So you’ve decided to take the plunge and go into cannabusiness. Stake your claim on the green rush frontier. Along with a healthy tolerance for risk (this industry is still illegal in a majority of states and under federal law, after all) and a desire to explore the unknown, one of the first things you need to consider and map out is the cannabusiness supply chain.
What is a Supply Chain?
A supply chain is the network of all the individuals, organizations, resources, activities and technology involved in the creation and sale of a product, from the delivery of source materials from the supplier to the manufacturer, through to its eventual delivery to the end user.
As a gangapeneur, you will be managing the cannabis supply chain, and, regardless on where you set your flag along the chain, you will be responsible for (1) receiving a product, (2) converting that product into something else, (3) ensuring the quality of said product (4) preparing and distributing your product.
Depending on the nature of your cannabusiness, you will be overseeing elements of:
- Product design
- Supply
- Production
- Manufacture
- Distribution
- Retail Sale
- End User Support
Although growing cannabis is not quite the same as growing arugula, many of the same rules of business that apply to other business models apply equally to the dispensaries and other cannabusineses regarding distribution, supply and demand, and risk management protocols.
“. . . you will be responsible for (1) receiving a product, (2) converting that product into something else, (3) ensuring the quality of said product (4) preparing and distributing your product. ”
So, how do you maintain a healthy and efficient supply chain?
You start by thinking like a client. Put yourself in their shoes – when they walk into your place of business, what do they want? Reliability, consistency, and quality of your service or product. If a returning customer found that his or her favorite strain was suddenly unavailable, or that it had suddenly deteriorated in quality and lost several decibels of its former loudness, then there’s a good chance you won’t be seeing that customer again. As such, these concepts should constantly be in the back of your mind when evaluating each link in you supply chain management.
The supply chain starts with the growers. Growers want what all farmers want: certainty of price and distribution. But there is a lot of diversity when it comes to the size and sophistication of suppliers in this industry. Some growers have a single tent in an apartment or a room in a home. Others use a green house plot or an entire field. This diversity can create inconsistencies for all members of the supply chain.
The next step in the supply chain is processing of the marijuana, where the buds are harvested from the plants. This could take place at the grower’s shop, or it could be a separate link in the supply chain, depending on the grower’s resources and business model.
This processing would involve different pre-distribution procedures, depending on whether they were intended for wholesale or retail buyers, in other words, whether it is being sent to an end user, or to additional links on the supply chain.
At this point, the cannabis has been prepared for preliminary distribution. Depending on exact where on the supply chain you want to focus on, product design and marketing may play a role
So the question becomes how to develop strategies to ensure efficiency and stability of your supply chain organization. Each entry point to the supply chain must be flexible, and able to cater to different sizes and qualities. As each supplier is aligned with suppliers of like size and quality, a marketplace is formed. Marketplaces are then organized by size, quality and variety, which leads to more specialized and often more interdependent markets.
There is strength in numbers. The cannabusiness community can and absolutely should organize and learn from one another to develop strategies for each link in the cannabis supply chain. Are you a smaller, more specialized grower? You can work with similarly sized businesses on coordinating timing, strains and vendor tactics.
“Much of the key is getting in early - the cannabis industry has unique opportunities to build an entire industry from the ground up, and that gives the first ones out of the gate a lot of leeway to shape the future of that industry.”
Conversely larger suppliers can band together to enter the commodities market, which can open up even more opportunities for scaling and expansion. This organization will be especially valuable when addressing the concerns of those that will inevitably oppose the sale of a formerly prohibited commodity
Future Supply Chain Opportunities
The marijuana industry and its supply chains are still in their infancy. There are countless ways for it to expand and evolve in the coming years. Production will become more sophisticated and tailored toward either a volume or high-quality, artisanal supply chain. Extracts, oils, butters, and edibles, and drinkables will proliferate in any number of directions. As businesses grow, they will build their reputation and brand within their community.
As the legal cannabis industry grows and develops, so to will the industry’s supply chains. There are dozens of potential links to this chain, from budtenders, to accountants, to growers, attorneys, social media consultants, couriers, security, to quality control. Much of the key is getting in early - the cannabis industry has unique opportunities to build an entire industry from the ground up, and that gives the first ones out of the gate a lot of leeway to shape the future of that industry.