to improve shipping practices. According to ShipStation:
70% of shoppers won’t return to a brand if shipping is too expensive.
51% of consumers are turned off by late deliveries
40% of shoppers won’t return to a retailer again if the packaging is bad.
The “CMA CGM Startup Awards”—created in collaboration with BFM Business and La Tribune—will identify the best innovations to accelerate its transformation, the French company said.
Specifically, the company will select the best startup among the applicants, with clear industry transformation objectives focused on environmental performance, competitiveness, and quality of life at work in each of the three areas:
Shipping: Enabling safer, more efficient, and sustainable navigation through innovative technological solutions.
Logistics: Reinventing the global supply chain with smart and sustainable logistics solutions.
Media: Transform content creation, and customer engagement with innovative media technologies and strategies.
Three winners will be selected during a final event organized on November 15 at the Orange Vélodrome Stadium in Marseille, during the 2nd Artificial Intelligence Marseille (AIM) forum organized by La Tribune and BFM Business. The selection will be made by a jury chaired by Rodolphe Saadé, Chairman and CEO of the Group, and including members of the executive committee representing the various sectors of CMA CGM.
The global air cargo market’s hot summer of double-digit demand growth continued in August with average spot rates showing their largest year-on-year jump with a 24% increase, according to the latest weekly analysis by Xeneta.
Xeneta cited two reasons to explain the increase. First, Global average air cargo spot rates reached $2.68 per kg in August due to continuing supply and demand imbalance. That came as August's global cargo supply grew at its slowest ratio in 2024 to-date at 2% year-on-year, while global cargo demand continued its double-digit growth, rising +11%.
The second reason for higher rates was an ocean-to-air shift in freight volumes due to Red Sea disruptions and e-commerce demand.
Those factors could soon be amplified as e-commerce shows continued strong growth approaching the hotly anticipated winter peak season. E-commerce and low-value goods exports from China in the first seven months of 2024 increased 30% year-on-year, including shipments to Europe and the US rising 38% and 30% growth respectively, Xeneta said.
“Typically, air cargo market performance in August tends to follow the July trend. But another month of double-digit demand growth and the strongest rate growths of the year means there was definitely no summer slack season in 2024,” Niall van de Wouw, Xeneta’s chief airfreight officer, said in a release.
“Rates we saw bottoming out in late July started picking up again in mid-August. This is too short a period to call a season. This has been a busy summer, and now we’re at the threshold of Q4, it will be interesting to see what will happen and if all the anticipation of a red-hot peak season materializes,” van de Wouw said.
The report cites data showing that there are approximately 1.7 million workers missing from the post-pandemic workforce and that 38% of small firms are unable to fill open positions. At the same time, the “skills gap” in the workforce is accelerating as automation and AI create significant shifts in how work is performed.
That information comes from the “2024 Labor Day Report” released by Littler’s Workplace Policy Institute (WPI), the firm’s government relations and public policy arm.
“We continue to see a labor shortage and an urgent need to upskill the current workforce to adapt to the new world of work,” said Michael Lotito, Littler shareholder and co-chair of WPI. “As corporate executives and business leaders look to the future, they are focused on realizing the many benefits of AI to streamline operations and guide strategic decision-making, while cultivating a talent pipeline that can support this growth.”
But while the need is clear, solutions may be complicated by public policy changes such as the upcoming U.S. general election and the proliferation of employment-related legislation at the state and local levels amid Congressional gridlock.
“We are heading into a contentious election that has already proven to be unpredictable and is poised to create even more uncertainty for employers, no matter the outcome,” Shannon Meade, WPI’s executive director, said in a release. “At the same time, the growing patchwork of state and local requirements across the U.S. is exacerbating compliance challenges for companies. That, coupled with looming changes following several Supreme Court decisions that have the potential to upend rulemaking, gives C-suite executives much to contend with in planning their workforce-related strategies.”
Stax Engineering, the venture-backed startup that provides smokestack emissions reduction services for maritime ships, will service all vessels from Toyota Motor North America Inc. visiting the Toyota Berth at the Port of Long Beach, according to a new five-year deal announced today.
Beginning in 2025 to coincide with new California Air Resources Board (CARB) standards, STAX will become the first and only emissions control provider to service roll-on/roll-off (ro-ros) vessels in the state of California, the company said.
Stax has rapidly grown since its launch in the first quarter of this year, supported in part by a $40 million funding round from investors, announced in July. It now holds exclusive service agreements at California ports including Los Angeles, Long Beach, Hueneme, Benicia, Richmond, and Oakland. The firm has also partnered with individual companies like NYK Line, Hyundai GLOVIS, Equilon Enterprises LLC d/b/a Shell Oil Products US (Shell), and now Toyota.
Stax says it offers an alternative to shore power with land- and barge-based, mobile emissions capture and control technology for shipping terminal and fleet operators without the need for retrofits.
In the case of this latest deal, the Toyota Long Beach Vehicle Distribution Center imports about 200,000 vehicles each year on ro-ro vessels. Stax will keep those ships green with its flexible exhaust capture system, which attaches to all vessel classes without modification to remove 99% of emitted particulate matter (PM) and 95% of emitted oxides of nitrogen (NOx). Over the lifetime of this new agreement with Toyota, Stax estimated the service will account for approximately 3,700 hours and more than 47 tons of emissions controlled.
“We set out to provide an emissions capture and control solution that was reliable, easily accessible, and cost-effective. As we begin to service Toyota, we’re confident that we can meet the needs of the full breadth of the maritime industry, furthering our impact on the local air quality, public health, and environment,” Mike Walker, CEO of Stax, said in a release. “Continuing to establish strong partnerships will help build momentum for and trust in our technology as we expand beyond the state of California.”