14 Tips for Better Cannabis Dispensary Inventory Management

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Whether you are spring cleaning, have some COVID-19 downtime, or both, consider these suggestions to improve your store’s inventory management process.

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May 29, 2020

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While the COVID-19 outbreak has caused some consumers and patients to rush to their local dispensaries to stock up on necessities, and online orders are booming, dispensary operators might notice less foot traffic in their stores. Others are being forced to close during stay-at-home orders, including adult-use dispensaries in Massachusetts.

The downtime your employees might experience is a good opportunity to review and update your store’s inventory management protocols and to perform an inventory check. In this tightly regulated and closely watched industry, a discrepancy in inventory management could lead to fines, license suspensions or revocations.

Consider these tips as you work to streamline processes and avoid costly penalties for your business.

[Editor’s note: Answers have been edited for length, style and clarity.]

Phillip T. Bryson Jr.,

Chief Financial Officer,

Ultra Health

1. Consider FIFO as an inventory accounting method.

“The most effective storage system we’ve adopted to manage our inventory is a FIFO (First In First Out) inventory accounting method. The FIFO method is extremely important when it comes to preserving the shelf-life of our flower, as flower is known to become dry if left out too long. So by selling the oldest flower in our inventory first, we can make sure our product doesn’t become too dry or stale by the time it reaches the consumer.”

2. Store each product type according to its own needs.

“Our inventory is comprised of the following three product categories: flower, concentrates and edibles. Here are the strategies I have found to be most effective in preserving the shelf-life and quality of these products:

  • Flower: I recommend keeping flower capsuled in an airtight container with humidity control packs to preserve the freshness of the product and keep it from drying out before it reaches the consumer.
  • Concentrates: I have found that concentrates are best kept in a cooler environment, such as a refrigerator to help keep the product stable, as warmer temperatures typically cause the product to lose its consistency.
  • Edibles: Edibles are the easiest to store, as you’re able to keep them at room temperature much like candies, cookies, and drinks on the shelf at a grocery store. Yet, you do have to remain cognizant of the expiration dates associated with edibles. Our FIFO inventory accounting method comes in handy here as well.”
3. Analyze KPIs to better manage your orders.

“We have developed our own internal tools that are fully customizable and integrated with the state mandated software.

It’s important for us to find that perfect balance between how much inventory and staffing we need to have on hand to make our operations run smoothly. Early on, we began to analyze our consumer data, and from that information we were able to develop KPIs (Key Performance Indicators), which allowed us to develop our internal Business Intelligence Tools such as Dashboards & Predictive Models, which help us cost-effectively manage our inventory and staffing needs.”

4. Conduct weekly or bi-weekly inventory audits.

“I would recommend mandatory inventory audits on a weekly to bi-weekly basis, where the dispensary staff is required to do a hard count on all the product in the store, and submit to senior management a list comparing the physical count in the store to the amount in the system.”

5. Consider an outside group for audit validation.

“I recommend that senior management conduct surprise inventory audits, where staff members outside the dispensary occasionally come by and perform hard counts on all the inventory to make sure there isn’t any collusion amongst the staff in the store and to help ensure the inventory audits are being done truthfully.”

6. Train staff how to do inventory audits.

“We require our cannatechs (budtenders) to go through a 2-week nesting period where they work directly with tenured staff and learn how to properly perform inventory audits as part of their new hire training.”

7. Have an anonymous reporting protocol to encourage staff to report suspected shrinkage or theft.

“I recommend having a way for your staff to anonymously report any shrinkage or other suspicious activity they might see going on in the dispensary. It’s also extremely important to have a video surveillance system that covers most angles within and outside the dispensary for proof of any issues that arise, so that no employee or customer is falsely accused.”

8. Dig into the data.

“Treat the data generated by your customers as an asset, as consumer information is the foundation to any good inventory management system. In addition, you must place data integrity at a high priority, as you will not be able to make informed business decisions and develop useful inventory management systems with bad data.”

9. Be open to better practices.

“Never get comfortable with how you manage your inventory. In today’s marketplace things are always changing rapidly, so make sure you are always fine tuning your processes and procedures to best leverage your inventory and staff to achieve your business objectives.”

Christina Dahm,

General Manager,

Greenlight

10. Consider color-coding inventory and packages.

“All of our boxes and all of our products that come in get organized by farm, and everything is labeled by green stickers. The green sticker will have the farm name, the date that it came in and the product inside of it.

If we pull out a box that has product in it that’s currently on the floor, we label those boxes with orange stickers. On those orange stickers we’ll put the last two [digits] of the SKU numbers. That way if I’m the lead (a senior budtender who can leave the floor to grab more stock) and I see that there needs to be two eighths of OG Chem stocked on my floor, I’ll go back to the OG Chem boxes, I’ll remember the SKUs of the eighths that are on the shelves, and I’ll make sure that the box I’m pulling from is the same as the numbers that I got on the shelf. That way, we don’t have multiple boxes of the same product open.”

11. Create a system of accountability.

“We have people check people. For example, there’s going to be a task that I can give to my assistant manager, and I double check his work to make sure that he’s doing it correctly. Then, the owner will double check me to make sure that everything is correct.

We do quarterly audits and double check the entire inventory. It’ll be the general manager, the owner, and the assistant store manager to make sure that it is correct. It’s time consuming, but it means we’re not breaking any laws or regulations.”

12. Keep as many hands out of the cookie jar as possible.

“We started keeping as many hands out of the cookie jar as possible when it comes to inventory. We trained our budtenders to put the customers first. If there’s something missing from our shelf, we have a program in place where we taught our budtenders to go to our lead and say, ‘Hey, can you see if we have any of this type of product in our system?’

We try to make sure that the budtenders are the only ones helping customers. That frees our leads up to put stuff on the floor, answer phone calls, take care of customers that are irate or that are unhappy when they come in.”

13. Keep a “damaged/broken” sheet to track losses.

“We have a ‘damaged or broken’ sheet. We have a clipboard with information on it that you fill out. Like, ‘It was an eighth of OG Chem, here’s the lot number and this is what happened.’ [For example,] a lead is putting something on the floor, and they drop a container and it shatters. We then collect all the glass, sweep it all up, put it in a bag, and then that gets put into our return system and goes back to the farm or vendor.”

14. Hire a detail-oriented inventory manager.

“Whoever your inventory manager is, they need to have a keen eye. Sometimes farms mess stuff up. For example, they might sticker a product that’s a pack of ten as a single pack. Those are little things you have to catch. As an inventory manager, when product is coming in, you have to be detailed-oriented, quick with numbers and able to count fast. It’s pretty simple, but those key details like matching SKUs, packaging, labels, [are] important.”