Supply Chain and Logistics executives are under a great deal of pressure to not only meet today’s more demanding customer expectations, but to do so in a cost-effective manner. Therefore, finding opportunities to minimize costs and improve productivity are more important than ever. One area that many companies overlook for potential benefits is material handling and fleet management. What are some of those opportunities and how do you capture those benefits? That’s one of the key questions I addressed with Jeff Burns, President of Kenco Material Handling Solutions, in a recent episode of Talking Logistics.
Fleet Management: A Different Definition
When people think of fleet management, they often think of over-the-road pick-up and delivery fleets. But fleet management can mean other things, especially in warehouse operations.
“We define fleet management as cradle to grave oversight of rolling stock,” says Jeff. “That includes all material handling equipment within a warehouse, distribution center or manufacturing site, such as forklifts, personnel carriers, yard spotters, sweepers, and booms. We find very few people are tracking data and spend on this equipment.”
Material Handling Challenges
Jeff points out that one of the key reasons this data is not tracked and analyzed is that in multi-site manufacturing and distribution operations decisions on this equipment are often made locally. It is virtually impossible, therefore, to have complete, integrated visibility to its usage and to standardize equipment procurement and utilization.
“This causes a natural blind spot, and as a result, companies are spending more on material handling than they need to,” says Jeff. “We find that it is very easy to save companies 10 to 15 percent, and sometimes up to 25 percent, by doing simple things that they could do themselves if they had complete visibility at the 30,000-foot level.”
Measuring Success
Once a company gets visibility to their material handling utilization and spend, what data should they analyze to optimize its usage? Jeff indicates it begins with looking at preventive maintenance. He recommends looking at what is abuse versus normal or elective maintenance because that will tell you if your equipment is being operated improperly. He notes, “Oftentimes, your provider won’t share that information because that means more money for them.”
Next, Jeff recommends analyzing cost-per-hour. That includes all aspects of equipment utilization such as lease or depreciation costs, the cost of maintenance and repair parts, as well as the labor to perform that maintenance and repair. Jeff says, “We help clients roll that into how they price what they’re selling because they now know the cost of the equipment used to make their products.”
Jeff also suggests companies look at true utilization. For example, he notes that for lease purposes utilization of a forklift is usually defined as the time from when the key is turned on until when it is turned off. But the equipment might be left idling for extended periods of time.
Another key metric Jeff cites is first time repair rates. If a repair is not completed properly the first time, it can lead to additional unplanned repairs and down time. This negatively impacts utilization and costs.
The Big Questions
Capturing all of this data raises some important questions, starting with how do you capture it? What can it tell you about key decisions such as lease vs. buy and repair vs. replace? Finally, how do you go about finding a partner to help you get visibility to this data and analyze it?
Jeff had some really interesting insights on each of these topics, including why material handling equipment technology may be 10 to 15 years behind what you have in your car, and why “pigs get fed, hogs get slaughtered.” As usual, I don’t have the time or space to share all of his insights and advice with you here, so I encourage you to watch my full interview with Jeff. Then post a question or comment and keep the conversation going!
