By Marcus Kirkwood
During my time on job sites, one of the most frequent questions I am asked is how the cost of labor compares with the cost of materials. Ultimately, the question we should be addressing is, how much of the work associated with acquiring a product should be outsourced to a supplier and how much should be completed by a contractor on site? The answer may not be as simple as we hope, but let’s try to break down the numbers and figure out if using a low-cost supplier is really worth it.
if one accounts for labor burden (added expenses such as insurance, payroll taxes, benefits, etc), the average cost of a journeyman carpenter is $25.57/hour. Most contractors on site will have 4-10 laborers performing work. Let’s average this out for the sake of our math and say there are 7 people performing work on your site. Statistically, a fairly average invoice in the commercial construction industry is $930.00. Let’s take into account two potential scenarios using the following numbers:
Ticket Total: $929.00
Hourly Labor Total: $178.99 ($25.57x7 people)
Scenario 1: Free Delivery
If a supplier offers free delivery and it fits your schedule, do it. We don’t need a chart to explain that using their labor is cheaper than using your labor.
a. What if the delivery is late? Using the lowest price supplier who doesn’t keep their word on delivery timelines might end up costing you. If the delivery is late, maybe their ‘free service’ isn’t so free after all. Let’s do the math:
-1 Hour Late=$178.99 of your labor hours being wasted. That’s equivalent to 19.5% increase in price from your supplier.
-2 Hours Late=$357.98 of your labor hours. That’s a 39% price jump.
It doesn’t take long before we see just how financially detrimental wasting your labor hours can be to your bottom line.
Scenario 2: Delivery Fee
If a supplier charges for delivery and you have the ability to move the product yourself, calculate the labor hours you’d spend acquiring the product and compare with their delivery fee. Your answer will be simple. If you opt to choose this course, make sure the supplier’s deliveries are on time or the $$$$ will add up in a hurry.
Scenario 3: Customer Will call
Sending your own labor out to a supplier can get you out of a bind, but it can also add up quick. In any metro area, a 20-30-minute drive is fairly standard to the nearest supplier. By the time the worker quits their task, gets in a truck, picks up their items and returns, you’re looking at factoring in 1-2 labor hours. It’s essentially a $51.00 outing. However, if your supplier can’t pull the strings and get you a quick enough turn around on free delivery, this may be your best option.
What does all of this REALLY mean for your job?
According to RS Means, the average cost of construction is up 24% since 2004. Despite recent tariffs, labor costs are still increasing at a rate much faster than that of material costs. Tariffs are affecting some, but for most, the fear of potential increases is far greater than the increases themselves. The real savings can’t be found in saving a few percents on materials. It has to be found in getting the most out of your labor hours.