I would think the answer is largely dependent upon your volume of business, your cash position and other related factors. The other question is how much bulk do you have to purchase to realize a significant discount?
Let’s just say you’re doing 5 roofs per week at an average of 30 squares per roof. That’s 600 SQ per month. If you purchase 2,000 square, you have enough material to last you 4 months even if you picked the right colors. Chances are, you would have 5 to 6 months worth of inventory. Let’s assume that’s right, that gives you 2 turns a year which sucks. A retailer that only turns their inventory twice per year is likely to be out of business.
I certainly wouldn’t be comfortable leaving over $100,000 worth of materials in anyone’s warehouse. Ever seen what happens when someone goes bankrupt and the sheriff comes out and puts chains on the doors? If you think you’d march in there and get your materials in the next day or two, good luck with that one.
So you store them yourself. Are you going to make sure that you contact your insurance and get (and pay for) another $100,000 plus worth of coverage? If you don’t, what happens if you have a fire, or they get stolen or any catastrophe happens that causes you to lose the material.
I’m not trying to be negative but when you consider the risks, and the additional hidden expenses, are you really saving that much by making the big purchase? And you also have to consider that you’re tying up over $100,000 of your capital in an economy where cash is king.
I think it’s great that you’re considering areas where you can save money and lower costs in order to increase your profits. However, don’t forget to consider and factor in the hidden costs. Warehouse space isn’t free. Insurance coverage isn’t free. The guy to load, drive the truck and deliver the shingles isn’t free. The insurance, fuel, maintenance and payments for the truck isn’t free. blah, blah, blah.
Now if you’re big enough to where you’re doing 25 to 50 roofs per week, or more, possibly different considerations. Now that truck can be utilized enough that it may pay for itself. Now the guy who is loading, unloading and driving can potentially be a full time guy dedicated to material handling and deliveries. And now your volume is high enough that you can potentially purchase a train car full and can go to the terminal and pick them up, which I suspect would be how you would get the lowest possible price.
Seems to me, instead of taking that $100,000 out of play and all the other expenses associated with the investment you are considering, put it into advertising and a couple of good Sales Guys, the profits you would enjoy from the increased volume of business would be considerably greater than the money you would save by cutting the cost of your shingles by a few bucks a square. And a heckuva lot less risk. You can turn off the advertising and fire the Sales Guys inside of week if they aren’t working out. You can’t dump that big pile of shingles and recover your money in a moment’s notice.