Chain of Thought

Make your Dent in the Deficit

The U.S. budget deficit has ballooned to almost 9% of the country's Gross Domestic Product, and Washington intends to do something about it. The Obama Administration has set up a Deficit Panel, and the first set of proposed budget cuts would hack that deficit down to 2.2 percent of GDP by 2015; that's more aggressive than the 3 percent target originally set by the Administration. That has several implications for your own business budget—including the prospect of losing a number of deductions.

Officials admit this first round of announcements is more of a trial balloon, an effort to arrive at more doable numbers. However, businesses would be smart to start looking at their own numbers with a little more care. As I said in my last blog, if you don't measure you can't manage. Even among world-class companies, fewer than half of them have any kind of way to measure their supply chain performance, according to that Next Generation study I cited. But let's get even more granular than that. How about lift truck fleet management?

Ken MacDonald, president of M&G Materials Handling Co., a Yale dealer based in East Providence, R.I., told me fleet managers need to be more granular in how they budget.

“Too often companies are still operating on a department, or location accounting practice where all the expenses go into one bucket,” he said. “That doesn't allow you to spot waste in a proactive manner because all the costs are blended into that account.”

He suggests that through asset-based management you'll not only save money but increase productivity. Productivity losses aren't always accounted for when examining spending habits. For example, what if you rent your lift trucks? MacDonald says rental costs are often not charged to specific assets. So if your equipment isn't being used efficiently, you won't be able to tie that under-performing asset to your rising costs.

My point is, if your business is going to lose deductions, it will be important to be able to cut costs more surgically than you've been used to. Lift truck fleet managers are their business's link to many of those opportunities. The problem is that these managers are often shackled by old-fashioned accounting practices and little access to productivity measurement tools. Lift truck OEMs are designing fleet data management tools into their products, but fleet managers have to learn how to make best use of them. That's where material handling equipment distributors really add value.

We are in the early stages of using these new communication technologies for fleet data management. However, there are pioneers at many leading-edge, lean-operating companies using data reports from these tools to help them run more efficient fleets and either repair or weed-out lift trucks that have outlived their usefulness. The resulting reduction in operating costs goes straight to their bottom line.

In an era where tax deductions may be on the chopping block, cost reductions will be more important than ever. The more material handling and logistics managers find these cost reduction opportunities, the more visible and valuable they'll be not only to their companies, but to the U.S. economy.

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