When is the right time to replace a forklift? If you are looking for financial justification for updating old forklift fleets with new lift trucks and calculating savings, try our calculator below. We have attempted to provide a business case analysis for replacing an old forklifts with a new forklifts in an easy to understand financial justification online calculation. In this article, we explain how to use the calculator below to create a business case to support exchanging an aging fleet of forklifts (powered industrial trucks) for a new fleet of lift trucks.

Using this calculator, you can compare the estimated savings when you exchange an older fleet of lift trucks for new fleet of lift trucks. The idea is that it is not always easy to show a financial model to demonstrate the need to replace older lift trucks for new ones. The reason is that many expenses in an operation are not tracked. Accounting does not usually have a line item on the P&L for lost time due to increased maintenance, loss of productivity, lost time due to battery droop and charging issues, additional space used for storing additional PIT (powered industrial equipment), and additional labor to operate the addition forklifts.

Financial Justification for Updating Forklift Fleets with New Leased PIT

For an explanation of the calculations and terms, see below.

Current Number of Forklifts in the Warehouse

In this field, enter the current number of lift trucks in the operation. This can be one, or it can be an entire fleet.

Forklift Definition – Forklifts is the generic name for material handling equipment, but can also refer to the specific equipment that has a steering wheel, drives like a car, and has 3 or 4 wheels on the ground. A forklift can also be called a counterbalanced truck specifically, or generally, it can be called PIT when referring to all manner of equipment that is found in a warehouse or distribution center. Equipment that moves goods, is called material handling equipment, or MHE.

PIT Definition – P.I.T. stands for Powered Industrial Truck and refers to forklifts and other types of equipment commonly used in a warehouse.

Lease Cost per Forklift

Enter the dollar amount per month paid per forklift on a leasing contract. Often, on a lease, the payment is called a rental payment, although the contract for the term of the stream of payments is called a leasing contract. To calculate lease payments, click here.

If the equipment is owned and currently does not have a lease payment, simply enter the cost as “0”. The justification for replacing the fleet will come from the increase in productivity, labor efficiency, and reduction of maintenance costs.

Forklift Operating Hours

An operating hour for a forklift is unlike a working hour for a forklift operator. The operator may work 8 hours per day and 40 hours per week, but a forklift logs pedal hours, also known as seat hours or operating hours when the forklift is in operation. Another way or measuring the operation of the forklift is “key hours” which would be the same as seat hours if the operator is diligent around turning off the forklift every time s/he disembarks from the forklift when not using the lift truck, such as during breaks or when stretching wrapping a pallet.

Maintenance Cost per Operating Hour

If you don’t already know what your cost per operating hour is per lift truck or as a blended average, take a fairly large sample of the maintenance and repair cost, such as 12 or 24 months worth of expense, and divide it by the number of operating hours.

If you don’t know what a reasonable expense would look like visit this link to review industry standard lift truck maintenance costs per hour here.

FORKLIFT AND CALCULATOR - CONSULTANT HELPING CUSTOMER WITH FLEET OPTIMIZATION
https://leanmh.com/material-handling-consulting/
Optimize your fleet – Consulting Services

Fully Burdened Labor Cost per Hour

Fully Burdened Labor Cost per Hour is a comprehensive measure used in business and finance to understand the total expense associated with employing a worker for an hour. This cost goes beyond just the hourly wage or salary of the employee. It includes all associated costs that a business incurs due to the employment of that individual. These costs typically encompass:

  1. Base Salary or Wages: The direct payment the employee receives for their work.
  2. Employment Taxes: These are taxes that the employer must pay based on the wages of the employee, such as Social Security and Medicare taxes in the United States.
  3. Benefits: Costs related to health insurance, dental insurance, retirement plans, and any other employee benefits.
  4. Paid Leave: This includes vacation, sick leave, and other paid time off.
  5. Training and Development Costs: Expenses related to the training and professional development of the employee.
  6. Overhead: A portion of the company’s overhead costs (like utilities, rent, and equipment) attributable to the employee.
  7. Insurance: Employer-paid insurance, which may include workers’ compensation, unemployment insurance, and liability insurance.
  8. Other Employee-Related Expenses: Any other costs directly associated with employing the individual, such as travel expenses, uniforms, or tools.

Calculating the Fully Burdened Labor Cost per Hour allows businesses to understand the true cost of their workforce, which is essential for budgeting, pricing, and overall financial planning. It’s particularly important for businesses like yours, Andy, as it helps in making informed decisions about hiring, pricing your products or services, and managing overall operational costs. This understanding can be crucial for your content marketing agency and your e-commerce ventures, providing insight into how labor costs impact your profitability and business strategy.

Days worked per Year

The number of days worked per year will depend on the number of days worked per week and number of weeks worked per year. 52 weeks of 5 days a week equals 260 days worked per year.

Labor hours worked per shift

If you work 52 weeks per year and 40 hours per week, then the number of labor hours worked per shift is equal to 2080 hours. This is used to calculate the cost of labor per shift per year.

Shifts per day

How many 8 hour equivalent shifts per day does your employees work? Enter one, two, or three into this data entry field.

Current lost time due to opportunity charging per PIT per shift

Enter the wasted time in the form of a decimal to estimate how much time is lost due to either changing batteries because they do not last for the whole shift or the time to plug in and unplug the forklift to the charger on breaks. As a battery ages, it will not perform as well as it does on the first day of operation. As a result, operators will find that over time their batteries do not last for the entire shift and they feel a need to plug the forklift batteries in for a top up charge on breaks. Sometimes, despite opportunity charging the battery, the battery still does not last the whole shift and the operator needs to take the forklift to the charging area to exchange the battery for a freshly charged battery. All this takes time. Record this lost time per shift per truck here.

Future lost time (hrs) for charging/PIT/shift

The assumption is that after replacing the old energy storage system with new batteries and chargers or with fuel cells the systems has greater efficiency and less wasted labor. If so, enter zero “0” in this field. If there is still a need for exchanging batteries, enter the time in the form of a decimal of what time is wasted charging or exchanging batteries.

How Many Pallets do you Move Per Day?

Roughly, on average, how many pallets do you move per day? How many truck loads of pallets do you unload? How many trucks do you load? Add these together to get your aggregate number of pallets moved per day.

Anticipated Increase in Productivity

Enter as a percentage your best guess how much more productive your fleet will be due to higher productivity, new batteries, faster chargers, more efficient and faster motors, etc. These are a soft cost decrease, but are still an important part of creating a business case for the justification for updating a forklift fleet.

Anticipated Reduction in Fleet Size

Enter in this field your best guess for the reduction you expect to see in fleet size reduction. Remember, for every lift truck there is usually an operator. By reducing forklifts you will be also reducing labor costs.

Cost per square foot

Factories, warehouses, and distributions centers all pay in some form or other for the space they consume. Every forklift consumes square footage when parked, and when charging. This space can be used for other uses that could potentially make the business money if it were not used for storing additional PIT. Enter in the fully burdened annual cost per square foot. This could be lease cost, plus the cost to heat, light, and insure the space.

Square foot per Forklift

Forklifts are roughly 3.5 feet wide by 10 feet long. Using 35 square feet is a conservative area to estimate the space that a forklift consumes. One could easily use double that number to realistically account for the space that a forklift uses when being charged, stored, and operated in. Understanding the space a forklift consumes helps understand how reducing the fleet size can help increase the efficiency of a warehouse by reducing fleet size.

Calculate the Savings from updating old forklift fleets with new lift trucks

When you enter in or change the default data to the data for your operation, you will be able to calculate the savings you can enjoy when you update your fleet with the latest engineering from new forklifts. These expense reductions are by no means guarantied, however, this calculator can be used to help create a model for why it makes sense using your own data to update your fleet of lift trucks with the latest forklifts, batteries and chargers.

Comments are closed.