By Chris Wolfe, I.D. Systems CEO
Manufacturing is still a key part of the U.S. economy, employing more than 12.3 million Americans. But since 2000, the manufacturing landscape has changed dramatically. Over 5 million U.S. manufacturing jobs have been lost to countries with lower-cost labor, like China, India and Mexico.
How can we compete more effectively and keep more jobs in the U.S.? Here’s one example of success: a leading producer of power equipment that reinvented how it managed material handling.
This company, based in the southeast U.S., was under intense pressure to find new ways to cut costs. Unless its 10 U.S. plants could curb spending and improve profits, thousands of U.S. jobs would be bound for Mexico. The company’s executives gave plant managers only a year to get results—and save those jobs.
Material Handling: Major Cost Center
With over 200 industrial trucks and hundreds of full- and part-time operators, the power equipment manufacturer flagged material handling as a major cost center. Lift trucks cost about $30,000 each. Lift truck operators made about $14 per hour, plus benefits, and line supervisors earned about $50,000 per year. In addition, lift truck accidents caused over $360,000 in vehicle repairs each year—not even counting damage to products and facilities. Lift truck accidents due to driving under the influence of alcohol were a particular, chronic problem.
Plant managers knew their pool of industrial truck operators had several big issues. During the peak September-to-April production season, temporary seasonal operators had to be hired and trained, so it was hard to get continuity and consistent quality from those workers. In addition, there was no precise way to show how productive the operators were, individually, on their trucks.
The Solution: Industrial Truck Telematics
To attack these cost and safety issues, the Company invested in an industrial truck telematics system to improve fleet management. To ensure the technology would succeed, the company chose a safety manager to own system implementation, focusing first on the “low-hanging fruit” of safety benefits:
- operator accountability through vehicle access control;
- accident prevention through impact sensing; and
- safety checks through electronic pre-shift checklists.
These functions paid immediate dividends. The controls over driver behavior had dramatic effects. In one case, the checklist system prevented a drunk driver from operating his forklift (he was so impaired, he couldn’t complete the checklist, so the telematics system prevented the vehicle from starting).
After safety, management focused on forklift fleet utilization. They studied analytics data on vehicle login, motion and idle time, integrating data from the company’s inventory management system. Management especially wanted to understand how often vehicles were in motion vs. idle during production periods. This data was posted in the form of key performance indicators (KPIs) to help line managers identify the best and worst lift truck operators, and focus their supervision on the workers who needed it most.
Data Drives Results
With that data, the company was able to systematically reduce the number of operators it rehired each year during peak season, and improve the quality of the driver pool. This led to fewer temporary employees, fewer annual layoffs, a more stable base of core workers, and retention of the most reliable and efficient drivers. As a result, the company’s culture of safety and productivity fundamentally improved.
Within a year of deploying lift truck telematics, this manufacturer was able to:
- reduce forklift damage costs 90%, from $360,000 per year to $30,000;
- eliminate alcohol-related driving incidents;
- reallocate equipment across plants, taking over 50 lift trucks out of service for a capital cost savings of >$1.5 million;
- eliminate 20 rental trucks for a net cost savings of $100,000 annually;
- reduce peak forklift driver headcount by 20, for a labor cost savings of $925,000 per year; and
- streamline material handling supervisor staff from 16 to 7, for an annual labor cost savings of >$450,000.
Going forward, the company also plans to use forklift telematics to reduce fuel costs for internal combustion (IC) lift trucks. By analyzing and controlling the time IC engines are left idling, the company’s believes it can reduce fuel burn by 80 percent, saving as much as $50,000 per year.
In aggregate, investing in forklift telematics has saved this company more than $3.2 million: $1.5 million in capital costs, $1.4 million in labor, and more than $330,000 in forklift damage.
Happy Ending: Still Made in the USA
By driving down these core costs in only a year, this manufacturer was able to meet its executives’ demands, help keep its operations in the U.S and save thousands of American jobs.
Today, the company still has its 10 production plants in the U.S., full of American workers, and is more competitive than ever in the global marketplace.
About the Author:
Chris Wolfe, CEO, ID Systems
Chris Wolfe has over 20 years of experience in building, implementing and selling paradigm changing technology solutions. During his 12-year tenure with QUALCOMM Inc., including serving as division President of Qualcomm Wireless Business Solutions, Mr. Wolfe was instrumental in developing and executing a series of strategic corporate initiatives that transformed its products and operations, and drove double-digit revenue growth over a four-year period. Mr. Wolfe received degrees in Data Processing, Business Management and Technical Education from the University of Akron, and completed an executive management program with Stanford Executive Institute.
Contact Info: https://www.id-systems.com/