In recent years sophisticated IT systems and e-commerce initiatives may well have helped to smooth the flow of product through the supply chain and made impressive inroads into the amount of inventory held on company books, but ultimately, goods still have to be physically moved, and in the warehouse, that burden falls on the hard-worked forklift truck.
The rigorous demands of the warehouse environment, with its commensurate pressure to shift product to tight schedules, places the operational warehouse fleet right in the management spotlight. Productivity and up-time are the key concerns, along with safety, of course. But purchasers are no longer swayed by the engineering or technological attributes of one manufacturer’s products over another, operational performance of the kit is a given, what the customer wants is highly reliable service at the most competitive price. And here in is the challenge for the manufacturers.
Having evolved over the last 50 years or so, warehouse trucks are now highly developed pieces of equipment. However, in this mature market, differentiating between the product attributes offered by the major manufacturers is becoming increasingly difficult. The manufacturers are fully aware of the commoditisation of product in their sector and have responded by moving to reposition themselves as more service orientated companies, concentrating on maintenance and customer service. No longer is it a matter of selling metal and moving on, the aftermarket is where the profit is and working closer with the customer ensures a longer lasting relationship. Warehouse truck makers now talk readily about ‘partnerships’ with their customers and actively look for ways of adding value.
According to Bill Goodwin, sales director of Jungheinrich UK, ‘Adding value to supplier contracts should be about reducing or removing costs for the end user, rather than the notion of adding any “sweeteners” to the deal.’ As an example he cites the development of a touch-screen reporting system for truck faults to improve levels of fleet management and productivity – a development undertaken by Jungheinrich on behalf of a major supermarket chain following the award of a major warehouse fleet contract.
Most truck defect reporting systems are currently paper-driven. These rely on strong operational controls to be really effective but, as warehouse operations grow in size, volume and throughput, such reports tend to deteriorate. Furthermore, truck operatives often experience difficulty and reluctance in recording written faults on paper. Here the driver records faults in a pictorial manner via a screen located close to the driver.
Reducing costs
In true partnerships, the value created can be applied to both the client and supplier organisations, underpinning the principle of a mutually beneficial relationship. This creates an environment that is conducive to innovation. In such an environment, the partner organisations will be able to focus on a pro-active approach to reducing current costs, avoiding future costs, and developing a relationship that has an on-going commitment to driving costs out of the operation – at least that’s the view given by one manufacturer.
BT Industries is thinking along similar lines. It has just launched an initiative aimed at saving its clients money through reducing the amount of damage that occurs within materials handling operations.
The scenario offered by BT Industries considers a typical site that uses a fleet of 200 trucks on a threeshift system and employs some 600 operators. On one such site, BT claims that its service data revealed an average 3300,000 worth of damage to trucks alone, in one year. Considering the strength and solidity of forklift trucks, BT estimates that consequential costs – damage to infrastructure and goods, downtime etc – are quite possibly ten times this amount. If that were true then the total costs involved would be around 33,000,000 – no insignificant amount. But, even if this estimate is considered high, halve the amount and the damage to the bottom line is still considerable.
So, how do BT Industries plan to help you reduce accidental damage in your warehouse? No, there is no quick fix technological solution offered here, the answer lies in a softer option – by improving driver performance. The approach offered is specifically not one of skills training, but rather one of raising personal awareness and responsibility, and even by improving self-esteem.
In practical terms, BT Industries provides support, and a package of materials, including a handbook for supervisors, a DVD film for drivers, motivational safety posters, and a scoring and incentive system. In the example cited, the claimed result is over 3150,000 worth of savings for the company in the first year – an amount worth saving.
Overall, the trend in Europe is away from direct purchasing of trucks and towards leasing agreements, normally along the lines of a two to five year contract where they own the truck at the end of that period. A full maintenance package is usually an all-important part of the contract and the reliability and proximity of maintenance engineers is a critical deciding factor for most companies looking to commit to a single source supplier of trucks. Principally, uptime is what counts in most buyers’ minds and confidence in a supplier’s ability to ensure the maximum level of uptime is perhaps, the most persuasive factor – even above price.
This is supported by the results of a recent UK survey of 208 small to medium sized companies, undertaken by an independent market research company, and sponsored by Jungheinrich. Findings indicate that the most important supplier selection criteria used when investing in a new lift truck is the level of servicing provided.
Interestingly, 40 per cent admit that supplier differentiation is very difficult and 35 per cent of respondents agree that product differentiation is almost impossible.
The survey also highlighted an important area for improvement in the sector, reporting that 83 per cent of respondents believe that current service levels are no better than adequate, the implication being that there is room for manufacturers to exceed customer expectations. Users would clearly respond well to those manufacturers able to offer added value in this critically important area. What’s more, service levels were seen as more important than either improvement in the quality of products or, surprisingly, their reliability.
Logistics Europe first reported a move by fleet purchasers to buy on a pan-European basis a few years back now, but momentum appears to be gaining in this area with most of the big manufacturers reporting major deals across several countries.
According to Alan Blyth, major account manager at Hyster, ‘Every one of the major 3pls [third party logistics companies] are looking at or involved in pan-European deals for their truck fleets and many international companies are active in this area too.’
The significant influence of the third party logistics service companies on the fork truck market is quite telling. Blyth admits that about 20 per cent of the total truck market is down to the contact logistics service sector.
A simple logic
The advantages of leveraging purchasing power over a number of sites across Europe are obvious and the appeal of arranging maintenance for several locations through one service agreement with a single source supplier has a simple logic, however, implementing such contracts is far from simple. An emerging trend is to use consultants to prepare the initial tendering. ‘Two of the last seven pan-European deals we have worked on involved Accenture’, points out Blyth. ‘They’ve created a sort of template for what they are looking for in these deals’.
Hyster has recently won a five-year contract with a leading global logistics company for the supply and maintenance of 4,800 trucks, mainly warehouse equipment. Working with the global procurement team Blyth explains that ‘this continuous dialogue with the customer enables both parties to the contract the chance to monitor the efficiency and cost effectiveness of the equipment and services we are providing across several worldwide locations.’
Hyster works with its European finance partner GE Capital to offer flexible European finance options. This has been taken one step further in their business with the MOD (Defence Logistics Organisation). One of Hyster’s major global distribution partners, Barloworld, has purchased the MOD’s total materials handling fleet and leased it back on a full service contract basis. This ten-year contract covers around 4500 pieces of equipment in over 16 countries.
When it comes to pan-European deals, most manufacturers look to fleet sizes of 500 trucks or more to make it worthwhile.
‘In general, demand is for more standardised trucks as bigger accounts are looking at reducing size of fleets, but increasing flexibility by moving them about between sites as required,’ points out Blyth.
Most companies committing to a fleet purchasing agreement will calculate the full lifetime cost of the truck and importantly, the cost per pallet moved. Of course, the most significant cost with any truck is its driver; accounting for 70 per cent of the overall cost of operation and its here that driver training, motivation and performance are critical. So, perhaps, it’s hardly surprising that a new trend is emerging. ‘There’s increasing demand for complete outsourcing, for manufacturers to provide, not only trucks, but also drivers,’ indicates Blyth. ‘It’s not that big at the moment although it’s growing. However, it does get a lot of resistance from in house staff.’ He sees that in five to ten years time this could be a big area for the manufacturers, as purchasers move to more flexible solutions – a particularly interesting area for third party service providers and major accounts.
Engineering origins
Fork lift truck manufacturers have come a long way from their engineering origins in the last 50 years, but now improving their service offerings appears to be the way of the future.
However, engineering still has a part to play and two new product innovations are worth a mention. First, is BT Industries’ ingenious addition to the industry’s most basic product, the hand pallet truck. As anyone who has ever used one will know, getting a heavy pallet load on the move is highly strenuous, but BT’s ‘Pro-lifter’ uses a simple mechanical lever, activated by the pumping motion of the handle, to give that vital push to the load, helping to overcome that initial inertia.
The other is Atlet’s advanced automated safety system on its UNS Tergo range of reach trucks. The new system, S3, is an ‘intelligent’ electronic system using the onboard computer and comprising interfacing sensors and height measurement inputs to provide greater stability when stacking and travelling. The drive speed is governed by the truck’s steer angle and the direction, height and reach of its forks. All in all, an important contribution to increased productivity with safety.
