How Cannabis Inventory Management Helps Your Business Thrive
Inventory management is a massive part of any business. Imagine how complicated it is to run a company with parts, tools, and machines.
You need to know where everything is, how much it costs, who is using it, and when to replace it.
The same is true any cannabis business. In the state of California, licensed operators must keep an airtight inventory that is trackable from seed-to-sale. This helps them remain compliant.
Inventory management helps all businesses place orders, track sales, and meet consumer demands. Read further about inventory management tips for any cannabis business, including cultivators to retailers.
Inventory management may sound like a forgone conclusion for any business. But cannabis inventory management must be more advanced and account for every gram transported or stored.
What Is Inventory Management?
Inventory management is a method used to control your inventory, its price, and its storage.
When overseeing a large inventory of legal products, you need to know more than cost and location. California regulators expect this and much more when it comes to managing your inventory.
Inventory management was once a “paper and pencil” operation taken care of by people in short-sleeved shirts and ties. Those days are over.
At big-time dispensaries or emerging brand startups, it can be difficult to do physical counts. It's likely impossible to check the inventory in person. We all have other things to do.
There are programs that reconcile your inventory which saves time, money, and energy.
The base level of inventory management helps you understand how much cannabis you have or how many products you carry. Inventory management programs help you place orders, understand sales, shrinkage, theft, or write-offs.
Any inventory management program should notify you of orders that are in-transit and arrive. This helps you review the entire supply chain from the moment you place an order to when it flies off the shelf. If you do not have a retail location, you should be tracking your products until they exit the dispensary.
Size Matters: How Big is Your Company?
As your company grows, you need bigger and better inventory management support.
In the beginning, you might have handled inventory with a spreadsheet and wasted a few hours of your time. Now, there’s way more to oversee and you need to streamline precise monitoring of your inventory.
Inventory management saves you money and prevents legal issues that may result in losing your license.
California does not care how big your company is. State regulators expect you to track every gram of cannabis. Your inventory might across more than one warehouse or containment facility.
Only your inventory management program can help you see the “big picture” in a few moments. You should also consult an accountant on your cannabis inventory as you make budgetary decisions in the future.
Compliance Changes Your Inventory Management Plan
Compliance alters your inventory system completely. You need to know more than just your inventory location as well as more information than a basic tracking number for each batch. Cannabis businesses must go the extra mile because of compliant regulations.
For example, California uses the CCTT or “California Cannabis Track-and-Trace” system. This is technology the state to watch cannabis products, from seed-to-sale.
Cannabis managers or owners must enroll in the CCTT so that they can remain licensed. Any slip-ups will put your inventory into question, and that is why you need as much support as you can.
At the same time, you cannot run your whole business only using the CCTT. That system only tells California regulators the location and quantities of your cannabis inventory.
You can automate your systems to send the proper information to the state. You should also forward that data to your accounting and business management software.
Once you take training on CCTT-METRC system, you need to start working on other parts of your business.
COVID-19 Was All About Cannabis Inventory
The COVID-19 pandemic has hit the cannabis industry hard. Consumers stockpiled cannabis when the virus was first identified and the United States began to lockdown.
As people ran to groceries store to buy everything in sight, consumers bum-rushed cannabis dispensaries.
There is no way to know the full effects of the COVID-19 pandemic. Revenues rose while growers, distributors, and retailers struggled to keep up with demand.
Some companies produced or bought products in anticipation of higher sales. The demand unfortunately regressed.
At the start of COVID-19, San Francisco did not designate cannabis as an essential product. The confusion made it temporarily difficult for cannabis companies to continue operations.
Intermittent consumer stockpiling required dispensaries to:
- Change their shipping plans
- Redirect resources
- Increase inventory accountability
These situations exemplify the importance of using advanced inventory systems. Cannabis businesses can better scale demand and stay afloat, even in a pandemic.
Understanding Cannabis Inventory Management
Every cannabis business owner needs to know how inventory management works.
A worker scanning barcodes on the warehouse floor needs to know where that information is going and why.
Managers need to know how the inventory system and the CCTT system work. If not, these workers do not understand the gravity of the information they are collecting.
Let’s say there is a new employee on the floor of a cannabis distributor’s warehouse. They do not realize that the CCTT system controls licensure in the state, and they might scan the same batch twice.
While this is a tiny error, it is a big deal for the state. Cannabis businesses need to train their employees to avoid issues with inventory management.
Without this understanding, a massive audit could occur due to nothing more than a simple oversight.
Defining Bad Inventory Management Protocols
Substandard inventory protocols cause a range of problems for cannabis businesses. Companies that don't manage inventory could suffer consequences and serious regulatory issues:
- Losing money on inventory that’s stolen or disappears
- Losing money on overpays or overbuys
- Wasting product that expires on the shelf
- Getting cited by the state for violating track-and-trace guidelines
- Losing business when stores or warehouses overstock and cannot take on more inventory
Substandard inventory management wastes time, requiring a change or recount of inventory. Who has the time for that when clients are standing by?
State citations for violations of track-and-trace inventory protocols, cause loss in profit. Depending in the severity, it's possible to even lose your cannabis license.
Without question, this is the worst-case scenario for a cannabis company.
Instead of trying to handle transfers, use a digital system that works with track-and-trace technology like METRC.
How Inventory Management Saves Money
Inventory management saves money by cutting back on shrinkage, losses, and employee theft. An inventory management system will note any shrinkage, theft, or losses.
The company can immediately investigate, and the shrinkage, loss, or theft can stop. Without this simple system, it is possible to lose money, customer loyalty, and key partnerships. State citations and fines could pile onto the losses.
Inventory management systems support teams that need help with technology and state regulations. They inspire teams to teams to work in confidence and avoid problems that disorganized cannabis suppliers, distributors, and sellers experience every day.