Introduction
Forklift life cycles within any business are ever-changing and dependent on a variety of factors such as usage, environment, and application. With the trend to lease forklifts to manage the life cycle, procuring the asset is only the beginning of the process. Companies should perform due diligence throughout the lease to review and create opportunities to improve on their investment. Businesses ebb and flow over the course of the lease, so periodic reporting and discussions need to be held to maximize the benefits and reduce the risk.
The Challenge
While the company is focused on building their automotive products, they have minimal bandwidth to collect and understand the information for their forklifts. They rely exclusively on suppliers to assist, but even their information is segregated between the OEM, dealer, and lessor. Below is the baseline assembled for an automotive manufacturer’s material handling equipment (MHE) fleet.
Leased MHE Assets (19)
- Five (5) assets on lease holdover*
- Fourteen (14) assets with leases expiring this year
- Eight (8) assets with hours exceeding lease allotment
Baseline Financials (Annual)
| Maintenance | $96,624 |
| Leases | $155,616 |
| Return/Overage Fees | $91,403 |
| Total | $343,643 |
*“Holdover” occurs when a lessee continues to keep (use and pay) the asset after the term of the lease ends.
With segregated information and a disjointed approval process, not only was the automotive manufacturer facing significant unforeseen costs due to exceeding the allowable usage, they were negligent on creating a deliberate plan for their fleet.
The Solution
Summary
- Replace 11 assets with new equipment
- Refinance 8 assets with remaining useful life
Projected Financials (Annual)
| Maintenance | $53,988 |
| Leases | $215,340 |
| Return/Overage Fees | $0 |
| Total | $269,328 |
Program Benefits
- Automotive Manufacturer receives $74,315 (21.6%) in total annual cost savings.
- Fleet updated with 11 new assets, lowering maintenance costs, and reducing downtime.
- $0 in upfront EOL (end of lease) costs.
Recap
Propellr broke down the silos of information to address the issues plaguing the fleet. According to the automotive manufacturer’s experience:
“Propellr has been helpful with our material handling equipment by identifying cash flow and cost savings opportunities through their program.”
— PURCHASING DIRECTOR
The automotive manufacturer’s implementation is a textbook example of a sophisticated, detailed baseline analysis simplified into action items to execute. By partnering with Propellr, companies can address weaknesses, make strategic decisions based on concrete information, and create initiatives that fortify business needs and best practices.
