April 22, 2013
material handling update | Lift Trucks

Is your lift truck ready to retire?

Is your lift truck ready to retire?

Wondering whether to keep that lift truck going a little longer or put it out to pasture? Here are some things to consider when making that decision.

By Toby Gooley

Lift trucks are the "workhorses of the warehouse"—essential tools for shipping, receiving, picking, and putaway. But no piece of equipment can last forever; sooner or later, every lift truck will reach the point when it should be put out to pasture, so to speak.

How do you know when it's time to say goodbye? If you lease the equipment, it's not an issue—the "retirement" date will be set as part of the leasing agreement. But if you own the equipment, this can be a tough call. The key, experts say, is determining when a lift truck has reached the end of its "economic life." That's the point when the cost to operate a vehicle exceeds the value it provides, and keeping it going would be akin to throwing money away. Several factors play into that decision, including hours of operation, operating conditions, utilization rates, maintenance costs, and productivity.

For an automobile, mileage is a better indicator than age of expected longevity. Similarly, the number of operating hours a lift truck has logged is a more reliable measure of its expected lifespan than its age. The typical lift truck engine is good for 10,000 to 20,000 hours, although some last much longer.

But the average number of operating hours is only a broad guideline; there are several other factors that also influence how long an individual truck will last. For example, electrics generally run more total hours than internal combustion (IC) trucks do. Operating conditions also play a big role, says Bill Rowan, president of Sunbelt Industrial Trucks, a dealer that represents Narrow Aisle, Nissan (now UniCarriers), Komatsu, and Doosan. You'll get more hours, for instance, from a truck that operates indoors in clean, dry conditions than you will from one that's exposed to extreme temperatures or messy loads that can gum things up.

One of the most important factors affecting operating hours is maintenance. A properly managed planned-maintenance program will help any truck operate more efficiently and last longer. "Being proactive on the maintenance side is one way to increase the economic life of the lift truck," Rowan says.

Utilization also affects longevity; a lift truck carrying heavy loads over multiple shifts will not last as long as one that sees light duty in a single-shift operation. In some cases, though, it is possible to extend a truck's lifespan, says Scott Craver, product manager of business and information solutions for The Raymond Corp. If a few trucks have lower utilization rates than others in a fleet, "locking out" some high-mileage forklifts for a while and using the low-utilization trucks will wring more hours from the latter and allow the fleet vehicles to wear at the same rate. But, he cautions, it's critical to investigate why certain vehicles are underutilized and to make sure there's nothing wrong with them before putting them to heavier use.

For companies that buy their trucks rather than lease or rent them, it's tempting to focus on getting as many hours as possible out of each piece of equipment. But that approach is counterproductive. Experts advise fleet owners to pay equal attention to maintenance costs, because these can eventually outweigh the benefits of keeping an older truck running.

Maintenance costs, which include parts and labor, usually are predictable for the first couple years of a lift truck's life. But after a few years and several thousand hours of use (the numbers will vary depending on individual circumstances), maintenance costs inevitably rise. In a hypothetical but common scenario, a new truck might have no maintenance expenses to speak of in its first year, and in its second year, maintenance might cost $1.50 an hour, says Bill Pedriana, director of sales for Big Joe Forklifts. "Then, in year five, that may go up to $3 per hour, even with good, planned maintenance," he says.

Major repairs are to be expected later in a lift truck's life. Components like motors, drive units, transmissions, and electronics may require repairs or replacement after about 10,000 hours and/or six or seven years, says Maria Schwieterman, a marketing product manager for Crown Equipment Corp. "That's a good time to question whether to keep the truck or not," she says.

In fact, the type of repair is a critical consideration when deciding whether or not to hold onto a truck, says Brian Markison, senior manager, national accounts for UniCarriers Americas Corp. (formerly Nissan Forklift Corp. North America and TCM America). Costs for "wearables," such as wheels, belts, and other parts that routinely require replacement throughout the life of the truck, are not relevant—"You will have tire replacements no matter how old the truck is," he says. Scheduled preventive maintenance costs also should be excluded from the analysis. More important are the big-ticket repairs like engines, transmissions, drive motors on electrics, and other components that potentially could require a rebuild and trigger capital expenditures, he says.

Markison suggests looking at how many work orders (other than preventive maintenance) have been opened on the truck in a 12-month rolling period. If there have been more than four, the truck bears watching and may be a candidate for replacement. "It doesn't necessarily have to be for major repairs," he observes. At a certain age, an old truck goes into "nickel and diming mode"—generating small but continual maintenance expenses, he says.

A sudden, unexpected increase in maintenance costs may be a sign that a lift truck is reaching the end of the road. But rather than assume that's the case, "it's worth the time to dig into why you're having to make those repairs," says Michael McKean, manager of fleet sales and marketing for Toyota Material Handling U.S.A. Inc. (TMHU). If an analysis shows that maintenance costs spiked because of avoidable problems like inadequate maintenance or a one-time event like an accident, then you'll have uncovered an opportunity to prevent such problems in the future and won't be getting rid of a truck that may still have plenty of life in it.

When do maintenance expenses cross the line from "acceptable" to "not worth it"? If you're spending more than 10 percent of the truck's purchase price year after year on maintenance, then it's no longer economical and it's probably time to retire the vehicle, McKean says.

Some fleet owners will retire a vehicle when the annual maintenance spend on a unit exceeds its resale value, Pedriana says. Raymond's Craver suggests giving serious thought to retiring a truck when the average maintenance cost per month approaches or exceeds the monthly payment for a new vehicle.

No matter what your criteria, you won't be able to judge when maintenance costs have become unacceptably high without accurate, complete data, Schwieterman points out. Fleet management systems are invaluable aids for collecting, tracking, and reporting that information, but small fleets with just a few trucks could manually collect the necessary information and use a spreadsheet to sort it out.

If a lift truck is becoming a drag on productivity, it's probably time to replace it, Craver says. There are several reasons that might happen: excessive downtime for repairs, inadequate ergonomics or outdated safety features, or the truck simply wasn't designed for its current (or future) job.

Downtime can be a huge productivity buster. The longer you hang onto a lift truck, the more downtime you are likely to experience. According to Hyster Co. estimates, replacing a truck after 10,000 hours will on average improve uptime by nearly 50 percent compared with replacing it at 20,000 hours. Some fleet owners that operate their trucks three shifts a day routinely replace them after five years because uptime typically declines after that point.

Downtime is expensive, too. There's much more at stake than the cost of an idle driver or actual maintenance expenses, Rowan says. Any lost time can be significant; to what degree depends on how downtime affects your operations, he notes. "If you promise to ship something but a truck breaks down and you can't meet your commitment to a customer, or an operator tells you he's losing time every week because a truck is being repaired, that all goes into your costs," he observes.

In some cases, the ergonomic and safety features that let operators today drive and handle loads faster than in the past may make older trucks obsolete, Schwieterman says. In high-volume multishift operations, these features may boost productivity enough to warrant replacing older trucks, she says. And if you plan to use a forklift differently—for more shifts, increased hours, or a new application—first consider whether the current truck will be up to the task or should be replaced, she adds.

The decision to retire a forklift should take into account not only the factors mentioned above, but also a truck's "book" value and its resale value. One common problem, McKean says, is that a company's finance department may insist on keeping a lift truck on the books for seven or more years until it is fully depreciated, without considering the vehicle's hours, maintenance costs, or resale value.

That means fleet managers may be told to put thousands of dollars into repairs because a lift truck has several more years to depreciate, even though the maintenance costs might be high or the trade-in value may be considerably less than its book value. "Once a truck is over a certain age, the trade-in value drops significantly," Rowan says. To help make the case for replacement, he suggests, show your finance people how rapidly maintenance costs will rise and the trade-in value will decline while an older truck remains on the books.

Exhbit 1

Exhbit 2

To bring some clarity to the economics of lift truck ownership, forklift makers have put together charts to help fleet owners find the sweet spot—where all of the factors affecting a lift truck's value and productivity are favorable—as well as determine when a truck has reached the end of its economic life. See Exhibits 1 and 2 for a couple of examples.

Exhibit 1 maps maintenance, ownership, and total costs per hour over the life of the truck. The point where the total cost is lowest is the best time to retire a forklift, say the experts interviewed for this article. After that, total costs will only rise, and the longer you hang onto a truck, the more it will cost to maintain and operate.

Exhibit 2 segments the trucks in a fleet into green, yellow, and red zones denoting peak (keep), declining (watch), and poor (replace) performance. Which category a truck falls into depends on its productivity and maintenance costs. As their productivity declines and maintenance costs rise, they move into less desirable categories.

Keep in mind that fleet segmentation may not automatically translate into replacements, because a company's capital expenditure planning will influence whether replacement purchases will be approved. "How many trucks you leave in the yellow and red zones will be partly based on whether you have enough dollars to replace X number of trucks," Markison explains.

Does this sound like fleet managers need a degree in finance to do their jobs? It all might seem a little daunting, but experts say digging into costs is worth the trouble. Given the relationships among maintenance, operating, tax, and other costs associated with forklift ownership, a manager who wants to run the most productive fleet at the lowest cost will benefit from understanding how all of these pieces fit together.

About the Author

Toby Gooley
Contributing Editor
Contributing Editor Toby Gooley is a freelance writer and editor specializing in supply chain, logistics, material handling, and international trade. She previously was Senior Editor at DC VELOCITY and Editor of DCV's sister publication, CSCMP's Supply Chain Quarterly. Prior to joining AGiLE Business Media in 2007, she spent 20 years at Logistics Management magazine as Managing Editor and Senior Editor covering international trade and transportation. Prior to that she was an export traffic manager for 10 years. She holds a B.A. in Asian Studies from Cornell University.

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