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When is it Time to Trade?

If you need a new machine and don't buy it, you pay for it without ever getting it.-Henry Ford

Some items to consider:

Is your lift truck fleet making you money or costing you a bundle?

How you answer that question may predict how you decide when to trade lift trucks. If you said your trucks are making you money, you probably keep simple but comprehensive records tracking the performance of each truck in your fleet. Those records help you schedule regular replacement of trucks, and you likely have few trucks with over 10,000 hours on their hour meters.

On the other hand, if you said your fleet is costing you a bundle, your trucks probably don't have working hour meters, and if they do, you pay little attention to them. Repair and maintenance expenses for all trucks are lumped into one big budgetary black hole that balloons larger each year. Most of your trucks are more than five years old; a few battered "Ol' Faithfuls" have been around for more than 10 years, and the average hour meter reading across the fleet is 15,000 hours. Ultimately, the decision of when to trade lift trucks in your operation is made by the fleet itself.

"If you only make repairs and do maintenance when a truck breaks down, or only trade trucks when an old truck is finally beyond repair, then you aren't running your fleet, it's running you," says Art Andrew, Jr., vice president with National Services, a nationally recognized consulting firm specializing in lift truck management. "But if you proactively manage your fleet, keep good records, and use those records to establish an Economic Break-even Point (EBP) for each truck in your fleet, you are in charge," he says. "With the right records you can predict and schedule the best time to replace each unit."

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Costs increase after EBP

Operating lift trucks beyond their EBP is expensive. "Once a truck passes its break-even point it costs more to own and maintain that truck than it would to own and maintain a new one," says Andrew. Repair and maintenance costs escalate, downtime increases and hidden costs (rental of replacement trucks or loss of work due to downtime) quickly eat away any advantages gained from depreciation or long-term ownership.

The EBP is different for every lift truck, depending on its usage and operating environment. Internal combustion (IC) trucks in foundries may reach their economic break-even point in as little as 6,800 hours; electric trucks in clean environments may stretch it to 15,000 hours. Only detailed record keeping enables you to accurately track performance and monitor where each machine is at in its economic life cycle.

Robin Fruth, lift truck maintenance supervisor at Tropicana-Dole North America's Bradenton, Florida, facility, tracks performance of over 200 lift trucks, ranging from 5,000-pound diesel sit-downs to small electric stand-up units. Despite a 24-hours/day, seven days/week workload, only eight percent of his fleet is off-line at any time, compared to a national average of over 30 percent.

Fruth credits this exceptionally low number of "down" vehicles to an aggressive planned maintenance schedule and a lease program that trades trucks as soon as they reach the calculated end of their useful life.

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"It doesn't really matter whether you're leasing or owning, the concept of the EBP is the same," he says. "The whole idea is to know exactly what each unit is costing you at every stage of its life and to be able to predict when it will reach the point where it makes more economic sense to trade it than to keep it."

Learning to track and manage the economic life cycle of all trucks was an eye-opening experience for Tropicana-Dole's fleet managers. The process was developed with the help of CLARK and its local dealer. Before Tropicana got into leasing its equipment it did an overall analysis of its fleet and found out that its average fork lift age was 14 years. They started tracking costs and were shocked to find how expensive it was to have older machines. They had records on their overall maintenance and repair costs, but it wasn't until they kept records on individual machines that they found out that the older trucks was where most of their money was going.

The company started leasing CLARK lift trucks in 1988, and has rotated its fleet through the program at least several times since. Fruth is now matching leases to each machine based on economic life cycles projected by software that tracks all costs charged against each machine.

Light-use units that accumulate only 500 to 1,000 hours annually take longer to reach their break-even point and will be set up on longer leases, while heavy-use trucks that put up to 5,000 hours on their hour meters every year earn much shorter leases. Detailed records, kept over time, enable Tropicana-Dole to accurately predict the best time to trade each machine.

Fruth emphasizes that simply keeping repair and maintenance costs for individual machines can be misleading if not used in conjunction with hour meters. "If a truck cost you $12,000 in maintenance and repair in one year and ran 6,000 hours, it cost you $2 an hour and that's acceptable," he says. "But if that truck only ran 2,000 hours, you're up to $6 an hour and it may be time to think about trading. The only way you can pinpoint your costs is with regular hour meter readings."

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Get help to figure trade-in time

What about lift truck managers who have no long-term records to help them determine the best time to trade trucks? Rick Radcliff, general manager of Clarklift of Des Moines, in Des Moines, Iowa, says lift truck dealerships are valuable consultants in deciding when to trade.

"We look at how the customer uses equipment, its age and condition, and really analyze the customer's needs," he says. "We understand that a small company with one truck that only runs one hour a day has different needs from a warehouse that runs trucks three shifts a day, seven days a week. We work with customers to decide, based on their needs, whether it is more cost effective to keep the machine or trade it."

Radcliff suggests that lift truck fleet managers ask their CLARK dealer to have a salesperson do a trade-in survey of their lift trucks (at no charge), or have the dealer's factory-trained mechanics do a two- to three-hour comprehensive mechanical evaluation for around $100 per truck. Both approaches give the customer an idea of what his or her machines are worth and what it would cost to bring them up to spec. Those numbers can help customers work with their dealer to analyze options.

Another option for customers who use dealer shops for maintenance and repairs is to use its shop records to monitor and evaluate their fleet. "We keep records on every machine we service," says Radcliff. "Customers with maintenance agreements with us or who have routine repairs performed by us can get a free parts and labor repair history on any truck in their fleet. We can also calculate the maintenance cost per running hour, (not counting fuel and driver's labor costs), and help customers determine where a machine is at in its economic life cycle and if this is the best time to trade."

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