Perils of Cannabis Inventory

There are a lot of shared problems operating cannabis businesses, but inventory issues are arguably the most common. In the lean manufacturing system, where waste is defined as “something that adds no value”, inventory is identified as one of seven wastes. Lean Manufacturing Tools describes inventory waste in this way:

“Inventory costs you money, every piece of product tied up in raw material, work in progress or finished goods has a cost and until it is actually sold that cost is yours. In addition to the pure cost of your inventory it adds many other costs; inventory feeds many other wastes.

Inventory has to be stored, it needs space, it needs packaging and it has to be transported around. It has the chance of being damaged during transport and becoming obsolete. The waste of Inventory hides many of the other wastes in your systems.” (http://leanmanufacturingtools.org/77/the-seven-wastes-7-mudas/)

From state-to-state inventory violations tend to be the most common fines, in the cannabis industry. These violations are typically for not properly reporting inventory and not reconciling actual inventory to the virtual seed-to-sale tracking system’s inventory.

While manufacturing waste and fines and violations are concerns for any business the biggest perils associated with inventory are criminal in nature. Inventory that is not well tracked is vulnerable for theft, embezzlement, and diversion of product into the black market.

The issues compound very quickly, if inventory discrepancies happen day after day, it becomes nearly impossible to identify what exactly went wrong. If a business does not catch an inventory discrepancy with in 48 hours the likelihood of identifying the issues drops dramatically.

To control waste, fines, and criminal activity every cannabis business must button up their inventory controls. Every process involved in producing, moving, and selling product should be clearly defined with responsibility assigned to specific personnel. While many states do not require daily inventory reconciliation it is best practice to do so. This requires businesses to count every plant and product daily and verify the virtual tracking numbers match. Many businesses see daily inventory reconciliation as too time consuming and burdensome, but the consequences are too high to not know exactly what your inventory is every day.