Uncover This Hidden Margin Boost

Most contractors don’t realize how much margin they lose on parts. It’s not because the work is wrong, it’s because the SKU list is too long, too messy, and never reviewed.

Over time, I’ve learned to treat supply chain decisions the same way I treat acquisitions: figure out what matters, cut what doesn’t, and focus on the levers that move the bottom line.

Audit Your Top 500 SKUs

We were buying more than 100,000 SKUs a year. Even for a large shop, that’s impossible to track. So we pulled the top 500 items and went line by line.

The result? Clarity on where the money was going. Instead of guessing, we had a roadmap for where alternatives could make the biggest impact.

Re-Spec Commodity Items

On commodity parts like registers, grills, whips, disconnects, and PEX fittings, brand loyalty doesn’t add value. When we swapped some of these out, the savings were eye-opening, often 50 to 60 percent.

The quality was there, the warranty coverage was equal or better, and the end customer didn’t care. That kind of margin lift changes the math fast.

Standardize Install Kits

We started building install kits for common jobs, and a surprising number of those SKUs were easy to replace with more cost-effective options.

Instead of buying piecemeal and paying extra, we created consistent kits stocked with the right mix of parts. Techs grab once, installs go faster, and we’re not paying double for branded odds and ends that don’t matter.

Match Inventory to Geography

Inventory strategy looks different depending on where you are.

Here in Cleveland, I’m spoiled because supply houses are everywhere. But in rural markets, some contractors are an hour from the nearest supply. That forces them to carry four or five times as much inventory, tying up cash in the process.

In big cities, it’s a different kind of pain. Traffic can turn a 10-mile drive into a two-hour haul. Either way, you have to adjust your inventory approach so lack of parts never slows your business down.

Break Free from Brand Loyalty

Too many contractors say, “This is how we’ve always done it.”

That mindset bleeds margin.

Some manufacturers even tie warranties to their own fittings or pipe, which locks you in. But there are plenty of cases where warranties hold no matter what combination you use. If the performance and coverage are the same, you don’t need to pay a premium for the name on the box.

Treat Suppliers Like Partners

Suppliers respond to feedback more than people realize.

Prices look off? Call it out.
Need a bulk quote? Ask.
Missing a variant you use often? Push them to add it.

We’ve seen suppliers willing to quote aggressively and even add SKUs based on contractor requests. That only happens if you treat them like partners instead of order takers.

The Lesson

Great operators don’t just run jobs well, they buy well. Tighten up your SKUs, re-spec where you can, and be intentional about how you source and stock. Every improvement in purchasing flows straight to margin, and that margin is what funds growth.

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