A method of categorizing inventory into three groups (A, B, and C) based on value and sales volume. Group A items are high-value, fast-moving products; Group B are mid-range; Group C are low-value or slow-moving items.

The process of distributing products to different locations or departments based on sales trends or needs, ensuring stock is properly spread out.

A physical count of inventory to ensure that the stock levels in your system match what is on your shelves, helping to maintain accuracy and compliance.

A system where inventory management software automatically places an order with suppliers when stock falls below a preset level (e.g., PAR or reorder point).

Orders that have been placed but not yet fulfilled due to stock shortages or delays in the supply chain.

When a product is ordered from a supplier but is currently out of stock. It will be delivered when the supplier restocks.

A unique identifier assigned to a specific group of cannabis products produced or processed at the same time, often required for compliance and traceability.

Any days or seasonal periods that should be omitted from inventory analysis that would otherwise skew results for determining activities associated with customer demand and reordering.

Extra inventory kept on hand to prevent stockouts in case of unexpected demand spikes or supply chain delays, also known as safety stock.

Purchasing large quantities of products at once, often to take advantage of discounts or to prepare for high-demand periods.

A system like METRC or Biotrack used to track cannabis products from seed to sale, ensuring compliance with state regulations.

The money spent on big, long-term investments like equipment, building improvements, or new technology for your dispensary. CapEx is essential for growth, but it ties up cash that might otherwise be used for daily operations.

The total cost of holding inventory, including storage, insurance, depreciation, and opportunity costs. These costs increase with overstocked items.

The money coming into and going out of your business. Positive cash flow means you have more money coming in than going out, which is critical for covering expenses like inventory, payroll, and rent.

Adhering to state and local laws regarding the handling, storage, and sale of cannabis products.

Your COGS is the total cost of the products you sell, including what you paid your suppliers and any other direct inventory costs. It’s what you subtract from your sales to figure out how much profit your dispensary is making.

A method of counting a small portion of inventory regularly (instead of all at once) to keep stock levels accurate without interrupting dispensary operations.

The number of days you can sell your current inventory before running out, based on average sales rates.

Inventory that hasn’t sold and is unlikely to sell, taking up valuable storage space and increasing carrying costs.

The process of predicting customer demand for products based on historical sales data, trends, and seasonal factors.

Working with multiple vendors or carrying a wide range of products to reduce risk, avoid stockouts, and meet customer demand.

A formula used to determine the ideal order quantity that minimizes the costs of ordering and holding inventory. EOQ helps balance inventory levels efficiently.

Stock that exceeds demand, leading to overstock. Excess inventory ties up capital and may result in waste, especially for perishable goods like cannabis flower and edibles.

The last date a cannabis product is considered safe or effective to consume, especially important for perishable items like edibles and beverages.

An inventory management method where the oldest stock (first in) is sold first (first out) to promptly rotate older inventory off shelves.

A method of managing perishable goods like cannabis products where items that are closest to their expiration date are sold or used first to avoid spoilage.

Gross margin is the amount of money your business keeps after paying for the products you sell. It shows how much profit you’re making from your inventory before covering other expenses like rent or salaries. A higher gross margin means you’re making more profit on each sale, which is critical for running a successful cannabis retail business. How to calculate gross margin: (Sales Revenue − Cost of Goods Sold (COGS) ​/ sales revenue) x 100

The costs associated with storing and maintaining inventory, including warehousing, security, and insurance.

The total expenses involved in acquiring, storing, and managing products, including purchase price, shipping fees, warehousing, and handling.

Money tied up in unsold products that can strain cash flow and limit a retailer's ability to invest in new stock.

The quantity of products currently in stock. Proper management of inventory levels ensures that you can meet customer demand without overstocking.

The loss of inventory due to theft, damage, or administrative errors, leading to discrepancies between actual stock and inventory records.

A ratio that measures how often inventory is sold and replaced over a given period. High turnover indicates efficient inventory management, while low turnover suggests overstock.

A database or list of all products in your inventory system, including details like SKU, price, supplier, and product category.

An inventory management strategy where products are ordered and received only as needed, reducing storage costs but requiring reliable suppliers.

The time it takes for a product to arrive after placing an order with a supplier. Longer lead times require higher inventory levels to prevent stockouts.

The amount of inventory you expect to sell during the lead time (the period between ordering and receiving stock). Helps determine how much to reorder.

A specific time period (e.g., 7 days, 30 days) used to analyze past sales trends and predict future inventory needs.

Marijuana Enforcement Tracking Reporting Compliance, a system used in many states to track cannabis products from cultivation to sale for regulatory purposes.

Margin is the difference between what you paid for a product (your cost) and what you sell it for (your selling price). It shows how much profit you're making on each item sold.

Strategies or agreements to maintain or improve profit margins on the products you sell. This can include negotiating with vendors for discounts, buyback programs, or credits for unsold inventory. For example, if a vendor agrees to take back unsold inventory, this reduces the financial hit to your dispensary and protects your profit margin.

The smallest amount of product a supplier requires to fulfill an order.

Inventory that is outdated or no longer in demand. Obsolete products can result in lost revenue and increased carrying costs.

The amount of product physically available in your dispensary at a given time.

How often you place orders with suppliers. Finding the right balance between frequent small orders and less frequent large orders can help control inventory levels and reduce costs.

Ordering costs are expenses associated with ordering inventory, such as transportation and labor costs for loading, unloading or overseeing delivery.

When more inventory is held than necessary, often leading to wasted product and tied-up capital.

The minimum amount of stock that should be kept on hand to meet customer demand. Once inventory falls below this level, it’s time to reorder.

The likelihood of a product, especially flower, edibles, or beverages, to lose freshness or expire over time, requiring careful stock management.

The Point of Sale (POS) is the system or place where a customer pays for their purchase in a dispensary. It combines software and hardware to manage transactions and keep track of sales, inventory, and customer data.

The process of sourcing, negotiating, and acquiring the products needed for inventory, including selecting suppliers and managing purchase orders.

Product velocity refers to how quickly a product sells through your dispensary’s inventory. It’s a measure of demand for individual items, indicating how fast they move off the shelves.

A document sent to a vendor specifying the products and quantities being ordered for restocking inventory.

The process of removing a product from the shelves, often due to quality or safety concerns. Cannabis retailers must follow state protocols for recalls and notify customers if necessary.

The inventory level at which a new order should be placed to avoid running out of stock before the new supply arrives. Calculated based on sales velocity and lead time.

The process of restocking inventory that has been sold or used, ensuring you have the right amount of products available to meet demand.

The price at which a product is sold to customers, which is usually higher than the wholesale price paid by the retailer to cover costs and make a profit.

Moving newer inventory to the back and older inventory to the front to ensure older products sell first, preventing expiration.

The run rate is how quickly a product is selling over a specific time period. It helps inventory managers predict how much stock they will need in the future. For example, if a product sells 30 units in 30 days, the run rate is 1 unit per day.

A unique code or identifier assigned to each product in your inventory, used to track and manage stock.

Safety stock is extra inventory you keep on hand to avoid running out of a product if there’s an unexpected delay or spike in demand. Think of it as a buffer to keep shelves stocked and customers happy.

The speed at which a product sells over a specific period. It shows how quickly inventory is moving and helps determine which products are popular versus which are slow-moving.

Fluctuations in demand for certain products based on the time of year. For example, demand for edibles might increase around holidays where discretion at gatherings is a higher priority for consumers.

Sell-through rate shows how much of the inventory you’ve sold compared to what you originally bought. It’s a percentage that helps you understand how well a product is selling. A high sell-through rate means the product is popular and moving quickly. A low rate means the product might not be selling well and could be overstocked. How to calculate sell-through rate: (Units Received / Units Sold) x 100

Shortage costs occur when the inventory held in stock is less than what is needed to satisfy current customer demand. The costs that occur during an inventory shortage might include loss of potential profits and expensive shipping rates for expedited purchasing.

The loss of inventory due to theft, damage, or errors. It reduces the amount of sellable stock and impacts profitability.

Spoilage happens when products expire or go bad before they can be sold, like flower losing potency or edibles passing their sell-by date.

When a product is out of stock, potentially leading to lost sales and dissatisfied customers.

A specific variety of the cannabis plant, with unique effects, flavors, and potencies. Cannabis retailers often manage inventory by strain.

The entire process of producing, transporting, and selling products, from the cannabis grower to the dispensary shelves.

The amount of time it takes to receive inventory from a supplier after placing an order. This affects how you plan and manage stock levels.

The rate at which inventory is sold and replaced over a specific time period. Higher turnover typically indicates efficient stock management.

Understocking happens when you don’t have enough of a product in stock to meet customer demand. This can lead to missed sales, unhappy customers, and lost revenue. Avoid understocking by tracking sales trends and setting reorder points to restock before you run out of popular items.

A supplier or distributor from whom a cannabis retailer purchases products. Maintaining good relationships with vendors ensures consistent stock availability and favorable pricing.

The process of working with and evaluating suppliers to ensure reliable product delivery, quality, and pricing.

The process of overseeing the storage and movement of inventory within a warehouse or stockroom, ensuring efficient use of space and easy access to products.

Purchasing cannabis products in bulk from growers or manufacturers, often at a discounted price, for resale at a dispensary.