Decoding the mysteries of fleet management
February 01, 2012 - MMH Editorial
“Visibility” is the buzzword these days among supply chain circles, while inside the four walls the concept of “lift truck fleet management” has quickly become the Holy Grail for savvy managers looking to get a better handle on costs. Amid the scramble for both, traditions are being challenged, business relationships are becoming more nuanced, and new products, services and technologies are emerging at a rapid rate.
And while establishing a comprehensive lift truck fleet management program can seem like a surefire source of savings and transparency, fleet mangers have encountered a few misconceptions and miscommunications along the way. To help overcome the early missteps, industry experts and manufacturers are now working to ensure that fleet managers are aware of the opportunities and pitfalls associated with a more structured—or more flexible—approach to fleet management.
According to Scott McLeod, president of independent lift truck fleet management company Fleetman Consulting, the heart of fleet management is identifying and managing each lift truck’s operating cost per hour. McLeod says that there are more than 40 separate costs associated with a lift truck, including fuel, depreciation, operator costs, and even the impact of aisle design and warehouse layout on a lift truck’s operation.
“Customers might feel that there’s only so much time in a day, and lift trucks are at the bottom of their to-do list. But if they have to do it, they just might find that there are thousands—if not hundreds of thousands—of dollars to save.”
But where do you start? Who should be involved? How should it be implemented? “It’s about peeling back the onion,” says McLeod. “If you do the basics well then you’re ahead of 80% of the companies out there.”
To help readers gain some ground, we’ve created a set of guidelines for navigating the adoption of an effective fleet management program with the help of a panel of consultants, suppliers and end users. No off-the-shelf solution will work for everyone, but these practices will help fleet managers avoid wasting time and money as they reconnect to their fleet’s true costs.
1) Understand what it is
According to Nick Adams, business development manager for the Mitshubishi Caterpillar Forklift America (MCFA) fleet services group, fleet managers should not fixate on assuming fleet management has a single definition. “A lot of people will tell you that fleet management means a full maintenance contract. That’s not necessarily true. They also say fleet management will always produce cost savings. That’s also not true. Like any product, it’s a set of tools that you have to use correctly to get savings.”
Michael McKean, fleet management sales and marketing manager for Toyota Material Handling, says it’s imperative that fleet management not be confused with other capital expenses. “The company might have five projects on the agenda, like a new roof or a new dock,” says McKean. “But those are just projects. Materials handling equipment is not a project, it’s an essential part of a well-run business.”
2) Know your needs
A well-run business will pay attention both to its customers and to its status as a customer, according to Adams. “You have to understand your requirements relative to your assets,” he says. “Two people may order different things from the same menu based on budget and tastes, and both are good meals.”
Before pursuing a third-party maintenance agreement or new equipment, McLeod advises customers take stock of what they have and what it’s costing them. “I’ve seen operations with 15-year-old trucks so well maintained that it makes sense not to upgrade,” he says. “Other places have trucks that are three years old and are a disaster.”
Jason Bratton is vice president of business development for BEB Industrial Asset Management, a third-party forklift fleet management company. Bratton says that each customer might have its own preferences for how to do business. “Third-party invoice consolidation works for some but not for others,” says Bratton. “End users either find they need that service or would rather keep control over it for other reasons.”
According to Patrick DeSutter, director of fleet management for NAACO Materials Handling Group, customers need to understand their asset mix—especially short-term rentals that have overstayed their welcome. “You need an enterprise-wide mindset,” says DeSutter. “A series of separate programs might not be working toward the common good.”
3) Communicate, communicate, communicate
Communication is often the single best way to ensure progress toward the common good. And it’s important to communicate not just with your fleet management partner, says Bratton, but also within your organization. “It’s critical for the success of a rollout,” he says. “If we’re calling a site to begin a preliminary fleet assessment and the first time they’ve heard about us is from us, that’s a problem.”
Effective communication is about more than memos. A discussion of motives and objectives with a fleet management partner will help a customer later evaluate the service. And communication within a company generates enterprise-wide buy-in that can be essential for the success of the program. A new fleet management program is unlikely to succeed if it’s as fractured and disconnected as the problem.
4) Don’t change too quickly
Initial communications can brace an organization for change. But as fleet managers work to identify costs, it’s essential to collect data at a manageable pace and to react to the data with incremental steps, not sweeping change.
“In fact, some clients should not change anything in the first three months,” says Bratton. “It allows your fleet management partner to establish a baseline. Let’s not go in guns blazing, saying we need to change this, fire them, buy these trucks.”
Depending on how well-capitalized a customer is, rapid change might not be a problem, says McLeod. A customer might instead plan to evolve over five or more years if it doesn’t have the capital to swap an entire or partial fleet. “Take things in bites, with a methodical approach and frequent pauses to review goals and progress,” says DeSutter.
Once a customer has established a baseline it can then address things like avoidable damage caused by either the operator or the facility design. “These can be significant costs,” says DeSutter, “as high as 25% to 35% of the lift truck maintenance spend.”