Member Blog: Cannabis Dispensary Inventory Management Done Right – Best Practices

by Ben Curren, Founder of GreenBits

Discover how state-of-the-art technology can help your dispensary thrive.

Many first-time dispensary owners do not come from a retail background. The cannabis industry is full of entrepreneurs running into long-established retail processes for the first time.

Although the cannabis industry is new, many of the processes upon which it relies are not. Sales, marketing, and administration operate on the same foundations no matter what you are selling, from apples to zucchinis.

Inventory management is one of those ever-present aspects of retail. Every business that sells physical goods has to keep track of its stock, perform inventory audits, and synchronize inventory movement across multiple systems in order to operate.

Cannabis dispensary owners have additional demands to meet. They must implement solid strategies for meeting compliance needs, including comprehensive seed-to-sale tracking. Managing all of these demands while running a successful business can be overwhelming.

Automated Processes Improve Inventory Management

Optimization is the key to responding to the many demands of operating a retail store in a highly regulated industry. In the retail environment, there are never enough assets and resources to get every job done – certain processes need to be automated in order to free up time for higher impact work.

Inventory management is one of those critical-but-time-consuming activities that is ideally suited to process development and automation. Since cannabis dispensaries already have to report on every purchase and transaction that takes place in the dispensary environment, the data is already there.

Yet without a tailor-made technological solution, cannabis dispensaries find themselves spending valuable employee-hours manually entering inventory data into their systems. This necessarily takes time away from other, equally important processes.

Enhance Inventory Management in the Dispensary

Dispensary owners who invest in process development and automation quickly find that the retail service industry already offers many solutions to the kinds of problems they face. Streamlined cannabis dispensaries use these technologies to solve a broad range of problems:

Inventory Categorization. A well-organized inventory is key to success in any retail environment. Dispensary owners that know which products sell best can place those products in the spotlight, further enhancing profits by focusing on their most successful lines.

Automated Data Entry. Manual data entry takes time and produces little value. If there is one readymade way to improve retail efficiency across the board, eliminating manual data entry and freeing up employees to focus on more valuable work is the first step to take.

Inventory KPIs. Key performance indicators (KPIs) help business owners identify opportunities to make better purchasing decisions, improve cash flow, and ultimately boost profitability. Dispensary owners that track data like inventory turnover are better-suited to make sound business decisions. More on these below.

Automated Tracking. Tracking inventory movement through the retail environment is another time-consuming process that, although necessary, produces little value. Implementing automated solutions helps to streamline the process and lets dispensary owners put more energy into value-driving initiatives.

Accurate Reordering. Dispensary owners that know when products are running low can reorder in time to prevent costly and embarrassing stockouts. This is key to maintaining a professional image in a regulated industry like cannabis.

Streamlined Stocktake. Stocktaking plays a critical role in financial management. In order to know how much money the dispensary is really making, owners need to calculate how much liquidity is frozen in stock.

Active Inventory Synchronization. Dispensaries that wish to synchronize their stock with a website database or an app like Leafly or Weedmaps needs to have a solid inventory system in place. Developing active inventory synchronization is key to selling products through multiple channels.

Which Key Performance Indicators Should You Track?

There are many different types of key performance indicators that relate to inventory management. Some of them are more important than others, but navigating the world of cannabis retail requires gathering enough data to calculate any of them when needed:

Weeks-on-Hand. This KPI correlates to the efficiency with which the dispensary moves stock. If the figure is too high, it means that inventory is not selling at the same rate that new goods are coming in. This results in lower profitability due to storage fees and liquidity problems.

Inventory Turnover Rate. This is a ratio that shows how many times the dispensary sold and replaced specific goods during a particular time period. This also tells dispensary owners how fast inventory is selling.

Time-to-Receive. This metric shows how efficient dispensaries stock retrieval processes are. It measures the average time it takes for employees to validate incoming stock, add it to the inventory record, and shelve it in the appropriate place.

Shrinkage. In a highly regulated industry like cannabis, shrinkage is dangerous. Dispensary owners need to be vigilant in recording any discrepancies between recorded inventory and actual physical inventory. Employers who catch discrepancies early can account for shrinkage before regulators come into the picture.

Cost of Carrying Inventory. Holding products in stock costs money. This KPI helps dispensary owners calculate how much capital they spend holding and storing inventory on an annual basis. It allows owners to identify dead and slow-moving stock.

Days to Sell Inventory. This KPI measures how long it takes to sell products in stock. When the number is high, it indicates inefficient inventory movement. When it is too low, stockouts become a risk. Every industry has its own average days-to-sell figure, cannabis included.

Maximizing dispensary efficiency requires gathering this data and acting on the insights it offers. This is only possible with specialized dispensary point-of-sale (POS) systems that adhere to the industry’s rigorous compliance standards on a state-by-state basis.

Invest in a Purpose-Built Point-of-Sale Solution

It takes more than drive and ambition to implement efficient inventory management in the dispensary environment. Dispensary owners need to deploy technological solutions that address the unique nature of the regulated cannabis industry.

This means investing in a POS system that auto-populates inventory database fields, consolidating sales data into a compliance-ready format. Dispensaries that collect high-quality sales data are able to manage growth while empowering their employees to continuously improve.

Ben Curren is the Founder of Green Bits, the nation’s leading retail management and compliance platform for the legal cannabis industry. Founded in 2014, Green Bits helps legal cannabis retailers run compliant, operationally efficient and growing stores. The platform serves more than 1,000 cannabis retailers across 13 states and processes more than $3 billion in sales annually through its point-of-sale platform. In 2008, Ben co-founded Outright, an accounting program used by businesses for freelancers and consultants, that web-hosting company GoDaddy acquired in 2012. Ben is a frequent commentator in national outlets about tech, trends, business issues, and state and federal policy and regulation in the legal cannabis industry.

Green Bits provides smart management solutions that help cannabis retailers maximize performance and make better business decisions. Our robust retail platform – with automated state-by-state compliance, inventory control, and personalized insights – enables owners, managers, and budtenders to run, protect, and grow their businesses with ease. The company serves more than 1,100 cannabis retailers across 13 states and processes more than $3.5B in cannabis sales annually. Visit Green Bits for industry resources.

Member Blog: Best Practices In Cannabis Cultivation For 2020

by Brett Strauss, President of FolioGrow

As with any industry experiencing unparalleled growth, the cannabis industry is going through a few growing pains in these early years of legalization. Cultivators especially are feeling the pinch as long-standing business practices no longer achieve the competitive edge in a crowded playing field.

Commercial operations look much different today than they did even a decade ago. It’s no longer about experienced growers nor about high tech solutions—the best practices for cannabis cultivation in 2020 come down to the math.

As we head into 2020, how do you increase yields, shave down production costs, and use metrics to manage future harvests? Start with the numbers and drill down.

Labor Considerations

Despite the advances in automation, cannabis still requires a human touch. From California to Ohio to Florida, labor is consistently a producer’s most significant business expenditure. As the largest monthly expense, labor is always a top priority when working on the bottom line. No matter how skilled or educated, human labor is still prone to inefficiencies, wasted time and costly mistakes. Keeping employees on task, consistently trained and accountable can go a long way towards reducing sky-high labor costs.

The best practices on labor in cannabis cultivation aren’t just about hiring the most talented person or operating with the leanest workforce, it’s about running a tight ship. Reduce costs through automated team management or digitally track to-do lists to assign the perfect employee to the most appropriate task. By focusing on improving the efficiency and value of each team member, you’ll create a measurable reduction of labor costs.

Analyze Past Performance for Better Forecasting

Unsurprisingly, cultivators can no longer rely on intuition and handsome experience as a means to produce a premium product. Detailed analysis of past crop performance is the only way to outperform the competition and predict future profits.

Accurate and detailed crop analysis creates consistency between harvests (which translates into consistent sales). It can also help improve the crop with minute adjustments during the growth cycle. These tiny tweaks are not feasible if your crop management is based on whiteboards and notepads.

We are working with a grow that will harvest 30,000 plants this year. If they were able to increase their average grams per plant by just one (1) gram, they would see additional sales of $385,000, at nearly zero additional dollars to grow that single gram. Crunching the data from past crops will help grow more profitable future harvests.

The Growing Demands of Metrc

The wrath of the regulator is increasingly prevalent within established markets. With 11 states and counting adopting Metrc (Marijuana Enforcement Tracking Reporting Compliance), it’s become a non-negotiator. Metrc is a mandatory requirement placed on all players in the industry to track, trace and stay compliant.

In many regions, Metrc is required by the state. As a cultivator, making Metrc a priority reduces risk and establishes your product in the market. If you can consistently master the rigorous requirements of Metrc, it’s setting the business up for long-term success.

Data is King, So Lean into the Numbers

Again, cultivation experience is only one piece of the equation these days. Data analysis is an increasingly necessary path towards larger harvests and to keep the costs-per-pound in check. Cannabis cultivation management systems (CCMS) facilitate the move off of whiteboards and spreadsheets into an automated, algorithmic analysis.

Without crunching hard numbers, it’s impossible to determine which strains are the most profitable. It’s equally as painful to decide which employees are the most efficient at which tasks. While spreadsheets can capture massive amounts of data, few companies have an experienced data analyst capable of performing the analysis. It’s why a CCMP is no longer a luxury, it’s become a best practice within commercial operations.

Controlling the Costs of Cultivation

The margin matters in the cannabis industry in ways it never has before. Beyond labor, how does the cost-per-pound break out? Spend the time (and the money) for a deep dive into your largest expenditures directly related to the grow. Examine the costs associated with standard utilities, nutrient procurement, pest management and waste management services to identify areas suitable for cost-cutting measures.

Which services are best farmed out to third-party contractors? What automation can be implemented to cut the cost of the process? Would an upfront investment into more efficient lighting or an on-site biomass cleaning facility make long-term sense? All are important questions to consider during this analysis.

The best practices in cannabis cultivation in 2020 are all about drilling down on the numbers. This is where a CCMP comes into play. It’s about saving on labor without cutting capacity. It’s about assessing the statistics of past harvests to develop a better product.

Cultivators need to have a solid grasp on the minute details contained within their cost-per-pound to shave pennies from utilities, pest control or waste management. At the scale of most commercial grows, pennies per pound transform into significant annual increases in profitability.

Brett Strauss is President of FolioGrow, a cannabis cultivation management system developed with the express purpose of using math and algorithms to help improve yields and profits for cannabis and hemp growers. Get a free 30-day trial or follow the company on LinkedIn, Instagram or Facebook.

Member Blog: Compensation in Cannabis – Is The Data Actionable Or Just Interesting?

By Dan Walter, FutureSense LLC

Everyone wants to know how much to pay people (or how much to get paid.) In a world of instantly accessible google searches, it can be maddening that pay data for the cannabis industry is hard to find. Even when you locate information, it probably isn’t compelling (or legally compliant). What’s the problem and how do we fix it?

Here are the most basic rules:

FTC regulations require the information provided by survey participants (companies) to be based on data more than three months old. Actionable survey data can only be supplied for positions with more than five respondents. No individual participant’s data can represent more than 25 percent on a weighted basis of the reported statistic.

Any data that does not meet these minimum requirements is interesting but is unlikely to provide a solid foundation (or a legal defense). Data collected directly from employees or talent searches are almost always non-compliant.

Actionable survey data will also give you ranges for each position. At the very least, usable survey data will provide statistically relevant minimums, midpoints, and maximums for each position. More comprehensive data will usually provide quartiles or percentiles for each job. To be blunt. Median numbers are the playground of thin data. If all you see is a median, you are probably looking at data that isn’t actionable. The median may be interesting, but it isn’t much more than that.

Many providers in the cannabis industry have spent their time and money trying to help companies with better pay data. Some of the data is accurate, and some are not. Some of the data meets legal requirements, and some are just fun to have. How should a company decide which data is actionable and which is only interesting? The paragraphs above provide some insight into assessing the information out there. NCIA and FutureSense are working diligently to augment that information with a data set that respects the breadth and depth of the cannabis industry (truly an industry of industries).

This is what makes your participation in the 2019 NCIA Cannabis Compensation Study, powered by FutureSense, so important. We have executed pay surveys for decades. Our goal is to provide actionable data for every position in the cannabis industry. Your participation is crucial! Participation is simple, FutureSense does most of the work. Also, many of the industry HR, Recruiting, and Accounting service providers are already set up to submit your data quickly.

Contact us today, or contact your service provider and ask them to collaborate for you! We will update this post as new providers get on board.