A well-crafted plan helps businesses maintain optimal stock levels, reduce waste, and maximize profits. When developing a buying plan, it's important to analyze sales data and market trends. This information guides decisions on which products to stock and in what quantities. We also need to account for seasonal changes, variance across stores, suddenly popular products, and upcoming holidays or events that may distort your assumptions.

Key Takeaways

• A strong buying plan balances market demand with legal compliance
• Regular analysis of sales data helps optimize inventory levels
• Building relationships with reliable suppliers ensures consistent product quality

How to Create a Buying Plan: A Step-by-Step Guide

Creating an effective buying plan is crucial for dispensaries to maintain the right inventory levels, maximize sales, and optimize profit margins. In this guide, we’ll walk through the steps involved in creating a purchasing plan, which is particularly useful for automating purchase order (PO) creation.

Step 1: Create the Order Window

The first step in creating a purchasing plan is to clearly define the selling period for which you are preparing an order. This period could be as short as a week or span an entire month, such as October 1st to October 31st, 2024. Defining the order window is essential because it sets the framework for all subsequent steps in the purchasing process. It ensures that all decisions are aligned with the specific timeframe during which the inventory will be sold.

Key Considerations:

• Define the exact dates for the selling period.
• Align the selling period with marketing campaigns, seasonal trends, and historical sales data.
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Step 2: Review and Establish Sales Targets for the Selling Period

With the order window established, the next step is to review and set for the defined period. This involves creating a purchasing budget that aligns with your sales goals. To do this effectively, consider the following:

1. Budgeted Sales: Review how much you have budgeted to sell during the selling period. For instance, if you’re planning for October 2021, examine your budgeted sales for that month.
2. Year-to-Date (YTD) Sales Performance: Determine whether your YTD sales are up or down compared to previous years. This will help you adjust your sales targets for the upcoming period.
3. Sales Target Update: Based on YTD performance, update your sales target for the selling period. If sales have been stronger than anticipated, you may want to increase your target; if sales have been weaker, you may need to lower it.
4. Inventory Requirements: Calculate the retail value of the inventory you need to have on hand to meet your sales target and achieve your desired Gross Margin (GM). This involves setting a target for how much inventory you need to purchase to hit your sales and margin goals.
5. Current Inventory: Review the amount of inventory you currently have on hand. This will help you determine how much additional inventory you need to purchase.

Final Output: A clearly defined Cost of Goods Sold (CoGS) purchasing budget for the selling period.

Step 3: Review Size-Specific Sales

Finally, if you’re dealing with products that come in different sizes (such as cartridge packs or minimum allocations), you need to distribute your budget across sizes. This step is critical for ensuring that you have the right mix of sizes to meet customer demand.

1. Analyze Size-Specific Sales: Review historical sales data for each size within a product. Consider how each size has performed in terms of total sales, sell-through rates, and inventory turnover.
2. Expert Consultation: For certain industries, such as cannabis, it might be beneficial to consult with experts early in the process to ensure that size-specific sales are considered appropriately, as this can vary significantly based on the product type.

Output: A buying budget allocated to each size within each product grouping will help you identify constraints, unavoidable overstocks, and products you might totally avoid early on.

Step 4: Review Product Category Sales

Once you have your overall purchasing budget, the next step is to allocate that budget across different product categories. This involves a detailed analysis of past sales performance for each category.

1. Create Accurate Segments In our industry, it’s essential to review sales performance at the sub-category level. This means analyzing how different product types or strains, such as sativa, sativa-dominant, hybrid, indica-dominant, and indica, are performing within each broader product category. While evaluating these subcategories think about:some text
   • Sub-Category Sales Performance: Determine how each sub-category (e.g., sativa, indica) is performing in terms of total sales, Gross Margin, and sell-through rates.
   • Consumer Preferences: Identify shifts in consumer preferences within these sub-categories, which can inform how you allocate your buying budget.
   • Inventory Optimization: Adjust your purchasing decisions to ensure that you are investing in the sub-categories that are most in demand, thereby optimizing your inventory for better sales performance.
2. Review Historical Sales: Review product category sales for the most recent comparable sales period. For instance, if you’re planning for October 2024, review sales from October 2023. Pay close attention to:some text
   • Total sales and percentage representation of all sales for each category.
   • Average Gross Margin (in both dollars and percentage).
   • Sell-through percentage: For example, if you purchased 1,000 units of a product and sold 800 units during the period, the sell-through rate is 80%.
   • Sales velocity: Analyze how many units of each category are sold daily on average over the entire period, as well as over the past seven days. Also, calculate how many days of inventory you have left based on current sales rates.
3. Compare Sales Trends: Compare October 2023 sales with both YTD sales and September 2024 sales to identify any notable trends. This analysis can reveal shifts in consumer preferences, emerging product categories, or declining trends that could impact your purchasing decisions.

Output: A buying budget allocated to each product category based on sales performance and trends.

Step 5: Review Brand Sales

After allocating your budget across product categories, the next step is to break down the budget further within each category by brand. This allows you to prioritize the brands that are performing well and reduce investment in underperforming brands.

1. Follow the Same Steps as in Step 3: Just as you reviewed product category sales, you should now review brand-specific sales within each category. Consider total sales, Gross Margin, sell-through rates, and sales velocity for each brand.
2. Budget Allocation: Based on this analysis, decide what percentage of your buying budget should be allocated to each brand within the category.

Output: A buying budget allocated to each brand within each product category.

Step 6: Review Price Point Sales

To optimize your inventory further, you should also consider how your budget is distributed across different price points within each brand. This step ensures that you are investing in the price ranges that are most likely to drive sales and profits.

1. Follow the Same Steps as in Step 3: Analyze sales performance at different price points within each brand. Consider how products in various price ranges have performed historically and how they are trending currently.
2. Budget Allocation: Allocate your buying budget across different price ranges within each brand, ensuring that you have a balanced assortment that meets consumer demand.

Output: A buying budget allocated to different price points within each brand, within each product category.

Step 7: Review Product-Specific Sales

At this stage, you should have a detailed budget for each product category, brand, and price point. Now, it’s time to drill down even further to the product-specific level. This step involves defining the budget for individual products within each brand and price point.

1. Follow the Same Steps as in Step 3: Review historical sales data for individual products. Consider total sales, Gross Margin, sell-through rates, and sales velocity for each product.
2. Budget Allocation: Based on this analysis, set a budget for each specific product.

Output: A buying budget allocated to individual products within each brand, price point, and product category.

Creating a comprehensive buying plan involves a detailed and methodical approach to reviewing past sales data, setting targets, and allocating budgets across various levels of your inventory. By following these steps, you can ensure that your purchasing decisions are data-driven, align with sales goals, and optimize inventory levels. This not only improves the efficiency of your automated PO creation but also enhances your ability to meet customer demand while maintaining healthy profit margins.

3 Ways to Streamline Your Cannabis Dispensary's Ordering Process

Efficient inventory management is crucial for running a successful cannabis dispensary. With the right approach, you can move away from manual guesswork and time-consuming spreadsheet analysis. Modern technology offers tools that simplify and optimize your ordering process, ensuring you stay ahead in a competitive market.

1. Leverage Real-Time Data

Real-time data is essential for effective cannabis inventory management. By utilizing digital systems, you can monitor stock levels, sales trends, and consumer behavior as they happen. This allows you to make quick, informed decisions, helping you avoid both shortages and overstock situations.

Point-of-sale (POS) systems that link directly to your inventory database are invaluable. Every sale instantly updates your stock levels, giving you a precise, up-to-the-minute view of your inventory. This accuracy is critical in a fast-paced environment like a dispensary, where product availability can change rapidly.

Real-time data also enables you to identify popular products quickly. By tracking which items are selling faster than others, you can adjust your purchasing decisions accordingly. Staying on top of these trends means you can meet customer demand more effectively and keep your shelves stocked with the products your customers want most.

2. Automate to Reduce Human Error

Automation is key to minimizing errors in your inventory management process. Using barcode scanners and RFID tags to track products helps eliminate the need for manual data entry, a common source of mistakes. Automation ensures that your records are accurate and up-to-date, which is crucial for both operational efficiency and regulatory compliance.

Inventory management software can further streamline your process by automatically alerting you when stock levels are low. Some systems can even place orders with suppliers when inventory drops below a certain threshold, ensuring you never run out of key products.

Automated reports are another powerful tool. These reports can quickly highlight discrepancies between your actual stock and your records, allowing you to investigate and resolve issues promptly. This proactive approach helps prevent losses due to theft, miscounting, or spoilage, protecting both your inventory and your bottom line.

3. Scale with Flexibility

As your cannabis dispensary grows, your inventory management system must be able to scale with your business. Choosing scalable software that can handle an increasing number of products and higher transaction volumes is essential for sustaining growth.

A flexible inventory system allows you to easily add new products or categories as your offerings expand. You can quickly update pricing, descriptions, and stock levels across all sales channels, ensuring consistency and accuracy in your product listings.

Building redundancy into your system is also crucial. Cloud-based inventory management solutions provide a safeguard against data loss, ensuring your inventory data remains secure and accessible even if local hardware fails. This reliability is vital for maintaining operations during unexpected challenges.

Flexibility in inventory management also means being able to adapt to market changes. Whether it’s responding to seasonal demand fluctuations or new regulatory requirements, a robust system allows you to adjust your stock levels and stay compliant without missing a beat.

Financial Aspects of Cannabis Inventory Management You Must Know

Managing the financial side of cannabis inventory involves more than just tracking stock. Understanding cost structures, choosing the right costing methods, and implementing strategies to improve profitability are all key elements in running a successful dispensary.

Understanding Cost of Goods Sold (COGS)

Cost of Goods Sold (COGS) is a critical financial metric in the cannabis industry. It includes all direct costs associated with producing or purchasing your cannabis products, such as cultivation, processing, and packaging expenses.

For retailers, COGS primarily consists of the costs associated with acquiring products from suppliers. Accurately tracking these costs is essential for calculating your true profit margins. Understanding COGS helps you set competitive prices, identify your most profitable products, and make informed decisions about inventory purchases.

Inventory Costing Methods: FIFO, LIFO, WAC

There are three main options for valuing your cannabis inventory:

• First-In-First-Out (FIFO): Assumes the oldest inventory is sold first. This method often results in lower COGS and higher profits in times of rising prices.
• Last-In-First-Out (LIFO): Assumes the newest inventory is sold first. This can lead to higher COGS and lower taxable income when prices are increasing.
• Weighted Average Cost (WAC): Uses the average cost of all inventory items. This method smooths out price fluctuations over time.

Each method affects your financial statements differently, so it’s important to choose the one that best fits your business model and complies with industry regulations.

Strategies to Improve Gross Margin

Improving your gross margin involves focusing on both cost management and pricing strategies. Here are some effective approaches:

• Optimize Supplier Relationships: Negotiate better terms with your cannabis suppliers to lower COGS.
• Implement Efficient Inventory Tracking: Use software to minimize waste and prevent out-of-stocks.
• Focus on High-Margin Products: Identify and promote your most profitable cannabis items.
• Dynamic Pricing: Adjust prices based on demand, competition, and inventory levels.
• Bundle Products: Create attractive packages that increase overall sales value.

By applying these strategies, you can enhance your financial performance while maintaining competitive prices in the market.

Navigating Challenges in Cannabis Inventory Management

Managing cannabis inventory comes with unique challenges, but with the right strategies, you can keep your stock in check and your business compliant.

Addressing Discrepancies and Inventory Errors

Inventory discrepancies can cause significant issues in the cannabis industry. Regular inventory audits are essential to catching errors early. Conduct daily counts of high-value items and perform full inventory checks weekly.

Leveraging technology is crucial in reducing human error. Barcode scanners and inventory management software streamline tracking from seed to sale, ensuring accuracy at every step.

Training your staff thoroughly on inventory procedures is also important. Clear guidelines and checklists help prevent mistakes. When discrepancies arise, act quickly to find and correct the cause.

Managing Perishable and Aging Inventory

Cannabis products have a limited shelf life, making it essential to manage perishable and aging inventory effectively. Implement a "first in, first out" (FIFO) system to ensure that older products are sold before newer stock. This helps maintain product quality and reduces waste.

Set up systems to track expiration dates, using color-coded labels or digital alerts to identify items nearing their end of life. Consider offering discounts on older stock to encourage sales before expiration.

Proper storage conditions are also critical. Control temperature and humidity in your storage areas to preserve the potency and quality of your cannabis products.

Regulatory Compliance and License Risks

The cannabis industry is heavily regulated, and compliance is non-negotiable. Maintaining detailed records of all inventory movements is essential to staying compliant and avoiding license risks.

Stay informed about changing regulations by attending industry workshops and consulting with legal experts. This proactive approach ensures your business practices remain up-to-date with the latest rules. Prepare for inspections by keeping your inventory areas clean and organized. Ensure that all required documentation is readily accessible to demonstrate compliance at any time. Having a solid recall management plan in place is also crucial. If an issue arises, being able to quickly and effectively manage a product recall can protect your customers and your business.

Say Goodbye to Spending Hours Creating POs

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