Market Trends

Oct. 1, 2003
Incentives To Go Electric Its about time companies that run clean fleets get some credit. That includes lift truck fleets. So says EPRI, the Electric

Incentives To Go Electric

It’s about time companies that run clean fleets get some credit. That includes lift truck fleets. So says EPRI, the Electric Power Research Institute. Bob Graham, area manager for electric transportation at EPRI, is making his case to the Environmental Protection Agency (EPA). In a letter he read during an EPRI Conference on electric material handling held in Sacramento, California, Graham challenged the EPA to consider off-road vehicles as an excellent opportunity to clear the air — starting in California, then eventually across the country.

“While cleaning up compression emission engines is a good way to clean up the air, EPRI believes that both existing and emerging electric drive technologies provide an excellent opportunity,” Graham explained. “EPRI recommends that consideration be given to amend [EPA’s emissions rules] to provide compliance flexibility so that electric drive mobile technologies can be rewarded for providing emission reduction sooner than or more than required. Forklifts, industrial tow tractors, scrubbers, and airport baggage totes are non-road vehicles that should be included in the proposed rule. Some flexible incentive mechanism should be in place for the zero emission capability of electric drive technology in proportion to their ability to provide additional environmental benefits.”

Graham also said EPRI would be anxious to assist EPA in determining a role for these technologies as possible sources of surplus emissions credits in the EPA’s proposed rule. On the program with him that day were representatives from two of the leading lift truck manufacturers in the U.S., Raymond Corporation and Toyota Material Handling.

Steve Raymond, president and CEO of Raymond Handling Concepts Corp., the authorized Raymond dealership for northern California, said it has been a challenge getting lift truck fleet managers to part with internal combustion engine models in exchange for electrics. However, the latest technology trends will make that decision easier.

“A large number of the automobiles sold in California today are partial zero emission engines, and are practically as clean as electrics,” he explained, adding that it was the same for lift trucks. “Torque and utility considerations in some applications make a one- to-one substitution of Class 1 [electric] for a Class 4 [IC] lift truck impractical. But the data tell us that the applications and purchases of electric vehicles are growing faster than the overall market. The rapid changes in technology that have been introduced into the lift truck manufacturing process in the last 10 years have accelerated. Because of the new technology, no one wants a 10-year-old lift truck any more. So people are changing fleets faster because they get higher productivity, lower maintenance costs, and better reliability out of the new technology as opposed to rebuilding the trucks they had before.”

That means incentives to go electric might have more power. Brett Wood, national product development, strategic planning and marketing services manager for Toyota Material Handling USA, said the markets are pointing that way.

“There’s been a change from customers picking IC as their power of choice over electric,” he noted. “In 1978, 30 percent of the market was electric power and 60 percent was engine power. Then electric growth took off from the early 80s. Now 55-60 percent of lift trucks sold in the U.S. are electric-powered. I expect that to climb higher into the 60s in the next few years.”

Another way to save with electric power was presented by Dick Cromie, senior program manager in the electric transportation division of Southern California Edison. He talked about power shifting, a strategy to shift power usage from the peak hours of the day to later hours. In trials with leading distributors, major savings were achieved.

“In most of the country there’s a historic peak demand problem where it’s expensive to generate power in the middle of a hot summer afternoon,” Cromie explained. “In response to the Energy Commission’s offer to fund innovative programs, we [adopted] a unique set of expertise. We knew we had a large non-road electric market, somewhere around 200 megawatts. We also knew most managers weren’t managing their loads very well. It wasn’t a priority. Many of the new battery chargers are fully equipped to shift charging off-peak but that function wasn’t being used.”

The Energy Commission made $50 million available for innovative peak load reduction projects. Southern California Edison proposed a $2 million program to help its larger customers shift battery charging to off-peak. Participants in the program were not allowed to charge batteries from 2 p.m. to 6 p.m. on summer weekdays between June 1 and September 30, 2002. The program was expanded to the 2003-2004 seasons. The program encouraged customers to install electronic controls or energy management systems to automatically shift charging off-peak. Incentives were up to $150 per kilowatt, limited by the cost of the system they installed. Eventually, 43 customers signed up, representing 74 sites.

“The Albertson’s warehouse in southern California was the single largest commercial warehouse customer we had,” Cromie concluded. “We monitored before and after activation of the system. The peak one-hour demand reduction was 114 percent of goal, average pkw ratio was 85 percent. Albertson’s saved considerable money in power costs because it had to pay a high on-peak energy cost in summer and on-peak demand charge, which was almost $18 per kw. This was all doable already, but the electronic controls made it simple and slick and easy to use.”

For more information on these strategies, or to get copies of the talks presented at the EPRI conference in Sacramento, contact EPRI at 800-313-3774, or send e-mail to [email protected]. The website is —

Tom Andel, chief editor

Career Patterns in Logistics

In spite of difficult economic conditions, the importance of logistics continues to grow as the role of logistics officers gains importance. Two recent surveys reflect trends in the growing importance of logistics within the corporate structure.

According to a study released by the Council of Logistics Management (CLM), the focus of logistics supply chain management has continued on the integration of the supply chain and the development and integration of supply chain technologies. In the Ohio State University 2003 Survey of Career Patterns in Logistics, Bernard J. LaLonde, emeritus professor, and James L. Ginter, dean’s distinguished professor, reported, “Concerns with financial management have fallen off the chart. This is the first time in the past three decades that financial skills have not made the top three in educational needs [for logistics managers].”

The authors indicate they are unsure what this decline in the importance of financial management skills means. “It could be that managers have developed these financial skills or that they have hired individuals with these skills,” said the authors. They add that it also might mean that, with the volatility of the business climate, more productive strategies have bumped financial skills off the chart.

According to the survey, the three educational needs respondents would most like to study are supply chain, information technology and international logistics.

Respondents were also asked to identify the factors that would most influence the growth and development of the corporate logistics function during the next decade. In order of priority, those factors were: information integration technology; supply chain integration; customer service; Collaborative Planning, Forecasting and Replenishment; and logistics functional integration.

The authors concluded that the skills and experience to deal with future challenges will change, and cross-functional change will become important, along with changes in channel relationships. “The global uncertainty will continue at least into the near-term future,” they said. “All of this change will likely lead to a more difficult operational, tactical, strategic planning process for the business enterprise and the logistics supply chain executive.”

It appears, as a way of relieving some of that difficulty in planning and executing, that more companies are outsourcing.

A recent report on Business Wire said executives are outsourcing for the control it gives them over business outcomes, not simply as a cost-cutting measure. This is according to results of a survey from Accenture. The findings indicate that outsourcing, which initially gained appeal as a means of reducing costs, is being embraced for the ability it gives executives to predict business results and support strategic planning.

The survey found that an overwhelming majority (86 percent) of executives reported that outsourcing gave them more control over business results in a variety of critical areas, the most important being the ability to plan. And while cost-cutting is among these critical areas, the executives also reported equal levels of control in reliability, cost variability improvements, and effective implementation of ideas. More than half of the respondents (55 percent) said that outsourcing allows their companies to implement strategies and change at a faster and more controlled rate.

Most of the executives (more than 80 percent) said they are committed to outsourcing at least one business function permanently.

Other findings of the survey:

-- Outsourcing has expanded. Forty-three percent of executives said their companies outsource IT functions and other processes such as supply chain, training, human resources, finance and accounting and customer relationship management.

-- Almost three-quarters of all respondents said that they would redistribute the cost benefits of outsourcing to either the bottom line or to growth efforts.

-- More retail executives said they measure the success of their outsourcing agreements by calculating business outcomes than did respondents in any other industry, while more health and life sciences executives said they measure service levels than did executives in any other industry.