By Andy Kennedy
Shop supplies are a necessary component of any service or repair. Make sure you’re covered. When it comes to shop supplies, the cost of these items is often absorbed by many shops not realizing just how much these costs can be. A lot of items have doubled in price, some closer to triple the price. Everything has gone up over the past few years and these items are very easy to overlook, especially since there are usually small quantities being used for each individual job.
Let’s look at a few of the reasons why there have been increased costs.
- Supply Chain Issues: Distributions in global supply chains due to factors like geological events and transportation bottlenecks can lead to shortages and price increases for raw materials and finished products.
- Inflation: General economic inflation drives up the cost of goods across all sectors, including shop supplies and equipment.
- Labor Costs: Rising wages for workers involved in manufacturing and distribution of shop supplies contribute to higher prices.
- Increased Demand: High demand for certain types of shop supplies can push prices higher due to market dynamics.
- Raw Material Costs: Fluctuations in the price of raw materials like metals, plastics, and chemicals directly impact the cost of manufacturing shop supplies.
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It’s also important to consider the ways these cost increases impact your business, and ways to help minimize those effects.
- Reduced Profit Margins: Higher costs for shop supplies can significantly eat into business expenses, forcing them to adjust pricing or look for cost-saving measures.
- Operational Challenges: Difficulty in acquiring necessary supplies due to shortages can disrupt operations and lead to delays in projects.
- Inventory Management: Implementing strategies to optimize inventory levels and reduce unnecessary stock to minimize carrying costs.
- Cost-effective Alternatives: Investigating more affordable alternatives or substitute products where possible.
- Technology Adoption: Utilizing technology to streamline operations and improve efficiency, potentially offsetting some cost increases.
The most common method for calculating shop supplies is to charge it as a percentage of total labor on a work or service order. For example, 8% of labor. If the total labor charge is $500, shop supplies would be $40. The intent is to recapture the cost of consumables used on a job. Labor is a good measure; the longer a job goes the more supplies the techs will use.
Some shops calculate supplies on labor and parts. To end up with a reasonable charge, this usually means the percentage is lower. For example, if you charge 5% on labor and parts, then a job totaling $800 would charge $40. The problem with this method is that the supplies charge gets unreasonable on services with big ticket parts and very little labor charges. If you’ve got a job with only a few low-cost parts and a lot of labor, the charge won’t be quite enough.
It is also a good idea to look into state laws. There have been lawsuits centered on the “shop supply fee” and various lawmakers have tried to address it over the years. Whether you can lawfully charge shop supplies and how detailed your invoice needs to be, some states require an itemized list. It will depend on what state you are in.
A shop can still make a profit from shop supplies considering that they have kept up with the price increases. A $5 or $10 charge here and there doesn’t seem like much at the time, but after a while it adds up to quite a bit, so make sure you’re covered.
Read this article with all images in the digital issue of Engine Professional magazine https://engineprofessional.com/2025EPQ1/#p=42