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Regular Industry Development Updates, Opinions and Talking Points relating to Manufacturing, the Supply Chain and Logistics.

Redefining Rental for Materials Handling Equipment

21-Jun-2018
Redefining Rental for Materials Handling Equipment
Digital disruptors are influencing every aspect of business—shaping growth, inspiring change and prompting new business models. The implications for the logistics and materials handling market are significant: according to research undertaken by Sapio Research on behalf of Jungheinrich UK Ltd into the forklift truck market, organisations are demanding more flexible operations – and that includes in the acquisition and use of essential equipment.

From speed of delivery to innovative pricing models, Neil Warren, Sales Management Director, Jungheinrich UK, explains why the forklift rental market needs to evolve and offer the flexibility demanded by organisations responding to the challenges of a 24x7 marketplace.

Introduction - Disruptive, commodity environment
Every organisation now operates in an increasingly commoditised environment. Consumers and businesses expect an ‘as a service’ model without any long-term commitment, from cars that can be rented for an hour via an app to the shift towards on demand cloud software. The shift in customer demands is prompting new thinking across manufacturing, distribution and logistics.

At the same time, tightly integrated supply chains place new pressures on suppliers and business partners – materials handling and logistics providers need to be increasingly embedded within organisations’ operations to support the demands of a complex 24x7 market. As a result, cost is not the primary issue when it comes to hiring a truck – it is fourth on the list (79%). Ensuring trucks conform to European safety standards (90%), the provision of full maintenance agreements (85%) and – notably - fast delivery times (81%) rated as more important.

As companies assess opportunities to release working capital, scale up and down without risk, find ways to respond to customer demands and explore technology innovation without long term commitment – is the materials handling market able to respond?

Time to Change
There is no doubt that organisations are beginning to rethink the way rental can be used both tactically and strategically – providing both short term cover to manage volatility and supplementing fleets for a longer term. However, it is also clear that the materials handling market has lagged behind when it comes to responding to these new demands. According to the research, almost two thirds (61%) agree that the nine to five approach to equipment hire is out of sync with today’s 24x7 demand – and a quarter of respondents feel that the truck rental market is outdated compared to other rental markets.

Organisations need to support the new pace of operations and demand patterns that are putting pressure on lead times; and they also need additional flexibility built in to the business model. As a result companies are asking for faster access to equipment. In addition, they want more innovation in the rental model to support the different requirements, from complementing existing truck acquisition models to responding to peaks in demand.

With rental now seen as a compelling solution to address a diverse range of business challenges, the research reveals not only a strong interest in the idea of a Daily Rental option but also evidence that rental is being considered as an alternative to traditional three to five year contracts. While materials handling vendors can clearly rejig financing options to support the use of rental equipment as an alternative to traditional acquisition concepts, how will the market gear up to the need for a fast, flexible and responsive 24/7 service that can support organisations’ changing warehouse/logistics requirements?

Demand for On Demand
One of the most significant findings of this survey was the strong interest (76%) in a rental model predicated on truck usage – based on telematics data – rather than a fixed term agreement. Such confidence in telematics data reinforces the way organisations are increasingly exploring technology to drive innovation in so many areas, including the Internet of Things (IoT) – and equipment rental should be no different.

In tandem with a usage based mode, companies also have rising expectations when it comes to speed of delivery. With over half agreeing they could benefit from quicker delivery of hired forklifts, there is strong demand for faster access to trucks to manage demand volatility. The standard seven day wait in place across the materials handling market does not offer the required speed of response.

Technology innovation is key to meeting this new expectation for faster delivery, on demand usage and 24x7 operations. Using telematics in combination with GPS, for example, is providing the visibility of national truck assets required to enable the essential shift towards a next day model with no premium delivery charge. Telematics also open up new rental systems with the option to charge by the hour, offering a highly flexible approach to rental in the UK.

Embedded Equipment
As organisations look to explore innovative technology at every stage of the 24x7 intralogistics model, many are leveraging real-time data capture to minimise downtime and improve efficiency. With the adoption of the IoT increasingly enabling every aspect of the supply chain to be recorded, analysed and adjusted in real-time, there is growing expectation that equipment vendors can also deliver vital data to support compliance, warehouse and logistics systems.

Telematics will play an increasingly significant role in this area – providing not only data on vehicle usage but also information such as overspend, vehicle status and warning alerts. Indeed, telematics has a fundamental role to play in improving the way in which organisations maximise the utilisation of trucks, as well as meeting expectations of full cost transparency and visibility over operational performance. Whether used for an hour or five years, a rented forklift truck must now be an embedded component of an integrated intralogistics model.

This is a significant shift in the way rented equipment is considered and utilised – and the onus is on materials handling equipment manufacturers to take the lead. There is no doubt that existing patterns of acquisition are becoming dated given a business model that demands agility, flexibility and improved cost visibility. A combination of innovation within a proven, high quality and consistent on demand equipment hire service will be increasingly important to support organisations as they respond to the challenges created by digital disruptors.

‘Redefining Rental for Materials Handling Equipment’ is based upon research conducted by Sapio Research sponsored by Jungheinrich UK, comprising findings from 300 interviews with individuals responsible for forklift trucks in organisations that have used them on a short term rental basis. To read the full white paper, please visit: go.jungheinrich.co.uk/rental-whitepaper.

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