How to manage material expenses

Jan. 1, 2020
A long material list detracts from a profitable bottom line because as the list grows so does the potential for waste.

With the continuous advancements in products available to collision repairers, keeping your inventory list to a minimum is difficult but necessary. A lengthy material list detracts from a profitable bottom line because as the list grows so does the potential for waste.

While in a shop helping to organize their materials, I saw a company paint salesman walking through the shop talking to each technician. I pointed this out to the manager, asked him how often that happens and if the technicians have any input into materials that are ordered.

While I agree that technicians should have input on what is used in the shop; that should only happen as you are developing your materials list. Allowing industry sales reps to talk directly to your technicians and permitting salespeople to offer products to technicians to "test" compounds the difficulty of maintaining a cost effective and profitable material inventory.

There is a time and place for introducing new products; however, it is not on the shop floor where technician production is disrupted.

Since working in that shop I have visited several others and have seen multiple partial cans of body filler from different manufacturers on repair carts that have been offered to technicians to test by vendors. Unfortunately, the technicians often don't understand that these test products are not free. Most vendors will bill you for what they offer the technicians and then give you a credit if you do not like the product. What also is unfortunate about this is that many times it occurs without your knowledge.

The best way to eliminate this problem is to develop a materials list with the assistance of your technicians, create an inventory process and then restrict purchases to this inventory. By using this system you will eliminate excess materials in your shop, restrict the freedom of vendors promoting new products and you will have only the materials you need at the time you need them.

Developing this list will take a bit of time, but the investment in time will pay off on your bottom line.

Here's how to proceed:

Have all technicians list the products they are using, from masking tape, to body filler and sandpaper. Review the lists carefully and evaluate each duplicated product and identify the most beneficial.

One shop I visited was using three different types of body filler between five body technicians. On the shelf was a backup for each type of body filler tripling their inventory expense. Discussing the pros and cons of any duplicate products with your technicians and having them decide on one will help reduce material expenses.

Evaluate each product on your list. Are you using inexpensive body filler and purchasing an expensive glaze to compensate for the body filler's performance? At times the least expensive product is not the most economical, such as with sandpaper. Less expensive sandpaper can cost you more because it does not cut as well, requiring your technicians to use more.

Are you using a paint grade masking tape in the metal shop when a less expensive tape would meet your needs?

Consider all these things when developing your materials list.

Once you complete your list you can implement an inventory system controlled by order tags or Kanban cards. Using an order tag or Kanban system will allow you to clearly identify the product, set inventory limits and eliminate the need for your vendor to stop the technicians from working to see what they need.

When a vendor has a new product to promote, the vendor would have to identify which product within the inventory it would replace, then set up a demonstration and provide a free sample to test.

Restricting the vendor in this manner will prevent your inventory from spiraling out of control.

Using a methodical approach to develop your materials inventory will reduce your overall material expense, which will be reflected immediately in your net profit.

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