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Are You Losing Money on Your Lift Trucks?

"A fleet manager's goal should be to run the fleet at lowest total cost and highest productivity compared to the industry," says Art Andrew, Jr. of National Services, Inc., a fleet management reporting service. His company maintains the world?s largest database on maintenance costs after the sale on virtually every make and model of lift truck, by industry type. "If a manager can know his costs and how they compare to the industry on every one of his trucks he'll know whether or not he's losing money on his fleet of trucks."

There are three things fleet managers should collect on a monthly basis on each truck in their fleet: parts costs per truck, labor costs per truck and a meter reading. The sad truth of the matter is, most fleet managers don't know if they're getting the most bang from their lift truck buck because they're not tracking those three pieces of information. And that means they're probably losing money. When you look at the data, just how much money is lost each year can be staggering.

According to industry estimates, there are more than 1 million Class 1, 4 and 5 lift trucks in North America. More than half of them have exceeded their economic life, which is the point at which a truck reaches its lowest total cost of maintenance and ownership compared to the entire industry.

"The average electric truck is being traded in at 26,000 hours. The average internal combustion truck gets traded in at 22,500 hours," Andrew says. "Most lift truck manufacturers have found that the best time to trade-in lift trucks is at 10,000 to 12,000 hours." In other words, on a truck that runs an average of 2,000 hours a year, it's being kept in a fleet for anywhere from five to six years beyond its economic life.

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"Ninety percent of lift truck users will tell you that they do not collect parts costs, labor costs and meter readings," Andrew says. Out of the 500,000 trucks that have exceeded their economic life, about $1 billion in excess maintenance costs have been wasted because there's $25 billion in rolling assets in North America that have exceeded their economic life. Since 90 percent of the companies don't collect parts and labor costs and meter readings, they are unaware that they're losing so much money.

The numbers don't lie. Do you know how much time your trucks run per shift? Per day? Per week, month, or quarter? If so, how do you know? Many managers assume that the trucks in their fleet are operating at 70 to 80 percent utilization. For every 8-hour shift, they believe their trucks run about six hours. "But the average utilization in North America is only 25 percent," Andrew says.

"Most people are fooled because they don't keep accurate information. They assume that their utilization is 70 percent to 80 percent. You can't get 70 percent utilization out of a truck that's six years old or older." The way to get accurate information is to take hour-meter readings, not by relying on what your operators or your instincts tell you. Consider the example of a grocer with a fleet of 500 lift trucks. The grocer was thinking about including 200 of his trucks on National Services monthly reporting service to track parts and labor costs.

"I asked him why he didn't want to include the other 300 trucks," Andrew says. "He told me that those were pallet jacks. They considered them throw-away trucks." But when he investigated further, Andrew discovered that the company rarely, if ever, discarded any of the old trucks. Some pallet jacks still in service dated back to the 1960s. After checking the maintenance records on two of the trucks, the grocer discovered that over the past 30 years, he had spent $265,000 in maintenance and repairs. The cost to replace the trucks today would be about $7,500.

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According to Andrew, companies who try to stretch too many hours out of their equipment are the rule, not the exception. "In some cases, companies spend $5,000 to $10,000 every year to maintain a truck that would cost just $18,000 to replace." Managers who don't track engine hours per year and keep records of how much it costs for maintenance and repairs aren't aware of how much money they're wasting.

"The best fleet managers are the ones who know when to get rid of their trucks at the lowest total cost or the economic break-even point," Andrew says. "If they know that, they can run a fleet that's leaner, at lower cost and at higher utilization."

Determining the economic break-even point of a lift truck:

At some point in time, because of rising maintenance costs, it makes more sense to get rid of an old lift truck than to continue to keep it running. That's called the economic break-even point. In order to determine a truck's break-even point, you first must know the truck's cost-per-hour. To determine a truck's cost-per-hour, add the total parts cost to the total labor costs and divide by the number of hours of operation.

The break-even point signifies the lowest obtainable cost per hour that the truck can achieve during its lifetime. Let's say that the break-even point on a truck is $2.50 per hour. If you run the truck at $3.50 per-hour, you're spending $1 more every hour than you should or could be spending. Depending upon how many hours you operate that truck, you can calculate how much money you could save if you'd replace the truck.

"The most important thing for a fleet manager to know today is not the best price to pay for a new truck," Andrew says. "The most important thing to know is when it's time to get rid of that truck."

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