Poor inventory management is all too common, and it poses a very real threat to both your cannabis business and your bottom line.
The amount of profit your cannabis business will achieve depends greatly on how well you manage inventory. Inventory management can be one of your business’s competitive advantage and the key to operational compliance and financial gain.
Keeping a watchful eye on your inventory, as well as performing regular inventory audits, helps you avoid potential errors that can lead to a loss of profits, and worse - compliance infractions.
Simple, daily inconsistencies such as careless packaging, incorrect or missing notes, miscounted stock, and employee theft can lead to discrepancies in inventory. These discrepancies can result in many problems, including increased costs, untraceable inventory, and conflict between vendors and customers - all of which affect your bottom line.
Inventory is the single most crucial element of your business and should also be the most supervised and transcribed — however, approximately 80 percent of canna-businesses struggle with inventory management.
On top of all this, industry leaders predict inventory management will only become more challenging in the coming years as legislation and regulations evolve. All of these elements can be overwhelming and result in inventory mishaps that can gravely affect the functionality and profitability of your business.
A Case of Mistaken Inventory
States are continually adding, changing, and removing regulations. For example, California recently reduced the amount of inventory allowed to be carried by a single delivery vehicle, from $10,000 to $5,000. Also, at least $2,000 of that inventory would have to be previous existing orders from customers before drivers leave the delivery station.
Should your inventory be off in this instance, you could unknowingly load an incorrect amount of product from the station into a delivery vehicle; or realize as you're packing you need five more bags of OG Kush, but there's no more Kush.
Now what? You're most likely disappointing customers and exhibiting questionable business practices. Should your delivery be searched by authorities, you're facing fines and possible suspension. Having the correct amount of inventory will affect not only the correctness of your order but also the legality of it.
Not every order coming in is labeled and packaged correctly either—checking individual units of products instead of relying on invoices and vendors for accuracy will also reduce inventory discrepancies.
It’s High Time
Time is a crucial input for any successful business. You know this better than anyone— the time invested in your operation is nonrefundable, therefore every second counts. The greater the inventory, the more time you and your employees will need to spend managing that inventory. Having a fluidly functioning inventory system is a real asset that can save your company time in more than one area.
Business operators spend hours upon hours trying to decide which products to reorder and which ones to hold off on. Having a POS system that automatically runs the numbers for you, telling you sales by item, which inventory is low or in excess, and what your inventory value is, will not only save you several hours, it will also help you make wise inventory management decisions.
Additionally, your POS system will alert you when items have low inventory so you can reorder to avoid the possibility of those items going out of stock. Ensuring your most popular cannabis strains and edibles are always on hand, will prevent you from losing sales and ensure your customer’s satisfaction is elevated to perfection.
Weighing cannabis products is a highly debated topic. While it may be easier to handle and weight pre-rolled products, they don't necessarily sell better. Customers usually want to see the flower before they buy it.
However, cannabis flower is the most challenging product to track and should have its own unique inventory system developed and readily available. It's one of the only goods in the world that is sold in various-gram sizes of different varieties.
It's a matter of preference at this point. While it may be simpler to track flower via pre-rolling, you may end up with an overstock. If you choose to handle loose flower in your facility, ensuring you as well as your employees understand the tracking methods and procedures is crucial for the operation.
seed-to-sale: the required intensive tracking of an individual plant throughout its entire life; from seed inception to final sale
While human error is inevitable, proactive measures can be taken to reduce mistakes and improve inventory accuracy.
Utilizing technology to track inventory discrepancies and reduce human error is a major must-have for any successful production facility. Software programs such as BioTrackTHC and Trellis are great tools to provide accurate data points of your operation.
Another simple but effective method is observing demand. Monitoring week-to-week sales for tourism and holiday spikes can help prevent overstock. Also, investing in a good inventory supervisor who can provide current, pristine inventory records will save you time, money, and a severe headache.
Stock Up on Compliance
While the inventory management system records the interactions from seed-to-sale, it’s important to reconcile those daily activities to ensure accountability and accuracy. Investing in a good inventory manager who can supply a spotless daily inventory record will save you time, money, products and keep you in good standing with state regulators.
However, the best option is to develop an inventory management procedure tailored to your operation with a cannabis consulting firm such as The J. Whitney Group. We provide risk assessment and can help you strategize and align your business so that it is efficient, accurate, and compliant.
The fastest growing cannabis businesses make inventory management a top priority. They understand that better, and compliant inventory management can give them a competitive advantage, improve cash flow and increase profitability.
Reaching out to a consulting firm does more than provide your business with the correct tools to remain compliant when it comes to managing your inventory —it also promotes fluidity and translucency in your operation. Through the organization, communication, and the learned skills provided by a consulting firm, you’re investing in your company.
You are providing a solid base for your business to operate on, treating fissures that already exist in your framework and greasing wheels so that your operation can work faster and smoother. Once these methods are incorporated, you are reducing the risk of workplace mishaps and increasing the efficiency of your operation.
You, your stakeholders, and employees are also securing jobs positions by establishing systems, procedures, and tweaking already existing networks so that when compliance officers come to call, you’ll be ready.
Stay Current on Compliance
When regulatory agents show up to your door, you want to exhibit translucency and cooperation. The auditing process is already grueling enough; why not prepare ahead of time with your consulting firm?
Audits tend to carry a negative connotation with most business owners but they don’t have to be damaging. In fact, they are designed to teach new and existing businesses how to best prepare for an inspection through real-world examples and hands-on exercises, such as mock recall and role-playing. Practicing with your consulting partners will make the entire inspection much easier and pain-free.
Agents will show up sooner or later, so why not be prepared? Regulations are constantly changing and updating; stay ahead of your competitors and legislation by joining forces with consulting firms, like the J. Whitney Group to keep your business productive and operative.