Considerations for Material Handling Equipment Acquisition

By Rob Cranford, material handling consultant at Element Fleet Management

There’s nothing cookie cutter about managing material handling equipment purchases. Every warehouse and every operator is different. To identify the best solution for a particular organization, as a fleet manager you must put together various pieces of the material handling equipment puzzle. When it comes to acquiring material handling equipment, the following are key factors to consider:

● Fleet size and utilization. A critical step before purchasing or leasing a piece of equipment is assessing how it will be used and how many are required to accomplish the job. An organization may need to acquire 150 forklifts but only run these forklifts 30 percent of the time. The biggest mistake I see organizations make is overestimating the usage for a piece of equipment. When you overestimate usage, you have a higher lease rate and pay more than you should. Third-party material handling professionals can conduct application surveys to accurately assess the true utilization rate.

● Proprietary software. Manufacturers often place proprietary software on equipment that requires specific tools or computer interface to fully utilize the piece of equipment. As an equipment manager, you need to be aware of proprietary components of an asset so that you align yourself with a manufacturer and service provider that can adequately work on your equipment.

● Type of lease. While it is impossible to predict the future with 100 percent accuracy, it’s imperative organizations look at the business climate and select a sustainable purchasing option. The most common type of lease we see today is a fair market value lease. In this scenario, organizations are locked in to a purchase period. Another option to consider is a terminal rental adjustment clause (TRAC) lease, which is not commonly used for material handling equipment. This type of lease allows organizations to change the length of the term after the first twelve months. While TRAC leases are most commonly used when acquiring automotive vehicles, it is an option to consider for your material handling equipment.

● Maintenance costs. When comparing specific pieces of equipment, it’s important to factor in the cost of maintenance, as it is a part of the total cost of ownership. You could save thousands of dollars up front on a piece of equipment but end up losing those savings over the life of the equipment if maintenance issues arise. It’s best to have an understanding of maintenance costs prior to purchase. It’s also imperative to track your maintenance spend and repair occurrence. Tracking and identifying outliers may help you cut costs and make process improvements.

● Equipment operators. From my experience, organizations may sometimes forget their most important assets: their operators. Ensure the equipment is right for your equipment operators by promoting ergonomics and training. Decrease chance of injury and increase productivity by selecting pieces of equipment that fit properly trained employees.
With these factors in mind, fleet managers can begin to put all of the pieces together and create an optimized acquisition plan.

Each month Fleet Management Weekly features material handling equipment guidance from consultants at Element Fleet Management. This month’s column is by Rob Cranford, an Element Fleet Management material handling consultant.

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