5 Ways to Turn Material Handling Financing into a Competitive Advantage During a Supply Chain Shortage

Material-Handling-FinancingForklifts and how they are paid for and managed may seem like a straightforward, run-of-the-mill operation for a company. But in reality, how a company makes decisions about forklift financing can drive productivity, safety and cost structures across your production facilities and warehouses. Done right, it can become a competitive advantage in today’s age where it is supply chain vs. supply chain.

This is truer than ever in light of equipment shortages caused by global supply chain issues: those shortages and delays mean getting your financing approach right is more crucial than ever.

Instead of being hindered by today’s challenges, the best organizations are using these challenges as a way to pull farther ahead of their competition. They are using financing as a weapon to gain a competitive advantage by accelerating decision making and ensuring their facilities are always ready to run at peak. This can be by eliminating the “I don’t have enough CAPEX” issue or “it takes 9 months to get equipment decisions approved” to increasing flexibility across your organization to benchmarking equipment productivity and safety across your warehouse network.

Here are five ways finance and procurement groups can think strategically about financing your fleet.

Get the Right Equipment Assets for the Job

In an ideal world, your financing partner will bring knowledge, flexibility, and varied brands to the table. When this happens, it means that the strategic needs of your business will drive your choice of assets, brands, and financing options.

Since this type of partnership is relatively uncommon, companies typically turn to one of two options instead:

1. Banks – While obviously well-equipped on the financing side, bankers often lack specific knowledge about forklifts and other assets and can be leery of commitments.

2. The finance arm of many Original Equipment Manufacturers (OEMs) – While often more knowledgeable than banks about material handling assets, OEMs are generally limited to the specific brands they offer—which is not always in line with their customer’s exact needs.

Financing decisions that provide a strategic advantage start with two things:

  1. Prioritizing your strategic business needs
  2. Designing a system that meets those needs

Find a Partner Who Provides Options

Material handling drives businesses. That means that the wrong decision can mean more downtime and lost revenue. You want to partner with a company that will work with you to gather comprehensive data that incorporates finance, sales, equipment, and more, then provide you with smart, data-driven financing options. One option that increases cash flow for some companies is sale-leaseback, a financial tool that allows you to free up cash flow using assets you already own. In a sale-leaseback agreement, you sell equipment your company owns to a commercial financing company, which leases that same equipment back to you—all without that equipment moving an inch. This can be a smart option for companies who need to free up cash while they are expanding, building new product, or hiring new employees—and it’s an option most banks won’t offer.

Look Beyond the Finance Rate

Don’t focus only on your finance rate—at least at first. That’s because the answer to “What is the finance rate?” is not the same as the answer to “What will I pay for this?”

Finance rate is important in determining what your total cost will be. But before getting to that point, you first need to consider:

  • What are my financial needs?
  • What do I need from this lease specifically? (And what do I want?)
  • What type of lease am I looking for?
  • Is the purchase point negotiable?

Once you’ve considered and answered those questions, you’ll be better equipped to determine what financial decisions are the best and most cost effective for your company in the long run.

Make Data-Driven Decisions

In order to make the right data-driven financing decisions, you first need to have the right data.

This is especially true when you’re managing multiple assets across multiple facilities. The more assets and facilities you have, the more challenging it can be to fully account for and understand your in-house assets.

That’s where outsourcing comes in. Outsourcing a site survey is a way to get the company-wide data you need to make data-driven financial decisions. A comprehensive site survey involves doing a full inventory of your assets company-wide, and then using that data to make asset recommendations—whether those recommendations involve new assets, or simply deploying current assets in different ways or different facilities. That’s a massive undertaking. By outsourcing it, you’re able to hand that massive undertaking off to experts, while allowing you to remain focused on your area of expertise—your company.

Think About Total Cost

In material handling, the equipment cost is ~30% of the total cost of ownership–and that’s just when measuring the hard costs and not safety risks, downtime, labor requirements, etc. Many procurement departments are used to making decisions based on the lowest initial outlay, which is understandable—after all, that’s their job! But while that approach makes sense for more straightforward goods like office supplies, material handling is different. That’s because material handling is what keeps your business running; it is inherently a more complex purchase. That’s why it’s important to consider what the actual total cost will be.

Now more than ever, it’s critical to be able to move goods quickly and efficiently, as global supply chain shortages continue even as customer buying habits remain steady. You need to find new, different ways to approach material handling financing that allows you to operate in a faster, more strategic way.

The best way to do this is to partner with a material handling fleet management company that has the infrastructure, expertise, partnerships, financial knowledge, supplier relationships and data-collection tools necessary to help you get the best financial solutions for your company’s specific assets and needs.