The pandemic impacted many industries worldwide–the cannabis industry is no exception. The sector suffered most from supply chain challenges. These issues resulted in bottlenecks, delays, and more. These issues stem from various factors, including:
- Outdated inventory management
- Raw material shortages
- Shipping logistics
- Intrastate distribution
These factors are further compounded by increasing consumer demand and slow legalization efforts from state to state. These challenges are solvable with the right solutions and innovations to existing supply chain strategies and processes. Therefore, before discussing solutions, let’s dive into the details of current challenges in the cannabis supply chain.
Outdated Inventory Management
Many distributors and supplies still rely on outdated inventory management. When companies use fax, emails, and spreadsheets instead of modern solutions like supply chain software, efficiency disappears, and operation costs rise. Both of these consequences slow down growth and harm supply chains.
Without updated processes, saving costs become a bygone opportunity. Improving reactive supply chain management with just-in-time inventory techniques requires the right tools and expertise. Scaling any aspect of a business too quickly without solid supply chain processes increases risks and reduces returns.
Managing inventory effectively is the only way to address supply chain bottlenecks. Tracking, sorting, packing, and shipping are only part of the problem.
Material Shortages
Another set of challenges arises when raw materials for shipping, packing, and refining cannabis products are short. First, raw material shortages result in supply chain bottlenecks. The most impactful materials, such as steel and petroleum-derived goods, are vital to the cannabis industry.
Steel
Steel is vital to the cannabis industry for everything from storage, processing, treatment, filtration, shipping, and distribution. With legalization comes higher production standards and a heavier reliance on steel. The cannabis industry supply chain challenges continue with high tariffs and import challenges.
Increased steel tariffs placed to protect US steel have dramatically increased domestic prices. For example, the recently lifted 25% tariff on imported steel has only impacted imports from the EU. This skyrocketed the expense of local raw materials, running double the cost of Chinese imported steel. However, with high prices, businesses in the cannabis industry still turn to imports for lower costs, which causes other supply chain issues like port overcrowding.
Petroleum Derivatives
Inflated oil prices affect more than shipping and freight costs for cannabis products. Petroleum is essential for multiple industries, including the cannabis industry. It serves as an integral part of the supply chain too. Petroleum-derived materials protect cannabis products in various stages, from packaging to shipping to distribution.
With an increased demand for crude oil and its derivatives, a material shortage was inevitable. The unexpected crunch and resulting supply chain bottlenecks only delay production timelines further. Without an alternative or the foresight to find alternative packaging solutions, raw material shortages like these add to current cannabis supply chain challenges.
Shipping Logistics
The most common issues for the cannabis industry reside in shipping logistics and supply chain management. Intrastate regulations, material shortages, outdated inventory management, and poor planning result in higher shipping and distribution timelines pressure. However, less profitable agricultural goods are a lower priority with an increased demand for other commodities.
Other industries, such as electronics and apparel, have higher investment returns and a larger market share, making these prized commodities. In addition, it’s even more advantageous and profitable to ship empty containers on a return voyage. This emphasis on China is mainly due to dominated trade routes and established shipping logistics through operations in legalized states globally.
Intrastate Distribution
Although increasing consumer demand may seem like a great opportunity for the cannabis industry, it puts more pressure. Legalization continues to grow, which further builds this demand. This increased pressure only adds to existing shipping shortages and logistical delays. Port overwhelm and shipping companies’ priorities only add to the difficulty of intrastate distribution. Yet there are workarounds to the cannabis supply chain challenges.
Many third-party distributors work with supply chain management to maintain a more open market. With state approval, packaging and shipping compliance can reside in the same warehouses. Storage and transportation compliance is consolidated, removing gaps between testing stages. A reliable cannabis supply chain company has proper licensing and approval to mitigate state-to-state regulatory variance and avoid regulatory challenges. Vertical integration allows for macro policies and processes, effectively reducing costs and streamlining operations.
Plan Ahead With a Tested Process
The best solution for overcoming the cannabis supply chain challenges begins with planning. Yet developing proactive approaches to shipping, storage, testing, packaging, and distribution require superior supply chain management. In addition, revamping current processes to accommodate new technologies and procedures takes dedicated experience. Our process allows for a comprehensive approach to shipping, warehousing storage, distribution, and other supply chain logistics. Our services are part of the solution, whether it means updating inventory policies, building in schedule contingencies, or a total operations evaluation and overhaul. As a result, shortages and other unforeseen obstacles are a thing of the past to product distribution.
