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Forget the cost of the rental rate of a forklift – it's irrelevant

Supplier: MLA Holdings
09 November, 2012

When you decide to enter into a term rental for a forklift you would, of course, prefer to select the best piece of equipment from the most respected supplier, but can you afford this luxury? Ken Rathgen, MLA Holdings' managing director, thinks so.

The rate charged by a rental company for a forklift is such a small part of the total cost of running that forklift that it is almost irrelevant. On a 2.5 tonne I.C. truck the rental rate will only be about 10 per cent of the total running cost of the forklift (wages and on costs).

Presume a rental rate of $180 per week, fuel cost at $200, supervision at $70 and the cost of an operator at roughly $1350 and you have a total of $1800 per week. That means the rental rate is only 10.0 per cent of that total cost.

To reduce this total cost is extremely difficult as the reduction of the rental rate has little significance. A 10 per cent reduction of the rental rate only reduces the total cost by 1.0 per cent

Whilst it is difficult to reduce the total cost of the operation it impossible to greatly improve the Productivity of the forklift and consequently improve the cost per hour by up to 33 per cent, dramatically increasing value for money.

The productivity of the forklift can be broken down into two parts:

The availability of the truck

The reliability of the truck and the promptness and quality of the service given by the provider can make a big difference to the availability of the truck over the life of the rental. Old or cheap trucks may be okay for the first year and during this time the provider may be able to cope, but as the truck ages and parts are required urgently, not only can you expect constant minor problems, but it is also very likely some long protracted losses of the use of the truck will occur.

Over the life of the truck an availability of only 80 per cent is not unusual. On the other hand, a quality truck backed by a reputable service organisation with a proper genuine Spare Parts holding will provide a much better availability and usability for the truck, therefore increasing Productivity and subsequently make the users money go further. For instance, MLA Holdings Pty Ltd guarantees 98 per cent availability for their Mitsubishi Forklifts over the term of the rental.

The work efficiency of the truck

This is its manoeuvrability, its lift and travel speeds and most importantly the ergonomics and comfort of the cockpit. Let's face it, the driver is operating this machine up to 8 hrs a day and if it is comfortable and easy to drive there is no doubt he or she will want to do it that bit extra.

On a late model quality machine compared with an old truck or one of the cheaper units, this extra productivity could be expected to be 10-15 per cent higher. Put it into perspective, if you are comfortable in your office and have the necessary modern equipment, don't you feel you are much more productive?

The worst case scenario is that the forklift's productivity will only be utilised about 70 per cent of the time over its rental period.

In the previous example this would mean a cost of $1800 for 28 hours per week, or about $64 per hour.

With a modern truck and a reliable supplier, a 95 per cent utilisation can be achievable. This will include a slightly higher rental rate (say an extra 10 per cent) and 5 per cent extra fuel because of the extra utilisation which will then equal a total cost of $1828 per week for an average of 38 hours.

While the overall rate is slightly more expensive, if you look at the hourly rate which is now $48 instead of $64, and an increased working time of 10 hours you can see that you are in fact increasing your value for money. Of course this is an extreme case but these conditions can exist.