For most warehouse managers, forklift truck maintenance and replacement decisions come straight from the gut. Relying more on historical experience and personal knowledge than on hard data about a vehicle's operating life, they take a decidedly unscientific approach to trading in, selling, or repairing their trucks.

"Most warehouse managers lack that kind of data, so they go on a gut feeling and try to rotate the trucks based on what they think is a good, economical lifecycle," says Larry LoMonico, national fleet manager for Toyota Material Handling USA Inc., in Irvine, Calif. The current economic downturn hasn't helped, he adds, because it has put even more pressure on managers to get more life out of existing equipment.

But holding onto equipment for too long can backfire, LoMonico and other experts agree. The price of new lift trucks now ranges anywhere from $15,000 to $100,000, depending on the model and type. And because it's easier to eke $1,500 out of an expense budget than to ask for $15,000 for a capital equipment purchase, warehouse managers often find themselves caught in a vicious cycle of breakdowns, downtime, and costly repairs as they continue to rely on trucks that should have been retired long before.

Running aging forklifts past their prime can turn the equipment into a money pit before you know it, says Jeff Meyer, manager at Hyster Fleet Services in Greenville, N.C. "The realization that a forklift needs to be replaced or repaired usually comes after one breaks down and the situation reaches crisis mode," he says.

No one, of course, can afford to let anything go until it reaches the crisis stage. But with money tight these days, how can you make the case for replacing costly forklift equipment? Savvy warehouse managers take the time to gather accurate data for each truck and analyze what it really costs to operate older, inefficient equipment.

The general rule of thumb is that a forklift truck can run 7,000 to 10,000 hours, depending on whether it's gas or electric and on the type of environment in which it's operating. "At that point, you should start thinking about changing the truck out," says Kyle Crist, president of Santa Clara, Calif.-based Crist Information and Research, LLC, which provides competitive lift-truck information through its "Lift Truck Guru" database.

Some other signs that it may be time to replace a forklift include increased maintenance costs, low utilization rates as a percentage of available operating time, loss of productivity, excessive downtime, and an increased reliance on rental or backup units to get the job done. LoMonico cautions shippers to watch for seemingly minor repairs—a starter here, an alternator there—which could be a precursor to a major repair that's just around the corner. "If you're getting a lot of downtime because of these small repairs, there's a good chance that you're facing something major," he says.

To get the most accurate measure of when it's the right time to retire a lift truck, though, you need to figure out the "cost per hour" to operate each piece of equipment. You can get that number by keeping good records not only on the truck's purchase and maintenance costs, but also on what it costs for fuel, processing maintenance invoices and payments, and the downtime that results when the forklift breaks down, says Warren Eck, vice president of fleet management for Yale Materials Handling in Greenville, N.C. "If you can't run your line or move product because a truck is down, you need to know how much it's costing you for every hour of downtime," he says. "These considerations need to be factored into the equation."

Jeff Brown, a senior consultant at Gross & Associates in Woodbridge, N.J., describes the process this way: "Track the age of your fleet, the number of shifts and hours per day your trucks are running, what kind of wear and tear you're putting on them, and how much money you're spending on maintenance. Then take the age, usage, and cost associated with operating them to create a ratio," he explains. In other words, add the truck's up-front purchase cost, the cost of downtime, and the cost of regularly scheduled and unplanned maintenance. Divide that number by the total number of hours of service to get the operating cost per hour.

Once you have that number, suggests Brown, compare it to industry benchmarks. He uses the following averages as guidelines: electric counterbalance trucks, $2 per operating hour; walkie/riders, $1.20; reach trucks between $1.40 and $2.40 (depending on the truck's voltage), order pickers, $2; and swing reach trucks, $4 to $7 an hour.

Cost per hour is a key piece of information for determining when a lift truck has outlived its usefulness. "Track maintenance cost per hour and ownership cost per hour, and where those two lines cross or intersect is usually the best time to replace a truck," says Crist.

Just because a forklift has outlived its usefulness in one section of the warehouse, though, that doesn't necessarily mean it should be banished from your facility altogether. Repairing an older truck may make sense if it could be redeployed to lighter duty or kept in reserve as a backup. "You may be able to justify spending the extra money in exchange for another year or two of use in a different part of your warehouse," says Eck.

Warehouse managers who really want to get a handle on their forklift expenditures should consider asking their forklift dealers and manufacturers about software for tracking operating and maintenance data. Most lift-truck manufacturers offer such programs, and some will even fold the cost into a truck's lease or purchase payments.

An increasing number of managers are turning to automated cost-tracking systems, observes Chuck Leone, vice president of sales and marketing for Nissan Forklift Corp. in Marengo, Ill. That's because programs like his company's Fleetraxx software provide useful tools that make it easier for lift-truck buyers to track the data they need to determine a truck's economic break-even point, he says.

The programs also help managers look beyond individual pieces of equipment and see the larger picture, Leone adds. "By tracking costs associated with each unit in operation, companies gain a clearer understanding of when service expenses are getting out of hand and a replacement decision needs to be made," he says. "Likewise, it gives them the information they need to prevent unnecessary capital expenses by looking at the big picture, taking into account the entire fleet's usage and the specific materials-handling requirements of their organization."

Whether you decide to buy, sell, or hold lift trucks, in fact, can have an impact that reaches outside the confines of your distribution center. In today's lean, efficient business environment, a warehouse manager simply cannot afford to have equipment breaking down and holding up a company's overall productivity. "It's important for warehouse managers to know that replacing obsolete trucks with new, efficient units greatly improves bottom-line profit, especially when the change is made before major component-replacement maintenance becomes necessary," Meyer says. "Companies that replace rather than retain older lift trucks realize a progressive increase in cost savings from year to year."

Bridget McCrae is a freelance writer who frequently covers warehousing, distribution, and related technologies.