Optimizing cannabis inventory
While much attention in the cannabis industry focuses on cultivation techniques and compliance, managing inventory is one of the most critical — and often misunderstood — challenges. It is more than just a list of products in storage; it represents cash flow, risk and opportunity. Growers can leverage insights from retail dispensary operations to optimize inventory, reduce costs and strengthen relationships with downstream partners.
Poor inventory practices, on the other hand, can lead to expired products, lost revenue and strained relationships with retailers. Dispensaries face significant costs tied to carrying inventory, and growers are directly impacted by how efficiently their products move through the supply chain.
Key strategies for inventory optimization
The financial health of a cannabis business hinges on how well inventory is tracked, valued and moved. There is a range of elements that demonstrate the impact of improved inventory management:
Track expiry and product movement
Retailers regularly review reports to identify products nearing expiration and determine when to take action, whether through disposal, promotions or targeted marketing. Growers can adopt similar practices by monitoring batch dates and shelf life, ensuring that products shipped to retailers are fresh and less likely to be discounted or destroyed.
Leverage performance data
Dispensaries use brand performance reports to negotiate with suppliers and optimize their menus. Growers should analyze sales velocity and traction rates of their products at retail, using this data to inform production planning and marketing efforts. For example, if a particular SKU consistently sells out, consider scaling up production or offering similar products.
Align inventory levels with demand
Overstocking ties up capital and increases the risk of waste, while understocking leads to missed sales. Dispensaries should focus on estimated days of supply and adjust orders accordingly. Growers can work with retail partners to forecast demand and plan harvests, reducing the likelihood of surplus inventory.
Ensure data accuracy
Not fully understanding data from point-of-sale systems can distort inventory assessments and lead to poor decision-making by retailers, who also need to have productive communications with growers to analyze SKUs, inventory turn and other factors.
Because growers must track inventory for compliance through METRC or other mandated system, maintaining accurate and up-to-date records is not only a best practice but also a regulatory requirement. Data entry errors or discrepancies can lead to compliance issues, disrupt inventory assessments and hinder communication between growers and retailers. Ensuring precision in production, packaging and shipment records — and keeping information consistent across all systems — is essential for both operational efficiency and regulatory integrity. Compliance tracking focuses on units as opposed to cost, though. Utilizing costing models and reporting is critical to understanding the full picture, particularly margins.
Build strong relationships with inventory managers
While it’s common to view the inventory manager as the main decision-maker at dispensaries, dispensaries often lack a dedicated inventory manager altogether — a gap that contributes to ongoing inventory challenges. For growers, this means it is even more important to build relationships across the retail team, offering support, training and actionable insights to help staff manage inventory effectively. Because turnover among dispensary personnel is frequent, ongoing education and open communication remain essential to ensure best practices and smooth operations.
Practical implications for growers
- Collaborative forecasting: Engage in regular conversations with retail partners about upcoming promotions, seasonal trends and anticipated demand shifts. Use these insights to adjust production schedules and avoid costly overproduction.
- Marketing support: Work with retailers to develop marketing campaigns for products approaching expiration or those with slower sales. Joint promotions can help move inventory and strengthen the partnership.
- Continuous improvement: Regularly review inventory performance data and seek feedback from retailers. Use this information to refine cultivation practices, packaging and product offerings.
Inventory management is not just a back-office function, it’s a strategic lever for profitability and growth in cannabis production. By adopting best practices from retail, growers can minimize waste, maximize revenue and build stronger relationships throughout the supply chain. Data-driven decision-making, proactive communication and continuous improvement in inventory are critical for growers looking to thrive in a competitive market.
