For cannabis dispensaries, there are few things more critical to the success of your company than your ability to effectively manage your inventory. Knowing where your inventory is, how much you have on hand, and when you need to reorder products is essential for serving your customers and competing in an increasingly crowded industry.
A recent study from The Motorola Future of Warehousing found that 65% of retailers make significant investments into warehousing and inventory management technology. The primary focus of those investments was on streamlining or eliminating manual processes. Although down from an all-time high in 2011, companies are still keeping large amounts of product in their inventory. U.S. retailers have $1.43 in inventory for every $1 in sales that they make.
But for cannabis dispensaries, managing inventory can be difficult. You may struggle to track products on an individual basis, which can put you at compliance risk with your state. In a still-emerging industry, products disappear and new products launch at break-neck speed. Supply chain issues can also cripple an otherwise well-run operation.
Cannabis retail companies must have the right tools and technology on hand to simplify processes, eliminate manual work, and better organize their inventory. In this article, we’ll cover some basic steps that any dispensary can take to improve inventory management and smooth out operations.
What is cannabis inventory management and why is it so important?
As a part of your larger supply chain, inventory management includes tasks such as controlling and overseeing purchases (both from vendors and customers), storing and organizing your products, controlling the amount of product that is for sale on your floor, and fulfilling orders.
There are many nuances to cannabis inventory management when compared to traditional retailers, where strict regulations dictate the way dispensaries can buy, store, display, and sell products. Most legal cannabis states require that your inventory operations are synced with a state traceability system, like Metrc, to ensure compliance.
Dispensaries aren’t the only retailers with inventory tracking and management challenges. According to a 2017 report from Wasp Barcode on small to medium businesses:
- 18% use manual methods (pen and paper) to track their inventory
- 24% manage their inventory through an accounting-centric software like Quickbooks
- Only 15% use a full inventory management system
This report shows that there is a lot of room for growth in this area, even for retail environments less regulated than cannabis. Inventory management is particularly important for cannabis dispensaries to remain compliant and competitive.
Now, let’s dive into some real-world tips that you can use to improve your inventory operations.
Tip #1 - Standardize a process for inventory audits
Physical inventory audits are absolutely critical for ensuring that you have accurate reporting in place and remain compliant. Without accurate information, your business will lose sales, make poor ordering decisions, and be slow to catch internal theft and fraud.
As a dispensary, your business is at a greater risk of penalties and triggering a full state audit if your physical inventory is severely off from what is reported. For this reason, we recommend establishing a standard operating procedure for inventory audits, ideally conducting a full audit of your entire inventory at least once a week. Most traditional retailers only do full inventory audits once or twice a month, a quarter, or even only a few times a year.
Cycle counting is an effective way to consistently audit your entire inventory over 30 days without having to count all your inventory at once. Cycle counting is defined as counting only a portion of your inventory at a scheduled time every month, until all inventory has been “cycled through” and counted. For example, you could divide and count designated product categories on the same day each week to break up the work. Your Mondays could be regularly committed to counting edibles, Tuesday to counting weighted and prepackaged flower, and Wednesdays to counting concentrates and non-edible products.
Make sure that you have the processes defined and accessible in written standard operating procedures, or SOP’s, and train several employees to perform audits.
Tip #2 - Maximize efficiency with the right tools
Trying to keep track of and manage your inventory by hand will not only make you prone to errors but will also waste your valuable time. Because managing inventory can be so time-consuming, it is important that you do everything you can to streamline processes for your team and avoid mistakes.
Giving your staff the right technology and tools will help cut down on the arduous man hours of auditing. Since counting inventory is a physical job, using Flowhub’s Stash App on the mobile NUG makes it easy for your staff to audit inventory on the go. The app allows any employee to conduct regular inventory audits simply by scanning package tags or SKU’s and confirming amounts rather than counting by hand. You can also set up discrepancy approval workflows so that a manager can double-check work and investigate any errors before your inventory changes are reported to Metrc.
Watch how Green Dragon leverages the Stash App to efficiently manage and audit thousands of SKUs:
Speaking of track and trace, your auditing isn’t only limited to matching your physical and digital point-of-sale inventory. Auditing for discrepancies between your Metrc account and point-of-sale inventory is also essential to avoid getting flagged by your local regulatory bodies. Flowhub’s Metrc Discrepancy Report can help you analyze inconsistencies between Metrc and point-of-sale inventory by providing an itemized spreadsheet of errors so you can easily track down and fix mistakes.
See how to access the report, and what is included in the report in this short demo video:
Investing in trustworthy software will not only reduce cost of operations and save you time but it will also help you track inventory movement in detail and provide the business intelligence you need to improve performance. The Flowhub cannabis retail platform provides full inventory reporting, giving you ongoing insights into all activities related to the movement of inventory, par levels and low stock items, purchase history, as well as best selling products and the busiest times of day.
Tip #3 - Integrate your tool stack
When searching for software solutions to help you manage your inventory, it’s important that you find a point-of-sale partner that integrates with the systems that are already an integral part of your business. You’ll want to find something that will seamlessly slide into your existing processes while freeing up your time to focus on big-picture strategies.
The first and most important integration for cannabis dispensary inventory management software is the Metrc (Marijuana Enforcement Tracking Reporting Compliance) integration. If you’ve worked in the cannabis industry for some time, you likely know all about Metrc. For those that don’t — Metrc is a seed-to-sale inventory tracking system that state regulators use to monitor activity and compliance.
Flowhub integrates directly with Metrc, ensuring compliance and keeping your Metrc systems updated, allowing you to:
- Import new packages and inventory from Metrc
- Verify package tags with pre-populated inventory information
- Push sales reports to Metrc daily or automatically after each sale
- Reconcile physical and reported inventory with the Metrc Discrepancy Report
But Metrc isn’t the only integration that most stores will need. A good point-of-sale system should be able to manage front-end operations such as processing payments and discounts, as well as a back-of-house functionality for inventory management and compliance tracking and reporting. It should also connect to other parts of your supply chain such as cultivation, analytics, digital signage, and online menus. An integrative system with an open API like Flowhub allows you to pick and choose the best tools for your unique dispensary and automate tasks like updating inventory availability in real-time with Leafly, powering delivery services through Dutchie, and tracking customer relationships with springbig.
Tip #4 - Plan for the worst
Even companies that put great effort into inventory planning will run into situations that throw their best-laid plans out of alignment. External factors may cause specific products to sell more quickly or slowly than expected. Spikes in sales based on seasonality, discounts, and regulatory changes can cause product shortages.
You may order a new product that just doesn’t connect with customers and your stock sits on your shelf taking up space that should be delegated to better-selling products. These situations may be predictable or may catch you by surprise. Other situations that may be out of a company’s control can include new regulations, cash flow issues, inventory miscalculations, or vendor delays.
Regardless of whether these issues arise internally or externally, it’s critical that all retail cannabis companies have contingency plans in place. Have a plan for reacting to product shortages, slow sales, or ordering issues. If a vendor has had issues in the past, have backup vendors with fast shipping options on file that you can turn to. Explore partnerships with other stores and vendors that may allow you to offload underperforming products. With plans in place, you can deal with any issues that arise.
Inventory management facilitates growth
Inventory management is the machine that drives growth and stability in retail cannabis dispensaries. Your ability to effectively store, track, and analyze your stock allows your business to be more effective, agile, and responsive to customer demands. With an inventory management solution that provides the right integrations, tools to simplify auditing, and accurate reporting and forecasting — you can streamline your inventory management processes and put your company in a position to capitalize on opportunities.
Ready to bump up your inventory management game? Request a demo of the Flowhub platform today.