Every year trade business owners waste hundreds, sometimes thousands of dollars on wasted stock. Many may not even be aware of exactly how much is going to waste.
The alarming thing is that throwing stock away is the equivalent of throwing money in the bin.
So, how can you streamline your trade business stock in order to save precious dollars?
Return unused stock
When you purchase additional stock for a particular job and don’t end up using it return it to the supplier straight away.
It can be tempting to hold on to stock because you know that in a week or months time you will be on a similar job that may require it. But, in doing so, you run the risk of not using, or even potentially losing the stock. If you keep them they often get damaged rolling around in your Ute so you can’t use it anyway. What a waste!
Keep trucks tidy
The title of this one speaks for itself. Keep all trucks tidy so stock doesn’t get lost. Every tool or supply in the truck needs a ‘home’. And if you have multiple trucks, they need to have the SAME ‘home’ so that each tradie knows where to find things when working together. Saves hours, trust me!
‘Lost’ stock will result in unnecessary purchases.
Have a supply list for every truck
To keep a truck organised and tidy you should have a supply list.
Supply lists prevent tradesmen from carrying too much or too little stock.
Too much stock can result in wastage when it doesn’t get used.
Too little stock will mean a waste of time and therefore money because a tradesman will have to go to a supplier to pick up stock that should already be a standard item on the truck.
When we designed a new ‘standard’ stock list for our vehicles and hence cleaned out and re-stocked each vehicle accordingly, we saved approximately $3,000 per vehicle. Now when you have 6 vehicles that’s immediately $18,000 tied up in assets sitting on a vehicle that isn’t required!
When you know what stock is on each particular vehicle, and compare that to what stock that has been used you can hold tradesmen accountable when stock gets wasted or goes missing.
Avoid storing stock in a warehouse
Keeping excess stock in a warehouse is mass wastage waiting to happen!
When you store stock in a warehouse you run the risk that stock will go missing, go off or become no longer useful by the time you get around to using it.
Storing stock in a warehouse also wastes a lot of time. Time that could be used making money on a job is often spent driving back and forth picking up stock from the warehouse. More often than not your work site will be located closer to a supplier than your warehouse. Therefore, it would make sense to save time and source your stock there, or even better, get stock delivered from the supplier directly to your work site.
Electronic ordering of stock
If you have implemented a job management software system in your business you have an electronic record of what stock the trucks need. With this record you can directly email suppliers your order like we do.
We encourage our members to get their tradesmen to use tablets. With this, tradesmen can record the inventory they use at each job. At the end of the week an office employee can then send the stock order to the supplier.
The tradesmen can pick up stock in the one trip, avoiding double handling and wastage, and saving time.
Get stock delivered to one place
You may consider getting the stock delivered at your Monday morning meetings.
The tradesmen are already required to be at the meeting so it makes sense to get stock delivered directly there so they don’t waste time picking them up themselves when they could be making money at a job.
It will also give you, as a business owner, greater control of the allocation of stock.
Save past orders
Saving past orders will save time when ordering.
It can also prevent certain items from being forgotten in an order. Forgetting necessary or urgent items may result in additional postage fees, as an additional order will need to be placed for these items.
Make sure you are separating labour and materials costs on your Profit & Loss statement
Separate labour from materials costs in your Profit & Loss Statement so that you can efficiently and accurately review where you are spending your money.
From the Profit & Loss Statement you will be able to see the difference on how much you have charged out versus what you have paid per month. With this information you will be able to see in a heartbeat if you have made money on materials or not.
If you did not make money, with this information you are now empowered to make potential conclusions on how you can prevent this going forward. For example, maybe you are not putting a big enough margin on stock or maybe your stock is going missing. Action can be taken to investigate and make decisions.
From year to year you may even notice that your suppliers have been putting prices up. You have documented how much money you are spending with them in a year so you can leverage off these figures and renegotiate the price you pay on particular items, or overall, to save money.
Compare Suppliers for a better price
You may even want to compare different suppliers using these figures to determine where your money is best spent. Just remember it is not all about having the cheapest supplier.
It is important to consider the service you get from the supplier, how many shops they have and whether the shops are located in or near the areas you service or work most.
When you own a trade business every cent counts. Streamlining your stock may be just one of many ways to make a huge financial impact in your trade business. Considering every job requires stock it is certainly a good place to start.
Begin streamlining your trade business stock now so you stop throwing away money that would be better off sitting in your wallet.
What’s next?
- Join our Kick-Ass Tradies Facebook Group, for access to trade business specific conversations, tips and resources, plus a like-minded community of tradies.
- Book a 15-minute Game Plan Call with Andy, owner of Dr. DRiP plumbing and co-founder of Lifestyle Tradie, to clarify your priorities and get clear action steps.
