Andy Milsom, Head of Partner Training & Development at BNP Paribas Leasing Solutions

Andy is an experienced sales and finance professional with over 25 years’ experience in sales aid leasing. Andy is widely recognised as an expert in business finance and has in recent years focused his attention on developing partner sales teams develop an understanding of how businesses secure project financing. His training programme – Finance Unlocked – is a highly rated customisable course and is offered at no cost to partners.

If you’re interested in helping your sales team overcome finance-related hurdles during the selling cycle, please get in touch with Andy on 07966 114 243 or email here.

Counterbalanced trucks account for nearly half of all new sales. But there has been an increasing share of sales taken by warehouse pedestrian trucks, reflecting how the rapid growth in internet shopping has led to an increase in the number of warehouses being built.

Manufacturers and their customers have rightly given additional focus to Total Cost of Ownership (TCO), to decide when and how to replace machines. Whilst the cost of a machine is an important element within any TCO analysis, it is by no means the only consideration. The cost of fuel, maintenance and personnel are fairly easily identifiable and key components within a total cost of ownership but less obvious factors affecting downtime need proper consideration. These include battery charge times, distance from a fuel source and driver skill. Proper analysis should also include an assessment of non-contract damage cost and a potential requirement for additional operators. Telematics and data analysis are being increasingly used to monitor hidden costs and make them more predictable.

A renewed focus on TCO has revealed the importance of fuel in the overall cost of running a machine, and advances in battery technology have helped to provide a method of reducing fuel costs when compared to the internal combustion alternative. Battery power now has a market share of about 70% but there remains doubt as to which battery technology, if any, will become an industry standard. It is the case that lithium ion batteries come in many forms each producing different results in terms of:

• Initial cost
• Specific energy (capacity)
• Weight
• Maintenance
• Thermal stability (safety)
• Charge time

A further development that manufacturers are starting to address is meeting the increasing demand for self-driving machines, operating in highly automated warehouses. The online grocery retailer Ocado offers an excellent example of how robots can complement humans to provide a highly efficient warehousing and logistical solution.

The need to address issues raised within a TCO analysis with a focus on increasing productivity, by taking advantage of the raft of new technology, involves operators having to acquire new machines. The good news is that leasing allows this type of investment to take place now whilst spreading the cost, in this way the equipment gives a much faster return on investment than with a cash purchase. HMRC also allows the cost of leasing to be offset against tax.

Andy Milsom, Head of Partner Training & Development at BNP Paribas Leasing Solutions

Andy is an experienced sales and finance professional with over 25 years’ experience in sales aid leasing. Andy is widely recognised as an expert in business finance and has in recent years focused his attention on developing partner sales teams develop an understanding of how businesses secure project financing. His training programme – Finance Unlocked – is a highly rated customisable course and is offered at no cost to partners.

If you’re interested in helping your sales team overcome finance-related hurdles during the selling cycle, please get in touch with Andy on 07966 114 243 or email here.

The report reflects data collected from a survey TCM conducted in late 2017. This survey included Operations Managers, Operations Directors, Logistics Managers, Logistics Directors, Owners/MDs and Warehouse Managers.

Economic adjustments

The upswing in e-commerce, advancements in automation, and the recent vote to leave the EU mean that it’s more important than ever that the materials handling and logistics sector has access to relevant financing solutions to support changing work practices. New business opportunities are already presenting themselves: home delivery fleets have grown and self-employment has increased. In the logistics sector for example, last year’s traffic growth for light goods vehicles was up by 12% from 2014. Vans now generate around 15% of road traffic and their presence on urban roads continues to rise.

The fast turnover of warehouse stock also calls for investment in equipment such as forklift trucks to manage the volume of goods in and out. When the seasonal clear-out is over though, you may find yourself with a fleet of fork trucks sitting idle. Rather than buying the extra trucks you need outright, you can lease them over a three-year period. This provides greater affordability and more budget control as you can pay more in peak periods and less when business is quiet. Also, most leasing agreements include regular asset maintenance – this works in the favour of both end-users and dealers. At the end of the leasing agreement, dealers can pay the residual value and gain a valuable asset that they can either resell or lease out again on short term contracts. And, a well-oiled fleet guarantees end-users minimal to no downtime which helps increase their profits and productivity. Essentially, everyone’s a winner.

Innovative technology

New technologies can provide an important competitive advantage for warehousing and logistics companies. Driverless trucks for example, can move loads around warehouses and onto road transport using ever more advanced software and sensor-based guidance systems.

Real-time inventory updates can be done with computers mounted onto trucks and hand-held or wearable mobile devices. These tools interact directly with stock-picking or asset tracking software and feed data through the system quickly and efficiently.

Microchipped tags can improve goods handling and tracking by transmitting product information through radio waves. This eliminates the potential for error associated with manually scanning traditional barcodes.

Greater transparency

In the world of e-commerce, customers expect to be able to determine the availability of an item, how long it will take to deliver and track its journey to them – all online. Using technology to manage stocks and logistics is now seen as essential to providing good customer service.

Adopting new technologies is vital for this industry to stay competitive and agile enough to adapt to fast-changing market dynamics. However, it can be expensive. Many firms are thus choosing to lease the solutions they need, rather than buy them outright. This enables them to have the most-up-to-date and relevant IT systems and machinery, but without the costly upfront capital expenditure.

There is little doubt that e-commerce is a capital-intensive business, demanding more sophisticated equipment and services to meet the rising demand of online shoppers. Leasing rather than owning allows businesses to upgrade their software or services as the technology improves or their needs change. It’s a cost-effective solution that enables new or established warehousing and logistics companies to stay up-to-date with ever-changing market demands. 

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Here are five compelling arguments for why leasing forklifts makes better business sense:

1. 1. Access to the latest technology

The materials handling sector is an increasingly competitive environment. New technologies can give businesses that all important edge in the market – but they don’t come cheap. For some businesses, this means doing without the necessary equipment or upgrades until they can afford it. However, delaying crucial investment can affect your business’ growth potential and impact its efficiency.

Leasing allows you to access the technology that is best-suited to your business at an affordable rate. New and top of the market technologies are usually more cost-effective to run than some of the older or cheaper models and a lease agreement means you’ll be able to afford all the benefits of these high quality forklifts.

A very important, and cost-effective, advantage of leasing rather than buying, is that you can upgrade your forklift to a newer model at the end of the contract. In other words, you are never stuck with an obsolete piece of equipment and your productivity levels will not be hampered by an old, tired forklift.

2. 2. Flexible payment options

With leasing, you can choose the payment period that is right for you and your business’ budget. The leasing model allows you to structure the deal to match your cashflow. For example, if your revenue cycle operates quarterly, your lease repayments can be made quarterly too.

By the time your contract has completed, your business’ needs may have changed. Your operations may have expanded or your strategic direction may have shifted, resulting in changes to warehouse dimensions or the lift capacity required by your forklifts. At this point, you can return the equipment and sign a new lease agreement to access the forklift that meets your current requirements.

3. 3. Helps you manage your budget

A lease agreement enables you to plan your budget with confidence and accuracy. Maintenance costs can be wrapped up within the payments and you won’t be caught on the back foot with any unexpected expenses. As a result, cashflow remains healthy and capital is freed up to allocate to other investments that could help grow your business.

In a lease agreement, all costs, including VAT, are spread out across the contract. These costs are fixed and predictable, helping you plan for the future with greater clarity and protect your business from unforeseen economic swings. What’s more, your repayments don’t affect your lines of credit with the bank which means your borrowing power for other investments is unaffected.

4. 4. Maintenance is covered

If you own a forklift, then you are responsible for its upkeep and maintenance costs. No matter how well you look after your equipment, unplanned repairs can occur outside of your maintenance schedule. This unexpected downtime is unproductive and can be very expensive.

A lease agreement can factor in maintenance so there are no surprise costs. This is often referred to as  a contract hire agreement, which can take care of equipment delivery, servicing and repairs. If your forklifts are going to be worked hard throughout the year this can be an important benefit for managing the lifetime cost of a forklift.

Next time you need a new forklift, consider leasing it rather than making an upfront purchase, and gain the perks of access without the burden of ownership.

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Save the planet – and save money

Access to new environmentally friendly technologies can help businesses reduce their operating costs, as well as their carbon footprint. Manufacturers are now developing products and equipment with recyclability in mind. Alternative power technologies such as electric batteries consume less energy and power equipment such as zero-emission electric lift trucks. Fuel efficiency is also a focus and manufacturers are producing models of forklift or order picking trucks that need less fuel and thus produce fewer carbon emissions.

The Internet of Things (IoT) is also helping businesses improve their fleet management systems. The IoT helps to identify potential problems with equipment which can then be remedied in advance, keeping equipment running smoothly and efficiently and saving downtime and inefficient use of labour.

The focus today is on achieving both financial and environmental sustainability. It’s time to replace older, inefficient, energy-guzzling assets. If materials handling companies can’t expand their fleets or upgrade their equipment, they’ll be at a competitive disadvantage.

Lease rather than own

A perfectly ‘circular’ economy could be the solution to our environmental problems. This concept goes beyond recycling, which requires energy intensive processes, and focuses on eliminating waste production in our industrial system. It would also involve a shift in the relationship people have with products: Consumers will become users and choose access over outright ownership. Companies therefore retain ownership and can ensure that products such as MH equipment are disposed of responsibly at the end of their lifespan.

MH equipment end-users can also benefit from the circular economy by leasing the assets they need, for as long as they need them, at a reasonable cost. The latest, environmentally friendly technologies will thus be much more easily accessible. A finance product such as contract hire even rolls up maintenance costs into the rental payments. Equipment that is regularly serviced and kept in good condition will consume far less energy, last longer, and be more sustainable to run.

Ultimately, warehouse and logistics businesses want to improve efficiency and manage their cash flow. Enabling businesses to invest in the latest environmentally friendly technology, which supports their business needs without costing them a fortune, is a sustainable solution to a changing global economy.

1. Service your fleet

Nobody running a materials handling company needs to be told that their equipment requires regular maintenance, but it’s especially important to ensure that your fleet is fully serviced before the Christmas rush. This can be a problem if you’re out of warranty and you haven’t budgeted for the appropriate support: third-party repairs can often be prohibitively costly for a cashflow-sensitive business.

This problem can be avoided with the right type of finance. A contract hire arrangement allows you to incorporate maintenance and repair costs into your regular rental payments – ensuring that your fleet is in ship shape for the seasonal surge.

2. Evaluate your staff and equipment needs

Christmas, Black Friday and other periods of busy sales activity lead to a kind of “all hands on deck” mentality, and they inevitably force businesses to re-evaluate their staffing and equipment needs. If you need to upscale your fleet or bolster your workforce, you’ll want to know well in advance.

Carefully analyse your business to identify areas where you’re suffering from a shortage, and take the appropriate measures to address it – whether that’s hiring temporary staff or increasing your total of forklift trucks.

3. Upgrade your fleet

It’s tempting to try and keep functional – if outdated – equipment running far beyond its use-by date, but there’s no getting around the fact that older fleets tend to break down far more. After a certain point, maintenance becomes more like life support.

So before the busiest season begins, make sure you’ve upgraded your fleet. The right leasing agreement can give you budget-friendly access to the best machinery on the market – and with terms that allow you to upgrade when you eventually renew your contract, at little additional cost.

4. Upgrade your fleet

The run up to Christmas is traditionally associated with a rise in forklift accidents. For the twin purposes of efficiency and safety, you should make sure your staff have an up-to-date understanding of how to use your machinery and equipment. Ensure temporary team members are properly onboarded, and that refresher courses are made available to anyone who might need them – the fewer workplace injuries, the less downtime, the happier your workforce, and the better your festive season.

5. prepare for the cold

Finally, make sure your fleet is as weather-proof as possible. Snow and ice make it harder for your warehouse’s trucks and vehicles to get around, and for obvious reasons, demand for snow ploughs and gritters increases exponentially around the winter season. If you need to clear some snow or ice, make sure you have access to the necessary equipment. A little preparation goes a long way.

In fact, it’s a principle that applies to both logistics and Christmas in general. If you go to the supermarket on December 24^th, you shouldn’t be surprised when you don’t get a turkey, and if your company doesn’t plan for the festive rush, you shouldn’t be surprised if things become chaotic and costs start to rise. For logistics businesses, Christmas starts long before December.

We have summarised the five hottest trends in materials handling right now. These trends are already having a big impact on the sector and are likely to continue to influence and shape it. Materials handling equipment suppliers will need to ensure that they’re clued up to stay ahead of the competition.

Flexibility

Busy sales periods now cause as much panic and chaos for warehouse personnel as they do for customer-facing staff.

Put simply, it’s not easy to adjust your fleet size and keep your finances under control. Buying more forklift trucks may seem like a practical solution, but when the seasonal clear-out is over, you may find yourself with rather limited use for them. Not buying more forklift trucks is also not the answer: overexerting a small fleet is likely to lead to breakdown and delays.

Instead of purchasing the assets you need outright, a three-year lease will allow you to pay more during periods of heavy custom, and less during quieter periods. This affords you the flexibility of a greater fleet and more control over your budget.

Easy upgrades

Of course, quality is as much of a concern as quantity. Every asset comes with built-in obsolescence, and as technology improves and automation rises to prominence, forklift trucks have shorter shelf lives – assuming they continue to function. Degradation and maintenance remain major concerns, and if your fleet is in poor shape, it can become a recurring drain on your resources.

The promise of subscription models is that they enable you to use the best possible equipment at all times. Why? Because suppliers depend on monthly recurring revenue instead of one-and-done transactions, so they’re incentivised to offer you good deals on favourable terms. When you can source machinery in this way, you can ensure you’re always using the very best tools on the market – maximising productivity and minimising expenditure.

Tailor-made service

The materials handling industry is diverse, and every company has complex, diverse needs. Some will depend largely on Automated Storage and Retrieval Systems (ASRS) for stock retrieval; some will have the bulk of their picking and packing done manually; some will need forklift trucks only for heavier goods. There’s no one-size-fits-all solution. Custom service is a necessity and yet is curiously rare: if you need multiple products, or multiple combinations of multiple products, a viable deal or offer is often lacking.

Again, suppliers who use a subscription model are naturally inclined to make sure you get the bespoke package that your company requires. Operating leases and asset finance agreements are conducive to a la carte deals: suppliers will often endeavour to provide whatever combination of products, vehicles, and services you need in a scalable, cost-effective fashion.

It’s a long-term relationship rather than a one-night stand. Naturally, it comes with certain parameters, and you’ll want to have your accountant look over any agreement before you sign it. But within those parameters, your logistics company can benefit from greater freedom, greater flexibility, and greater control over its finances. The world of subscriptions and alternative finance has levelled the playing field: ambition, strategy, and wherewithal trump sheer size and monetary clout.

If you don’t have the latter, make sure you have the former. If you’re clever about how you finance your forklifts, you can scale at will, you can limit your outlay – and you can make obsolescence a thing of the past.

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