A healthy and efficient supply chain is vital for the success of any business that manufactures and distributes a product, and cannabis businesses are no exception. Unfortunately, the pandemic, the Suez Canal blockage, trade tensions and more have weakened the supply chain. As a result, new supply chain trends for the cannabis industry have emerged—and the trends are both good and bad.
Materials and Ingredients Shortages
Within the cannabis industry are various players tasked with getting the cannabis product into the hands of the consumer. This “seed to sale” process includes cultivators and growers, manufacturers and producers, wholesalers and distributors and retailers. Regardless of what role they play, each participant requires specialized ingredients, materials and equipment. According to an Omega Equipment & Supply article, two of the raw materials shortages affecting the cannabis industry the most are steel (used in equipment and in construction) and petroleum products (used in many cannabis-based products). Global supply and container shortages, congested shipping ports and a lack of truck drivers have all contributed to the scarcity of these and other resources.
Though these shortages are concerning, the industry continues to win legislatively with more states legalizing medical and recreational cannabis. This is good news, but businesses in the cannabis industry can expect demand for materials, ingredients and equipment from incoming competitors to rise in response.
As demand (for resources and from consumers) increases, so do the challenges in distribution. Transportation regulations vary in different countries and provinces, as well as from state to state. For example, supply chain licensing differs depending on where the cannabis business is located. Proactive Worldwide dissects this distribution challenge, noting:
Currently, many states’ cannabis industry runs on some form of a vertically integrated supply chain. In this design, MRBs are encouraged — if not required — to hold multiple licenses across major phases of the marijuana supply chain. For example, in Massachusetts, where vertical integration is required for cannabis businesses, organizations apply for multiple licenses allowing them to control multiple stages of their supply chain internally, from cultivation through production and onto retailing. In contrast, states like Washington allow MRBs to hold only one license for one stage of the supply chain. Meanwhile, other states like Colorado and Oregon give MRBs the choice to hold one or more supply chain licenses.
Navigating regulations and remaining compliant is a multifaceted and complicated task, especially as regulations continually evolve and are not standardized. Standardizing industry guidelines across countries, provinces and states does not appear to be a trend happening any time soon.
Nearshoring Due to Challenges in Supply Chain Disruptions
Supply shortages and distribution challenges have forced cannabis businesses to revise their supply chain strategy. One revision has been to seek out local partners for purchasing supplies and resources, replacing global partners. Called “nearshoring,” this practice puts supplies and resources closer to a cannabis business’ location, reducing transportation costs and eliminating the supply deficits from overseas. It also gives cannabis businesses more control over when—and how much—they order.And a SourceToday article reveals another benefit: “A cornerstone of nearshoring is increased collaboration through real-time communication within similar time zones and more opportunity for onsite visits.”
Another supply chain strategy change is the creation of distribution hubs (or centers), which is consolidating distribution sources into one geographical location. Using distribution hubs is a strategy that is a close cousin to nearshoring and provides similar benefits, such as having easier, faster and less expensive access to supplies from a single warehouse.
While distribution hubs are nothing new for businesses in other industries, cannabis businesses have not needed them until now. Increased demand, supply chain issues and shifting regulations have made distribution hubs an attractive and popular option for the growing industry.
Millions of people have left their jobs since the pandemic, and the trend has affected every industry. Or has it?
Turns out, the cannabis industry’s employment rate is booming. In a recent Forbes article, contributor A.J. Herrington reviews an annual jobs report by cannabis marketplace and online resource Leafly. Among many other things, the report highlights the number of jobs the cannabis industry currently supports (428,059 full-time equivalent jobs). The Leafly report also notes that the cannabis market is expected to reach close to $45 billion annually by 2025.
With such growth, worrying about shortages would seem appropriate, but cannabis businesses aren’t stressed. While the Great Resignation labor shortage has caused employers in many industries to reconsider their strategies for retaining talent, cannabis doesn’t appear to be one of them. Karson Humiston, founder and CEO of cannabis industry hiring platform Vangst, “has seen the cannabis industry report a 25% increase in full-time employees, many of whom entered the sector from other industries. It’s a trend that is likely to continue.”
Finally, cannabis businesses are managing a specific inventory concern: shelf life.Cannabis products—whether edibles, beverages, topical treatments and more—can and do have expiration dates. Managing expiration dates is not normally a major issue, but it has become one due to forecasting errors. Because the industry is still new, demand forecasting is based on limited data. As such, many businesses overestimated the demand, resulting in an excess of product. Cannabis businesses are now tasked with safely storing the extra product until it can be distributed.
Managing Trends with Cannabis Business Software
As trends go, the six discussed today are a mixed bag. Some help the cannabis industry and some challenge it, but all of them are manageable with the right technology. The right technology for cannabis businesses is cannabis business software, such as CannaBusiness ERP.
CannaBusiness ERP is a modern Enterprise Resource Planning (ERP) software (or cannabis ERP) built for the cannabis cultivation and processing industry. Complete cannabis business management software, it comes with all the functionality required to keep up with evolving industry standards and opportunities. Built in Sage X3, CannaBusiness ERP was developed from years of industry experience incorporating best practices from cannabis companies and industry leaders across North America. It is a single system that runs the entire business through quality, compliance, traceability, manufacturing and finance. To learn more about the latest version of CannaBusiness ERP, download our Product Deep-Dive or reach out to us. We’d love to chat and show you a demo.