Your dog may have allergies, or dry skin. I have three Pekingeses, and two have allergies, one chews until she doesn't have any hair, it always comes back, but we go thru this each spring, the vet says its a skin allergy.
Also we are having a problem with chiggers biting dogs here, so its possible that could be happening with your sheltie.
Good luck with finding out whats happening with you dog.
Erna