Managing Shop Supplies

Managing shop supplies is a critical part of expense control within a Service Department operation.

Shop supplies should be categorized into three areas:
• Supplies used in the disassembly and assembly of a component
• Supplies used in the rebuilding of a component
• Supplies used in the clean-up of the shop

Supplies used in the disassembly and assembly of a component are critical in rebuild quality of the component. The types of supplies that would fall into this category would be degreaser, paint remover, surface conditioning material such as grinding and buffing disc, and drill bits.

Supplies used in the rebuilding of a component would be considered a requirement in the actual rebuilding of the component. The types of supplies that fall into this category would be liquid gasket material, sealant, paint, and hardware.

Supplies used in the clean-up of the shop that fall into this category would be floor clean, cleaning materials used to clean the shop work benches, mops, brooms and shop towel.

The first two categories should be billed directly onto the work order to the customer. These parts should be purchased through the Parts Department that provides the opportunity for the normal parts mark up and profit margin.

Typically the Service Department will earn a smaller margin when charged as part of a shop supplies markup.

The third category should be billed as the shop supplies on the work order as part of a recovery based on a percent of the overall work order.

Very often Service Departments' apply a shop supply charge for all three categories. This method limits the opportunity for the dealership to earn normal parts margin on parts that would typically be charged as part of any rebuild. When this is done the dealership looses out two ways. First, the dealership has lost parts margin, and secondly the customer will very often critic the invoice and adjustments may be made to the work order to address the customer’s concerns.

The net impact is the dealership has lost the opportunity to recover the shop supplies that are typically used during the component rebuild. This is an unnecessary loss of revenue and profit.