The pandemic, inflation, supply chain issues, labor shortages, and more: companies are grappling with one of the most unpredictable times in modern history—and material handling has been hit especially hard. While it may feel that you have no effective way to control costs, the good news is that you likely have many more options than you think.
Unpredictable times call for agile strategies. And when it comes to managing fleets for material handling operations, there are several ways that flexible financing and procurement strategies can offer relief.
Many fleet operators are experiencing long lead times on new equipment or key parts while, at the same time, spending money on fixed lease payments and constant maintenance for the equipment they already own. It’s a lot to take on, especially during a period when operations are frequently scaling up and down.
“The ability to flex and pivot in those times of change is vital—and financing is the key instrument to do that,” said Tom Ryder, Chief Commercial Officer, TFS.
To better understand how financing and procurement can make your material handling more agile and effective, we interviewed a panel of top finance and sales executives.
Here are five ways that financing can help your company become more flexible:
- End-of-lease extensions
Supply chain shortages and delays are creating stress among fleet managers—‑especially those “stuck” in leasing arrangements that do not align with their current needs. Now may be the ideal time to revisit and retune financing structures to find end-of-lease solutions.Walter Stranzl, President of OnPoint Capital, working alongside TFS, said, “There are many creative financing options we can take to a customer. We show them that their equipment lead time may be long and their buyout on existing equipment may be fixed, but we can help get payments reduced below the current amount. Even better, we can make that new amount fixed and obligated at a lower cost until new equipment arrives.”
- Flexible solutions
It pays to explore how current financing strategies can be tweaked to better accommodate both immediate and future needs. According to Chad Hoffman, Vice President of Sales, OnPoint Capital, part of being a fleet management specialist is anticipating potential shifts.“For example, there have been clients who don’t know if they’re going to need the same amount of equipment within two years. That’s why we put downsizing clauses in their contracts that allow them to get rid of assets mid-lease without any penalty,” Hoffman said. “There is a cost to that route, but having that flexibility is very important to their business. Our role is to work with them to figure out the best solution for their operation.”
- Effective allocations Sometimes, the easiest and most cost-effective solution for an asset gap is moving pieces of equipment from one facility to the next. Yet while this may seem like common sense on paper, reallocating forklifts or other material handling equipment can be difficult without a holistic view of one’s entire operations and the ability to pivot as demands between each location change.
“One thing we do for clients is try to find solutions that might be within the enterprise versus bringing on and financing a new asset,” Hoffman said. “When you’ve got a comprehensive enterprise view regarding all the owned and leased assets, you can start to better manage those allocations. With creative financing and flexible financing strategies, you can shift those assets from one location to another and restructure leasing terms to ensure that asset fulfills whatever needs the client is looking for over a certain period.
- Refurbishment Flexibility also counts when choosing where to purchase new equipment. Buying new may be the go-to strategy, but with current lead times, refurbishing pre-owned equipment can make financial sense.
“The reality is that people need equipment, and most can’t wait a year to get it. That’s why many are buying used equipment and reconditioning that asset to extend its useful life,” Ryder explains.
True, he adds, the cost of that refurbishment may be upwards of thousands on top of the cost of the forklift. “However, you can finance that refurbishment cost, capture that three-year extended life, and give yourself a bridge until you can get new equipment.”
- Fixed maintenance costs Maintenance costs can be a source of strain for operators already stretched thin by lease payments. Add a catastrophic repair to the mix, and budgets can quickly go off the rails. Here’s where proactive maintenance—as well as finding ways to save on maintenance operations—can help mitigate costly surprises and keep fleets intact.
“When you set up a maintenance program, you can start to get ahead of potential issues and extend the lifespan of the equipment you already have,” Hoffman said.
There are financial and logistical advantages to entrusting that program to a third-party fleet management specialist. TFS’s GuaranteedFLEET® solution, for example, enables fleet operators to offload key maintenance responsibilities (and the challenges therein) to a trusted team for a predictable monthly fee.
“The idea is to let us take on these challenges, keep those forklifts powered, and provide that proactive maintenance through our on-site technician—all for a fee that you plan on,” Ryder added.
In other words, challenging times are motivation to rethink your fleet management financing in new ways. Global challenges may keep operations on their toes, but the upside is there are multiple leasing, maintenance, and asset allocation strategies that can help companies adapt to whatever comes their way. While TFS can’t negate inflation, we can help your company find new and creative ways to control your costs and work towards a more budget-neutral state.