What would you say to a company that would guarantee a 15-25% savings in the first year on your lift truck fleet? Would you figure it sounded too good to be true?

Not so, says Warren Eck, vice president of fleet management for Yale Materials Handling (800-233-9253). All you have to do is outsource lift truck fleet management.

"Choosing a materials handling outsourcing company...lets a customer focus on their core business, while their partner analyzes, streamlines, and improves their entire mobile industrial fleet while reducing costs," Eck says.

"After a (fleet management) partner has completed its analysis of a company's operation, and begins to research ways to implement savings on materials handling costs, immediate cost savings of between 15 and 25% should be demonstrated for the first year," says Eck. "However, savings should extend well beyond the first year."

While fleet management is most often associated with large companies that have a hundred or more lift trucks, it can also be useful for smaller ones. "A program can be designed for a one-truck user, not just the big guys," says Eck.

In fact, there's just as much strategy in outsourcing management of one lift truck as twenty or more.

One question Eck often asks small companies is "Would you rather own an old truck that doesn't quite do the job, or lease a new one that does two jobs?" Few are stumped by the question.

As Eck explained at a ProMat 2003 seminar in February, lift truck fleet management can take many forms. These range from total fleet management to single service packages such as maintenance contracts. Services that are commonly available include: development of specifications for equipment based on the distribution center's needs; financing and acquisition services; truck maintenance; operator training; supply of rental trucks to meet peak period needs; itemized single monthly invoicing; and recommendations for timing of fleet replacement to optimize investment.

But the first step toward outsourcing fleet management, says Eck, is understanding the baseline costs. The main components are acquisition, use including truck operation, service and parts, and administration.

There are several more aspects to acquisition costs than what is paid for the truck. Other factors to consider include depreciation and interest as well as the potential loss of investment income by buying more lift trucks than needed. That last factor can be especially costly, explains Eck.

He estimates that the average warehouse has about 10% too much equipment. Why? Because older trucks break down, so extras are kept on hand. And because often some trucks become proprietary for a certain worker; "You ask why they have a certain old truck on the floor, and they say, 'Oh, that's Jim's truck,' Eck adds. Unfortunately, Jim's truck is using more than its fair share of fuel and maintenance while hurting productivity.

The next component is the cost of lift truck use. Included here are service, replacement parts, fuel, management and operators. Service costs range from technician wages and benefits to training. In addition, Eck says the cost of parts is much more than the part itself. There are also costs associated with storing and ordering them. But the most overlooked cost of a lift truck fleet is truck operation from operator wages to fuel.

Some of the potential savings from outsourcing lift truck fleet management won't even occur on the warehouse floor, but in the accountant's books.

Don't underestimate the cost of administration, explains Eck. One Yale client had 50 facilities, each with 8-10 lift trucks, some generating up to 20 purchase orders per month. "We centralized that to a single monthly bill, just 12 a year, and it was like a revelation to them," Eck says.

In another example, a seasonal retail chain hired Yale to manage its 8,600 vehicles at 750 locations nationwide. The main challenge was variable demand, peaking in the late summer and autumn. Yale created a short-term rental program, and centralized invoices, cutting them from 77,000 per year to just 36. Together, those moves saved the company $500,000 in annual operating costs.

But a baseline cost analysis is only the starting point for more effective fleet management, explains Eck. An in-depth analysis of the warehouse's operations should be done to get maximum benefit. The emphasis here should be on finding ways for improving operations and productivity both immediately and into the future.

When choosing a fleet management partner, do your homework and make sure they have a track record in the industry, Eck recommends. It is also important to check into the reputation and references of the fleet management partner.

Be sure to ask if they have experience implementing a plan. "That's where the biggest screw-ups can happen, because it could block the flow of work in a DC, and you definitely don't want that to happen," says Eck.

He emphasizes that the fleet management partner provide a dedicated team of professionals that do more than just keep lift trucks up and running economically. In addition, it is important that there be an eye for continuous improvement opportunities that can streamline operations and improve efficiencies.

"Choosing a fleet management partner is a big decision that delivers big results," Eck says. "It allows the end user to focus on the core business and become more competitive, profitable and successful in the long run."