Inventory management refers to how a business order, processes, stores, uses and sells its raw materials, components, and finished products. It is basically how you optimise your stock of products.

Inventory management is a different ball game for cannabis dispensaries in Canada. The reason is that, unlike with traditional retailers, there are a lot of regulations (compliance) that control the way these dispensaries buy, store, display, and sell their cannabis products, accessories, and branded merchandise in Canada.

So managing inventory in such a landscape can be a tad bit difficult as cannabis dispensaries have to be super-mindful of how they buy, store, organise, control, and deliver cannabis products at every particular point in time.

This is why the way you manage your inventory is a crucial part of your cannabis business if you are looking to steer clear of compliance issues while running a tight and profitable business.

We understand how vital effective inventory management is to Canadian cannabis dispensaries. That is why we will be sharing some tips on how to manage your inventory the right way.

Let’s dive in.

4 Strategies for Effective Cannabis Inventory Management

There are several strategies that you could implement to manage your cannabis inventory adequately. Let’s take a look at some of them.

First-in, First-Out (FIFO)

This is one of the most popular inventory management strategies for cannabis dispensaries because, as the name suggests, the orders from customers are fulfilled using the products that have stayed the longest on the shelf.

The thing is, even the best-preserved cannabis product goes stale/expires if it stays too long on the shelf. The FIFO strategy ensures this does not. You will have to keep regular tabs on the expiration dates of your products, though.

Plus, delivering fresh products to your customers will do a whale of good for your reputation as the “plug” for great cannabis products.

Last-in, First-Out (LIFO)

With this strategy, an approach different from the FIFO strategy is applied. Here the latest product is the first to be sold. We do not recommend this strategy for your cannabis business because you deal with products with a relatively short shelf life.

With the LIFO strategy, the most recently processed cannabis products are sold last. That is why it is excellent for non-perishable products that have a long shelf life. However, it can lead to a potential loss of revenue coming from expired products.

Just-In-Time (JIT)

JIT is great for retailers looking to reduce the number of products lying dormant on their shelves. It involves a structure of practices and controls that link customer demand to production.

Essentially, products are only processed when there is a demand for them. So all the processes required to get the finished product on the counter only start when there is an order.

JIT ultimately reduces costs and risks of revenue loss via expired products. It also makes it easier to manage your inventory.

ABC Analysis

This strategy aims to categorize products based on the frequency of their sales and how much they generate. When utilized properly, you can identify your best selling/worst selling products so that you can take the appropriate steps. Here is how it works.

Three groupings (A, B, C) are used to organize your inventory. They include:

A grade: This is the category of bestselling products and is arguably the most valuable aspect of your inventory. The class “A” products are the products that you focus the most on because they generate a majority of your revenue.

B grade: This is the grade of products that has the potential to either go a step up or down the ladder. For this reason, you want to manage it well to be able to optimize it.

C grade: This is the class for those products that you struggle to get off the shelves. Often referred to as “deadstock,” these are the products that you don’t want to invest a lot of time and effort in.

Now that you know a thing or two about inventory management techniques, here are some other tips that might come in handy:

  • Store each product type according to its own needs
  • Analyze KPIs for better order management
  • Conduct weekly or bi-weekly inventory audits
  • Get professional audit validation
  • Train your staff on how to do inventory audits
  • Exploit the data
  • Keep an open mind
  • Consider colour-coding inventory and packages
  • Create a system of accountability
  • Hire an inventory manager

Mistakes Online Dispensaries Should Avoid

In a bid to get their inventory management right, some dispensary owners make certain mistakes that could hamper their cannabis businesses. Here are some of them:

Working Without an Industry-Specific POS Solution

The cannabis industry has peculiar demands; that’s why you need a point-of-sale (POS) solution specially designed for a cannabis dispensary.

Using a cannabis-specific POS will help you skirt any compliance issues while allowing you to integrate with the authorities’ automated compliance reporting seamlessly.

A cannabis-specific POS solution also comes with some features like automated product equivalency, product recall management, purchase limit calculations, in addition to facilitating regular inventory audits, projections, and reconciliations.

Poor Vault Management

This boils down to how you organize your vault. Poor management of the spaces in your vault will make auditing and reconciliation challenging to implement, and this ultimately leads to problems with managing your inventory.

You also risk product diversion, revenue loss, and breaking the law if you don’t secure your vaults or backrooms.

Not Taking Stock of Your Inventory Regularly

It would be best if you took inventory counts as regularly. To stay on the right side of the law, we suggest that you take inventory counts daily. That eliminates any issues that might arise from products being diverted or lost.

As such, always ensure that all sales, receipts, returns, and disposals are well documented and reported to facilitate the detection of any discrepancies ASAP.

Neglecting the FIFO Strategy

The FIFO inventory strategy helps to keep your cannabis products fresh while helping you avoid possible compliance issues. When you opt for other inventory strategies, you risk stocking and selling stale or expired cannabis products.

This is a costly mistake that can make you lose customers or get on the wrong side of the laws governing cannabis businesses.

You could avoid these mistakes by using cannabis inventory management software.

Why Cannabis Businesses Need Inventory Management Software

Cannabis inventory management software is a mission-critical tool that automates inventory and warehouse management aspects, streamlines the tasks required to effectively track inventory, manage the reordering, and update accounting data.

With the right inventory management software, you get a bird’s eye view of your inventory, even if you have to manage multiple locations. Here is why you need inventory management software for your cannabis business:

Top-notch Inventory Tracking

Inventory management software is designed to integrate with other vital systems to track your inventory in real-time, the product location, and movement during the order fulfilment. This way, your inventory control is improved, and human error is eliminated.


With the right inventory management software, you get to streamline your product reordering to prevent running out of your grades “A” and “B” products.

You could also set up the software to order the right quantity of products for fulfilling orders to avoid having excess products that sit on your shelves for a long time.

Accounting integration

Proper accounting is vital to the success of your cannabis business. Thankfully, most inventory management software is designed to have in-built accounting capabilities or the ability to integrate with your accounting software.

Such issues like double-entry of data and other pitfalls that might hamper your business are eliminated.

Handling Compliance Issues

The Canadian cannabis industry has a million and one regulations that you need to be aware of if you want to stay in business.

There is a high risk of you having compliance issues if you opt to go about your inventory management manually or use non-cannabis-specific inventory management software.

What To Look out for in A Cannabis Inventory Management Software

So how do you decide on the best cannabis inventory management software for your business, especially when there are quite a number of them out there?

We think you should look out for some of these features when shopping for cannabis inventory management software.

Real-Time Inventory Updating: With this feature, once order gets placed or delivery arrives, the changes are tracked, and the inventory is updated in real-time.

Advanced Reporting: You should opt for a solution that offers the intelligent reporting of sales data, reorder levels, and more provides invaluable insights about your cannabis business on the whole. This will help you make the most of your order times and track your most popular products.

Omnichannel Sales Support: This is an important feature to look out for, especially if you intend to sell across various channels. It would help if you had an inventory management solution that seamlessly integrates with as many channels as possible.

Multi-Location Inventory Control: This is one feature to look out for if your inventory is in more than one location. You will need a solution that can give real-time insights into stock volume, location, and movement across these sites.

Inventory Demand Planning & Forecasting: You need this feature because it allows you to leverage data on seasonality, consumer trends while providing accurate forecasts of future customer demand. This way, you will be able to invest in the right inventory at the right time.

Inter-Unit Integration: Inventory is just one aspect of your cannabis dispensary, so you want an inventory management software that seamlessly integrates with other aspects of your business operations.

POS: You can afford to settle for an inventory management solution that does not have a cannabis-specific point-of-sale (POS)solution. An integrated POS solution facilitates instant inventory updates across your channels by harmonising your purchase and stock details using your automated inventory system.

Inventory Management Fix: Sway

Sway is a comprehensive cloud-based software and hardware cannabis solution that is currently revolutionising the Canadian cannabis industry. It is designed to offer Canadian cannabis dispensary owners improved uptime and highly efficient sales channels while keeping their customers’ data private and secure.

It achieves this feat by providing a smart inventory management solution that stands out from others in the Canadian cannabis space.

Great One-Stop Solution

Although there is no one-size-fits-all inventory management software in the market, Sway offers a range of features that make inventory management a lot easier.

  • Customer relationship management
  • Ordering(e-mail, phone, fax)
  • Returns management
  • Payment(integrated online and offline payment solutions)
  • Logistics
  • Consulting
  • Shipping
  • Delivery
  • Billing
  • Warehousing

First-Class POS Solution

Sway’s POS solution is cannabis-specific, so it provides a range of functionalities besides processing payments. It is essentially a compliance-driven POS solution that can handle multiple registers across different locations in addition to supporting third-party integrations.


The compliance thingy bears repetition because the Canadian cannabis industry is controlled by hordes of regulations that you could easily default on. Sway’s inventory management solution is designed to help you avoid legal issues and all by offering automated compliance.


Your inventory management data contains a lot of actionable business insights. The Sway cannabis software has functionalities that provide and mine your real-time inventory data for actionable insights that improve your decision-making.


The best part of opting for the Sway software is that it offers a lot of functionality for a small price. All you need to enjoy Sway offerings is a regular $499 with a $99+tax on a 2-year contract per store.


As a cannabis dispensary in the Canadian market, you need to incorporate efficient inventory management to keep your business compliant while staying profitable. To do that, you need industry-specific tools and technology to simplify and improve your inventory management processes.

The good news is that Sway offers such tools and technology for Canadian Cannabis businesses. Your best bet will be to get Sway’s inventory management software if you are interested in reducing costs, automating your processes, and preventing any deficiencies in your inventory.