Inventory management involves tracking, controlling, organizing and distributing goods. For vertically integrated cannabis businesses, inventory management goes beyond tracking and moving cannabis products to a host of other necessary goods, from seed to sale, labels and trash bags to nutrients from the soil and living insects.
Inventory management is an important aspect of compliance, especially in the heavily regulated cannabis industry. The value of good inventory practices for improving profitability and efficiency is often overlooked. Here are five tips for optimizing inventory management to reduce costs and streamline operations.
1. Invest in integrated tools and technologies.
Beyond the mandatory tracking that most states require for cannabis products throughout the supply chain, other essential cultivation elements, such as material inputs for cultivation, supplies of packaging, paper and durable goods must also be registered. Invest in technologies and toolsets, such as data viewers and enterprise resource planning (ERP) software, that allow you to manage these non-cannabis materials and get a holistic view of all areas of the business.
2. Optimize inventory space.
Warehouse, retail, manufacturing, and grow space are scarce and often limited. To maximize space:
- Go vertical. Extend shelves vertically and use pallets, bins and shrink wrap.
- Explore creative storage options. At Sweet Dirt, we use 40ft storage containers to store growing supplies such as fabric pots, trellises and other heavy duty products that withstand Maine winters, freeing up space in our warehouse. temperature controlled for more delicate soil additives and nutrients, packaging and paper and durable goods.
- Use first-in, first-out (FIFO) rotation. Keep product fresh and create consumer value by placing older products at the front of shelves with newer products at the back.
- Plan climate needs. Circulate inventory through the warehouse based on climatic needs. For example, at Sweet Dirt, we must store fish emulsion, molasses and beneficial insects for our integrated pest management program at safe temperatures. The same goes for cannabis products in manufacturing facilities and dispensaries.
3. Take stock (and document everything).
As the saying goes, “You can’t improve what you can’t measure.” Start by recording all merchandise and associated data, including best-before or suggested best-before dates, to help your sales team reduce accurately and incentivize to stay ahead of waste. While Sweet Dirt adds expiration dates and other key information to its ERP system, the team also likes to use spreadsheets to record data. Take advantage of the tools you have and what works for you.
Although time consuming, enter merchandise data into your systems and manually check stock levels. This is the only way to ensure compliance and accuracy and to identify any shrinkage or other issues. To sweet dirt, an Eliot, Maine-based vertically integrated cannabis company that operates medical and adult dispensaries, we’ve invested in easy-to-use tally sheets and documentation that work well with the technology we use. This made inventory counting and reporting transparent for frontline workers in warehousing, manufacturing, and retail.
4. Stop stockpiling.
Tied up capital and facility space with a bloated inventory is costly. Take advantage of inventory, cultivation, and manufacturing lead times to meet your just-in-time (JIT) needs. Instead of putting capital on warehouse shelves, keep inventory levels tight.
It also allows you to better negotiate with suppliers and discuss long-term needs, reduce unit economics (profitability per unit) and improve gross margin, all without taking up storage space. . Look for suppliers willing to work with Periodic Automatic Replenishment (PAR) levels by extending volume discounts and then holding excess inventory until your business is ready to receive these goods, freeing up space in your warehouse.
5. Centralize purchases.
Rather than having individual offices or stores buy and stock paper products, coffee, and other supplies, Sweet Dirt’s warehouse team purchases operational supplies at a discount and distributes them internally.