Part of our Inventory Guide series
Poor inventory management kills smoke shops. Too much inventory ties up cash; too little loses sales. Here's how to get it right.
Key Inventory Metrics
Inventory Turn Rate
How often you sell and replace inventory in a year.
Formula: Cost of Goods Sold ÷ Average Inventory Value
Targets:
- Vapes/consumables: 10-15+ turns/year
- Accessories: 6-10 turns/year
- Glass: 4-6 turns/year
- Overall shop: 6-8 turns/year is good
Days of Inventory on Hand
How long current inventory will last.
Formula: (Inventory Value ÷ Cost of Goods Sold) × 365
Target: 45-60 days for most categories
Stockout Rate
How often you're out of stock on items.
Target: Under 5% on core items
GMROI (Gross Margin Return on Inventory)
Profit generated per dollar of inventory.
Formula: Gross Margin ÷ Average Inventory Cost
Target: $3+ means you're generating $3 profit per $1 invested
Setting Up Tracking
POS System Integration
Your POS should track:
- Current quantity on hand
- Sales velocity (units sold per week)
- Reorder point alerts
- Historical sales data
Category Organization
Structure inventory logically:
- Main category (Vapes, Glass, etc.)
- Subcategory (Disposables, Pods, etc.)
- Brand
- SKU-level detail
Physical Organization
- Consistent storage locations
- Labels and signage
- FIFO (first in, first out) for dated items
- Regular reconciliation with system
Reorder Management
Setting Reorder Points
Formula: (Average Daily Sales × Lead Time) + Safety Stock
Example:
- Sell 5 units/day
- 3-day lead time from supplier
- Want 3 days safety stock
- Reorder point = (5 × 3) + (5 × 3) = 30 units
Order Quantity
Consider:
- Minimum order requirements
- Volume discounts
- Storage capacity
- Cash flow
Seasonal Adjustments
- Increase stock before holidays
- Reduce before slow periods
- Track year-over-year patterns
Managing Problem Inventory
Identifying Slow Movers
- Items unsold for 60+ days
- Below-average turn rate for category
- Products collecting dust
Dealing with Slow Inventory
- Markdown: Discount to move
- Bundle: Pair with popular items
- Promote: Feature in marketing
- Relocate: Better store placement
- Write off: Accept loss, clear space
Preventing Future Issues
- Buy less of unproven items initially
- Set trial quantities for new products
- Track performance from day one
- Don't reorder what doesn't sell
Physical Inventory Counts
Full Counts
- Count everything at least annually
- Close store or do overnight
- Reconcile with POS system
- Investigate major discrepancies
Cycle Counts
- Count portion of inventory regularly
- Rotate through categories
- Catch problems sooner
- Less disruptive than full counts
High-Value/High-Risk Counting
- Count expensive items more frequently
- Track theft-prone categories closely
- Daily counts on register items
Loss Prevention
Common Shrinkage Sources
- External theft: Shoplifting
- Internal theft: Employee theft
- Administrative: Pricing/counting errors
- Vendor: Delivery shortages
Prevention Measures
- Camera coverage
- Case locks on high-value items
- Employee training
- Receiving verification
- Regular counts
Technology Tools
Inventory Management Software
Your POS likely includes basic inventory. Consider:
- Automated reorder suggestions
- Integration with suppliers
- Multi-location tracking
- Reporting dashboards
Helpful Tools
- Barcode scanners
- Label printers
- Spreadsheet backups
- Inventory apps
Frequently Asked Questions
How much inventory should I carry?
Enough to not stockout on popular items, not so much that cash is tied up. 45-60 days of inventory for most categories is a good target.
How often should I count inventory?
Full count annually minimum. Cycle counts weekly or monthly depending on category. High-value items more frequently.
What's an acceptable shrinkage rate?
Industry average is 1-2% of revenue. Under 1% is good. Over 3% needs attention.