Cannabis Supply Chain: The Biggest Challenges in 2023 (and Beyond)As the breadth of legalization expands, this new landscape comes with new obstacles, increased competition, regulatory compliance struggles, and supply chain issues.
As the cannabis industry continues to grow, supply chain challenges have become increasingly prevalent. From limited access to skilled labor to shipping logistics problems, businesses are facing a range of obstacles that threaten to stifle their growth and success. In this article, we will explore some of the key supply chain challenges facing the cannabis industry and discuss strategies that businesses can use to overcome them.
Overview of the Cannabis Industry in 2023
In recent years, the movement for legalization has seen huge momentum. Rhode Island, Maryland, Missouri, and Delaware are the latest states to legalize recreational cannabis. With more states expected to follow suit, the industry is experiencing a period of rapid growth and expansion. Companies are having to navigate complex and evolving regulations while also dealing with issues related to quality control, distribution, and product consistency.
Cannabis supply chain challenges
The cannabis supply chain refers to the entire process of producing and distributing cannabis products. The stages of the cannabis supply chain include:
● Cultivation - planting and harvesting the plant
● Processing - packaging the plant into various products like prerolls, edibles, and tinctures
● Distribution - transporting those products to retail locations
● Retail - selling them to consumers
Increasing consumer demand is great, but it adds a lot of stress to the supply chain, which is still relatively young. This, combined with current global events and economic struggles leads to big obstacles in the cannabis supply chain. Here’s what’s going on now and in the immediate future:
Limited access to skilled labor
Industry stigma combined with regulatory and legal complexities makes it difficult to attract and retain talented workers. A shortage of qualified personnel can lead to delays, reduced quality, and even safety issues in the production and distribution of cannabis products.
Shortages of raw materials, such as steel and petroleum-derived goods, are causing supply chain bottlenecks in the cannabis industry. Steel is essential for storage, processing, filtration, and transportation, but high tariffs on imports and inflated domestic prices have driven up costs. Despite the high prices, businesses are still importing steel, leading to port overcrowding. Petroleum derivatives are used to protect cannabis products during packaging, shipping, and distribution, but increased demand and supply chain bottlenecks have caused a shortage. Without alternative packaging solutions, these shortages add to the already-existing challenges in the cannabis supply chain, which include regulatory compliance struggles and quality control issues.
Lack of uniformity in regulations between states and marijuana still being illegal at the federal level makes shipping over state lines difficult. This means companies often have to rely on local transportation, which is costly and inefficient. The stigma attached to the industry itself makes it difficult for cannabis companies to find willing partners in the shipping and transportation industry.
Furthermore, cannabis is highly perishable and requires specialized transportation and storage conditions to maintain its quality and potency. Traditional shipping and transportation infrastructure is not always equipped to handle these requirements, which can lead to product spoilage and loss.
Impact of Supply Chain Issues on the Cannabis Industry
The sum of these issues result in much higher costs for businesses. Now that the cannabis industry is more competitive than ever, this means some companies are going to flounder. Businesses need source inputs from non-traditional suppliers and invest in alternative solutions to overcome supply chain bottlenecks. The shortage of skilled labor can also drive up labor costs and reduce profitability for businesses.
All these challenges affect the consumer, too. Fluctuations in product quality erode consumer trust and loyalty. Consumers expect high-quality, consistent products, and any inconsistency in quality due to supply chain issues can lead to decreased sales and a damaged reputation for businesses, which is particularly rough on cannabis businesses due to the already high level of scrutiny (because of the illicit nature of the drug at the federal level).
Strategies for Overcoming Cannabis Supply Chain Issues
To overcome supply chain issues in the cannabis industry, businesses need to implement new strategies:
Build out a resilient supply chain
By developing a flexible and agile supply chain, businesses can better cope with disruptions and changes in the market. This can involve diversifying suppliers and establishing several backup plans for when supply chain bottlenecks occur.
Establish key partnerships
Building strong relationships with suppliers and distributors can help improve access to high-quality inputs and distribution channels. This might involve negotiating favorable terms with suppliers or collaborating with distributors to improve product delivery. The industry is still very young and rapidly evolving, so combining your experience in navigating these shifting markets is extremely valuable.
Invest in tech
Implementing technology and automation can improve efficiency, reduce costs, and increase the accuracy of inventory tracking and quality control. This helps companies gain greater visibility into their supply chains. AI is being used across all industries to analyze and fine-tune metrics like production rates, inventory levels, shipping times, and even hydration levels in the cultivation process. Overall, these tools help to optimize supply chain management and streamline operations in cannabis manufacturing and distribution.
To address the shortage of skilled labor, it’s key to invest in workforce development and training programs. It doesn't need to be cookie-cutter training videos - create training or mentorship programs to teach the skills your company needs. Build up existing employees and partner with educational institutions to develop the skilled workers you want to see.
The cannabis industry was and still is stunted by legal barriers, but now it's time to grow up. As more states legalize cannabis and the industry continues to mature, it's more important than ever for businesses to take a proactive approach toward building stronger supply chains and addressing growth obstacles before it's too late.