Best Practices for Cannabis Inventory Tracking

Accurately tracking inventory is essential for a successful retail cannabis business, really any retail business.

It ensures that products are accounted for, regulatory requirements are met, and stock is managed efficiently to meet demand without tying up too much cash on your shelves. 

We make it easy to understand by outlining the best practices, the importance of accuracy, the technology to help you get there, and elements of proactive loss prevention.

The Benefits of Accurate Inventory Tracking

Let’s start with the good stuff.

Accurate inventory tracking is your golden ticket to maintaining compliance, managing product availability, and reducing costly errors. Moreover, it offers peace of mind for inventory managers, retail buyers, and business owners in equal measure.

Since retail dispensaries are so heavily regulated, inventory accuracy isn’t just about operational efficiency; it’s also about covering your ass. 

Failing to track inventory accurately can lead to stock discrepancies, fines, or even license suspensions.

Benefits of Accurate Tracking include:

• Enhanced Compliance - Let’s face it compliance costs retailers time and money, and it’s part of doing business in this industry. However, non-compliance will cost you way more. Keep these issues to a minimum and maintain good standing with regulators by checking all the boxes.

• Optimized Stock Levels - You don’t want to carry too much weight and you want to have enough between re-ups to keep customers happy and coming back. Meet demand without overstocking, which ties up capital, or understocking, which can lead to missed sales by keeping stock in line with demand. In order to do that, you need to be accurately tracking what moves in and out of your store.

• Improved Customer Experience - If you want your customers happy, you need to have great products available whenever they walk through your doors. Otherwise, they’re going to the dispensary down the street to find what they need. Ensure that popular products are always available, this consistency improves customer satisfaction and builds loyalty.

Choosing the Right Inventory Management Software

Manual inventory tracking is being phased out across industries.

It’s too inaccurate, time consuming, and an easy way for products to go “missing”.

In cannabis, it’s not even an option if you want to remain in the good graces of regulators. 

Inventory management software built  for cannabis retailers specifically is the way to go. 

This way, you don’t have to conform to other industries’ idea of what inventory tracking looks like when they don’t have the same requirements cannabis does.

This is essential for simplifying inventory processes and ensuring your tracking is accurate. When evaluating software, look for features that will streamline your workflows, save time, and support integration across other systems you use day-to-day like POS, CRM, and accounting applications.

Features to Look For:

• Integration with Other Systems - Does it “play nice” with your other systems? Easy integration and inventory data syncing means the same information is being used across systems for consistency, accuracy, and to be shared with stakeholders. Inventory software should be easy to plug into POS, CRM, and accounting systems to get a full view of sales and stock levels.

• Demand Forecasting - Software that includes forecasting tools can help predict trends, reducing stockouts and overstock situations. This way, you’re keeping the right amount of inventory in-store between orders. The best software can take into account or remove from your calculations seasonal shifts around holidays or specific events that should be omitted from general ordering activities.

• Ease of Use - The system should be user-friendly. While you can never idiot-proof a system, you CAN stoner-proof it. Cannabis inventory software that is intuitive and easy to use ensures all team members that need visibility into inventory can access and use it without issue.

• Custom Reporting -Every business is different and in cannabis every market is different. Being able to customize reporting to fit your specific needs comes in clutch when keeping the business in the green, so to speak. Great cannabis inventory tracking applications allow users to generate custom reports that track sales trends, inventory turnover, and stock levels.

Cycle Counts vs. Annual Physical Counts

Anyone who has been in retail for a meaningful amount of time has likely participated in an inventory audit, otherwise known as a physical inventory count. Chances are they hated it.

Manual inventory counts have a lot of drawbacks, including:

• They’re manual
• They’re tedious
• They’re time consuming
• They require a high attention to detail
• They shut down business or take place after business hours, extending the workday or requiring staff to come in on their off-day
• Sometimes 3rd parties are contracted to do the work, which opens the door for inaccuracy due to unfamiliarity with the business
• They catch discrepancies, in many cases, long after the fact

While annual physical counts have been standard in legacy industries for ages, regular cycle counts have grown increasingly popular as a proactive method that helps maintain accuracy throughout the year.

This minimizes the need for full counts and the drawbacks that come with them. 

Cycle counting involves breaking down inventory into smaller groups and counting that inventory on a scheduled basis to ensure records are up-to-date and uncover discrepancies sooner, rather than later.

In short, cycle counting is a more accurate and more proactive approach to managing inventory than the traditional annual inventory audit.

Benefits of Cycle Counting

Cycle counting supports ongoing accuracy of your inventory levels, which reduces end-of-year surprises by identifying errors sooner.

It also minimizes disruptions to your business. Unlike annual inventory counts, cycle counts can be done without shutting down retail operations.

Lastly, compliance and accountability remains a focal point. Cycle counting Helps meet compliance standards by ensuring your stock levels match system records more often and you are not left scrambling to address myriad issues at the end of the year.

Setting Up a Simple System

Spectacular results are the product of unspectacular preparation.

Setting up a solid system to count products is in no way glamorous, but it puts you in position to:

1. Classify Inventory - Group items based on sales velocity (e.g., A, B, and C items) and count high-priority items more frequently, since they’re your most valuable inventory.
2. Create a Schedule - Determine how often each group will be counted. High-demand products might need a weekly count, while slower-moving items can be counted less frequently.
3. Track and Document Counts - Record cycle counts in your system of record to identify patterns of discrepancy and possible loss.

‍

‍

How to Avoid Shrinkage and Loss of Cannabis Inventory

Shrinkage can cut deeply into profits. 

It’s also an indication that your compliance standards aren’t being kept. This will be a problem if it isn’t brought under control.

Shrinkage can be an especially tough challenge to get a handle on in the cannabis industry due to the high-value of inventory, strict but often changing regulations, and potential for theft.

Some Common Causes of Shrinkage

• Internal Theft: Let’s face it, not everyone acts with integrity. Employees may be tempted to access and misuse inventory if controls aren’t strict and they are not held accountable.
• External Theft: Cannabis products are valuable and sometimes targeted by shoplifters or even organized theft.
• Product Damage: Mishandling during storage or transport can lead to product damage. If that’s the case, you need to have coverage with vendors and distributors to reimburse you for loss so that you don’t end up bearing the cost of an unsellable product. They may need those damaged products back to produce your compensation, so keep those items under lock and key until they can be returned.
• Record-keeping Errors: Manual data entry mistakes can cause shrinkage if counts don’t match sales and products simply can't be located in the store.

How to Prevent Cannabis Inventory Shrinkage

1. Employee Training - Train employees on inventory handling, security protocols, and shrinkage prevention to foster a culture of accountability.
2. Surveillance - Treat your business like your automobile, a dashcam for car insurance claims saves a world of headaches when issues come up. So, cover your front and rear end by positioning cameras to cover inventory storage and high-traffic areas; this helps deter theft and aids in investigations, if it comes to that.
3. Regular Audits - Perform regular inventory audits or cycle counts and compare physical inventory against system records to catch discrepancies early.
4. Controlled Access - Limit inventory access to authorized personnel to reduce the risk of internal theft. Electronics locks are tougher to crack than keys that can simply be copied.

Get Good at Cannabis Inventory Tracking

Hopefully, by now it has sunk in that cannabis inventory tracking isn’t just about matching numbers between shelves and spreadsheets. It requires a constant and layered approach that combines technology, routines, and security. 

As the cannabis retail market grows, implementing best practices for inventory tracking supports your business’ long term success. Following these best practices will help you:

• Prioritize inventory accuracy
• Utilize cannabis inventory management software
• Remain compliant
• Improve profitability
• Stay resilient when industry changes cause chaos 

Want to go a step further? Take control of your inventory management with Happy Buyers to keep it chill and keep it profitable by simplifying the entire process, saving time and reducing costly errors. Book a free demo today.

‍