Warehouse and DC Management: 5 reasons to take a second look at fleet management programs
Today's lift truck fleet management programs have gone beyond simple maintenance and lease agreements. They've become a total service solution meant to comprehensively manage the true costs of total lift truck ownership. Here are five reasons to give fleet management programs a second look.
By Maida Napolitano, Contributing Editor -- Logistics Management, 4/1/2009
So, you think you're a fairly savvy warehouse or DC manager, right? When buying or leasing lift trucks you've held back from purchasing too many "after-market" services. In reality, your lift truck fleet is practically a United Nations of trucks from many OEMs that require several different service vendors for repairs and regular maintenance. But you're certain that as long as you keep those trucks running you don't need a fleet management program? Right?
Well, it may be wise to think again.
According to Alan Marder, director of technology solutions for The Raymond Corporation, the purchase and acquisition of a lift truck accounts for only 11 percent of the total cost of ownership over a five-year period. About 80 percent of the total cost is attributed to the operator who's required to run the truck and the maintenance needed to keep it running. Multiply these operating costs by a fleet of trucks that can sometimes run into the hundreds and it's clear that how you manage these "after-market" costs can seriously affect your company's bottom line.
A fleet management program identifies the true cost per hour of operating your lift trucks and helps reduce and monitor these costs by tracking and analyzing a whole gamut of data, so that you—the savvy DC manager—can make intelligent decisions regarding one of your most valuable material handling assets.
And, it's not limited to just lift trucks: Fleet management providers can track and monitor all kinds of warehouse and DC equipment, including batteries, scissor lifts, and golf carts frequently used for personnel transport. For many years, OEMs and independent material handling equipment dealers have always offered some form of fleet management, but these were mostly geared towards the day-to-day upkeep of a fleet of lift trucks via a network of service dealers. As software programs grew in sophistication and the real-time sharing of information over the Internet became more mainstream, software providers started offering fleet management solutions that allowed users to remotely monitor a fleet's movement and operational history. Over the past three to four years, OEMs have partnered with these third-party software suppliers to usher in a new era in fleet management. Under a total solutions fleet management package, they now offer customers not only basic fleet management services, but also access to more accurate data so that management can make decisions regarding their equipment in a real-time, wireless, paperless environment.
In this difficult economy, providers have seen interest in these programs grow as DC managers pay closer attention to an increasing number of service contracts and invoices left unchecked. They've realized that now, more than ever, they will need to put a handle not only on direct costs, but also the indirect costs of equipment ownership.
How Does It Work?
The process is comprehensive, but fairly straight forward. First, the fleet management provider dispatches their network of service dealers to survey each truck from every facility. They record their make, model, age, application, hours of use, maintenance and expense history, lease terms or cost of ownership. They analyze this information to understand where the money is being spent, determine the level of utilization, and recommend which trucks their customer should retain, repair, retire, or re-deploy to another facility.
Aside from a comprehensive fleet analysis, other basic fleet management services include maintenance agreements with qualified dealers across the country with discounted customer labor and parts rates; centralized service dispatching from one toll-free number, consolidated billing; fleet leasing and disposal; and web-portal data access to better manage this information.
But that's not all. As an option, OEM providers can install a hardware device, also known as a vehicle management system, in the dash of a lift truck, regardless of its make or model, and combine it with a series of sensors, wireless data transfer networks, telemetry software solutions and the Internet. In doing so, you can track the performance of a truck in Dubois, Wyo., from a computer in Mobile, Ala. You can tell where a truck is located and what percentage of time a truck is actually in motion or carrying a load. (See above table.) By installing the same telemetry hardware on the battery chargers, the system can even guide the operator to the best battery available.
It's up to the customer to decide which fleet management service they want. Providers typically charge a nominal fee per truck per month for the sum of services selected.
So, What's The Hold Up?
With such a wide range of service offerings, why aren't more warehouse and DC managers jumping on the fleet management bandwagon?
"Some managers think they're already managing their fleet, but they're really not," says Raymond's Marder. "They're just defaulting to a calendar schedule of planned maintenance every 30 or 60 days. What if the truck runs only 10 hours this month, does it really need to be serviced?"
Mike McKean, fleet management sales and marketing manager for Toyota Material Handling U.S.A. Inc., agrees with Marder, adding that he believes that some managers are only focused on the acquisition cost. "Once operators use the trucks, managers have no idea if it's running at $10 per hour or as efficient as $1.50 per hour."
According to John Russian, manager of fleet marketing for the Hyster Company, managers just have so much to focus on with the day-to-day rigors of getting goods out the door that no one's mentioned to them just how much benefit can be achieved with a comprehensive fleet management program. Many of these busy managers may not have the slightest idea of what the programs are. "They want somebody to help them manage their trucks, but they don't know enough about fleet management programs to do it," adds Russian.
Well, if you feel as if you've been in the dark, here are five reasons why you should consider a fleet management program.
Reason 1. Fleet management will help you "lean" your fleet. Many materials handling equipment users maintain the mindset that they need to keep more equipment on hand than they actually need—just in case. But equipment costs money, and when it sits idle, it breaks down. The only way to truly know if a truck is being used is by measuring and tracking its utilization.
Leaning of a fleet typically happens within the first year of deploying a fleet management program. What these programs do is actually help to keep you lean. McKean believes savings from leaning a fleet can be anywhere from 10 to 30 percent in that first year. "It depends on how much excess equipment there was and how the equipment was being maintained," says McKean.
Reason 2. Fleet management lowers costs. A fleet service provider always works for its customer's best interest; they're the ones checking the invoices, analyzing the data, as well as keeping checks and balances. McKean explains that if a planned maintenance is invoiced by a service provider at $100 when the negotiated rate was $90, then the system is going to automatically adjust it on behalf of the customer. "They'll never be overcharged for what has originally been agreed upon contractually."
Companies that use consolidated billing, also known as centralized invoicing, report significant savings in administrative costs by dramatically cutting down on the number of invoices they process per year—from hundreds per month to just one per month. With some fleet management programs, maintenance and repair transactions are posted within 24 hours of work completion, allowing fleet managers and supervisors to review invoices and work orders immediately through a web portal.
Companies with large fleets can take advantage of preferred customer discounts on parts and labor from qualified dealers. "It's a simple matter of economies of scale," says Hyster's Russian. "Large fleets can take advantage of special parts pricing, because it's volume-based."
Reason 3. Fleet management promotes safety and operator accountabiliy. Before an operator can drive a truck at the start of each shift, he must complete a daily OSHA checklist. Hyster's telemetry solution, for example, mixes up the questions on the OSHA checklist to prevent operators from giving automatic answers to the same check list. Instead, they are forced to read each question, because it may be out of order the next day. Both systems also verify that a licensed operator is driving the truck.
Raymond's iVerify software is part of the OEM's wireless data management system that can prevent a truck from starting when critical items such as brakes fail. It then sends an automatic e-mail or text message notifying maintenance of both critical and noncritical issues.
Today's state-of-the-art fleet management systems can also immediately alert managers when a lift truck strikes a rack or another vehicle. Hidden throughout a lift truck are various sensors that detect impacts by the driver and automatically send an e-mail or a text message to the supervisor.
If an increasing percentage of avoidable damage is detected, corrective action can be recommended in the way of operator training or by remotely limiting the speed limit of that driver. Because drivers know that they are being monitored, it escalates operator accountability and workers tend to drive more carefully.
Reason 4. Fleet management allows you to compare costs over multiple site locations. Comparing operating data and associated costs among multiple facilities can be invaluable for diagnosing problems and investigating solutions. Let's say you are the manager of 10 facilities: Most fleet management systems allow you to enter a website and request the average costs per hour of each truck in all 10 sites.
You may observe one site with a cost per hour of 75 cents, another with $1.25, and one with $2.50. The $2.50 cost per hour will immediately signal a red flag to the fleet manager to investigate and determine the cause, so it can recommend necessary adjustments.
Reason 5. Data on equipment utilization can be used for better planning of operations. Fleet service groups can use data from equipment usage to recommend when purchasing a new lift truck for a fleet may be more cost-effective than continuing to repair an old one.
Vehicle motion data can be used to monitor utilization for labor allocation in real time. For example, lift trucks in low usage areas can be reassigned to areas with higher activity. In a large facility, the location tracking ability can be used to find specific vehicles requiring maintenance. By keeping an accurate record of costs, a company can plan more on-target budgets for next year. Reports can be generated to show you where you can improve productivity, save time, and reduce operating costs.
| This data has been collected from over 20,000 VMS vehicle installations. Of course some operators are higher while some are lower but VMS provides operational visibility and productivity metrics that are not achievable in any other way. Source: Hyster Fleet/I.D. Systems Vehicle Management System (VMS) |
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| Across multiple industries, initialVMS data reveals a very similar and startling pattern of vehicle operation | |
| Typical shift pay | 8 hours |
| Operator logged into truck | 4 hours |
| Truck in motion | 2 hours |
| Truck moving with load | 1 hour |
| One hour of product moved for every 8 hours paid | |
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