How the Cannabis Industry Is Redefining Supply Chain Management
Like so much else in the legal marijuana industry, stocking a product that was utterly illegal but is abruptly legal and in huge demand is a unique challenge.
November 7, 2018 4 min read
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Wholesale and retail veterans know that mastering the supply chain is the key to meeting customer expectations. However, it can also be one of the biggest operational headaches. What if you could start from scratch, optimizing the supply chain with brand new technologies built for the sole purpose of efficiency? That’s exactly what’s happening in the cannabis industry today.
The explosive growth of this space in such a short time has created a need for a new era of supply chain management to help operators adapt to new regulations, distribution models and other issues related to a highly-regulated but thriving industry.
We have had the unique opportunity to witness and contribute to the development of the massive, brand-new cannabis supply chain. The innovations being made to streamline the process from start to finish beg the question: will the cannabis industry serve as the model for future innovations in supply chain management?
Empowering retailers to manage sky-high volume.
Cannabis retailers have to face the unique challenge of going from zero to 100 in a matter of days as their state legalizes. Retail sales this year are projected at $9 billion, with an expected growth to $22 billion by 2022. This unprecedented volume is difficult for retailers to prepare for.
In research phase of our platform, we discovered that retail purchasing managers are spending up to one full day per week on wholesale ordering to keep up with increasing consumer demand. Because there were no technical supply chain solutions in place, these managers had to call, text or email dozens of vendors a week just to keep enough inventory in stock. To save time, cannabis operators require easy-to-use online tools inspired by consumer ecommerce.
Streamlining order management for vendors.
Growing cannabis sales impacted vendors who had to adapt to increasingly larger orders coming in from retailers. The average order for a vendor on our platform is $3,000 to $4,000 with some orders totaling over $250,000. That’s big money for a fairly new cannabis producer.
Sales reps at leading cannabis brands were beginning to spend an inordinate amount of time managing and fulfilling their current retailer accounts, preventing them from bringing on new business. Once ordering started to take place online, reps found more time to focus on selling and growing their footprint in more stores.
Brands and distributors benefit from the online ordering platform, because the marketplace keeps them on retailers’ radar and empowers them to fill bigger and more frequent orders.
Tax and compliance intricacies.
High order volume is not the only challenge facing this supply chain. Managing the supply chain for a cannabis operation also requires a significant amount of tax and compliance homework.
Any software used to manage cannabis inventory must also account for the intricacies that come with the industry, including dynamic tax rates as well as labeling and lab testing requirements, which currently vary widely by state and sometimes even by locality. Managing millions of dollars worth of orders, and having to report all transaction details, test information and more to the state leaves very little room for error in the supply chain management process.
To create a custom supply chain solution for cannabis, we built technology that takes all these requirements into account, but is also flexible enough to work for the different regulations and processes of every state.
What can other industries learn from cannabis?
Efficiency is key. Pen, paper and verbal confirmation used to be the norm in the cannabis business. Now, the legal market offers new enterprise technologies which allow operators to be compliant, but also incredibly efficient. While companies in other industries might feel comfortable sticking with processes they’ve used for years, cannabis companies are ready and eager to adopt new tech.
Be Adaptable. The cannabis industry is in a constant state of flux, businesses are built to be highly adaptive and reactive in order to roll with the punches.
Research and stay one step ahead. Cannabis companies are always conducting market research and hiring consultants to determine next steps. Whether it’s expanding into new territory with different regulations, or simply exploring new product type possibilities, these companies are rarely complacent with their position in the market.
Business requirements are always evolving. The focus for all new industries should be to build — or use — flexible solutions that are adaptable enough to stand the test of time.
This article is from Entrepreneur.com