Branching Out

How a pioneering security company has confronted the challenges of branching out to develop a trimming, drying and distribution business

by Joseph Peña

The team behind Oregon-based CannaGuard Security implemented a Herculean change last year.

Executives decided to branch out from the compliance, armed guard and transport offerings that the company built its name on and expand into the plant-touching side of the marijuana industry. In particular, CannaGuard executives launched a third-party logistics business that manages cannabis drying, trimming, storage and distribution for multiple Oregon MJ growers.

It’s nearly unheard of for an ancillary cannabis company to undertake such a move, let alone do it successfully. But by all accounts, it seems CannaGuard has done just that.

The Cannabis Distribution Company (TCD Co.), as the new business is called, is housed along with CannaGuard’s other companies under a new parent: OmniTek Holdings. The parent company now has approximately 180 employees and offers customers a range of services, including security, curing, transportation and storage.

Business has been brisk for the new venture.

TCD’s 40,000-square-foot marijuana storage facility in Portland, Oregon, is near capacity. As of October, the company was providing trimming and drying services to four large marijuana producers and 12 smaller ones, as well as providing inventory and sales services to 12 farms in Oregon. Executives anticipate the company will eventually nearly double its staff of 80 trimmers.

Third-party logistics hubs are common in many industries – think online retail giant Amazon, food-service distributor Sysco, or trucking or parcel-delivery carriers such as FedEx and UPS that serve multiple customers. But TCD appears to be among the pioneers in the cannabis industry, and its strategy could serve as a template for other businesses.

Noah Stokes, OmniTek Holdings’ CEO, said the demand for full-scale distribution services from CannaGuard’s existing clients helped executives identify the opportunity.

But moving from an ancillary business into plant-touching operations – and scaling the operations for a large, centralized hub – has been challenging. It’s meant navigating new licensing processes and filing proper regulatory documents, as well as pivoting from other strategic development opportunities. It’s also meant resource-sharing among the businesses, finding new facilities and hiring and training a workforce.

“A lot of what we’re doing is stuff that just hasn’t ever been done in the regulated space,” Stokes said. “When you add that layer of the regulated space – with pesticides, cross-contamination, trimming, packaging, seed-to-sale tracking, sales, third-party logistics and security – all these things together really add a significant layer of complexity.”

Software Solutions a Challenge

Unlike other industries, products that help companies effectively operate in the regulated cannabis market are harder to come by.

For example, finding effective inventory software that meets the unique needs of the legal cannabis industry is challenging, Stokes said.

TCD needed software that was simple to use. It also had to integrate with Oregon’s seed-to-sale tracking system and handle distribution for a third-party logistics hub that houses multiple growers’ products at different stages of production.

That software didn’t exist. But TCD, leveraging the CannaGuard team’s experience with technology and software development, was prepared to do the heavy lifting.

In September, TCD bought and deployed inventory software it purchased from Washington state’s VerdeMark. The software works in conjunction with METRC, the Franwell seed-to-sale tracking system used in Oregon.

The software also has an e-commerce feature that allows retailers to browse the distribution company’s inventory and add items to a shopping cart. Those goods are then transported to buyers – the retailers – in CannaGuard Transport’s secure vehicles.

TCD has spent more than $100,000 developing the software to tailor it for the cannabis industry, and it plans to spend more than $1 million to make the software commercially available to its Oregon clients – plus those in California and Colorado. Like Salesforce, TCD plans to host the software in the cloud and charge clients for the license to use the technology.

Offering Customized Trimming

In February 2017, TCD acquired Cut & Dry, an Oregon mobile trimming business, to run its in-house product care operations.

Jon Pelzner, Cut & Dry’s CEO, joined TCD as vice president of business development to scale its cannabis processing operations – including its trimming and drying services – and its tactics for avoiding cross-contamination among growers’ plants.

“Primarily, what we’re looking for are clients who can grow great flower but might not have the ancillary services dialed in on their farms,” Pelzner said. “We want to take the ancillary need off their plate because the allocation of resources for trimming, drying, storing, and transportation – security aside – is so vast, and the business acumen that is needed to develop those services internally just requires so much bandwidth, that we want to be a solution for farms that want to focus on growing and only growing.”

TCD’s trim consultants meet with clients to fill in a three-page consultation form to understand trim specifications and build a client profile that includes information on the bud’s structure, density, height and moisture content – all factors that affect how cannabis is trimmed, Pelzner said.

“We don’t take the stance that we’re the masters of trimming and we’re going to trim it how we want it – we give the most comfort to clients by telling them, ‘You tell us how you want it done, and we’ll find the most efficient way to execute your trim preferences,’” Pelzner said.

Trim leaders then study the client’s profile and teach TCD’s trimmers how they should be trimming a client’s product.

For TCD’s hand-trimming operations, staff work with 300 grams of cannabis at a time, which Pelzner’s team identified as the sweet spot for trimmers to be most efficient. By contrast, 200 grams resulted in high bin turnover, meaning trimmers finished quickly and spent too much time returning bins of trimmed cannabis and taking new bins; 400 grams bogged trimmers down.

Each bin comes with a time-stamped receipt to monitor how long trimmers take to trim different product, and that time is entered into a system to help standardize processes. The receipts also identify the flower by client, strain and the ID from the METRC seed-to-sale-tracking system.

The receipts track valuable, post-trim data, too, such as loss percentage and average trim ratios, which tell growers exactly how much yield is generated by a specific strain or phenotype. TCD shares that information with growers so they can reallocate resources for higher-yield strains for future grows. The receipts also allow floor managers to keep real-time tabs on trimmers’ progress and individual bin ratios, which all help to standardize trimming. If one trimmer yields a high ratio of a particular strain, trim leads can audit other trimmers’ techniques to yield similar ratios.

Trim trainers also monitor operations to be sure trimmers are using the most efficient practices – rotating by the stem while trimming, for example.

Dialing in the Drying

Honing the strategy for its drying operations for multiple clients was “a whole new beast,” Pelzner said. It was a challenge figuring out how to get the marijuana from farms to the warehouse without over-handling the product.

As a solution, the team retrofitted cargo vans and 20-foot trailers with a specialty racking system. Staffers take the racks to the farms, rack the product there and then load it into the trailers. They drive it back to the warehouse and move the racks directly into drying crates. The process minimizes virtually all touching of the plant once it’s racked – which reduces degradation and breakage of trichomes.

All the drying crates in the warehouse are painted with anti-microbial paint and fitted with exhaust systems and dehumidifiers. They’re also electronically temperature and moisture monitored, so staff can check levels in the dry rooms through a mobile app.

“If anything goes a little haywire, we get notified and can send someone up immediately to the crate to fix the issue,” Pelzner said.

Anti-Contamination a Priority

TCD expects to dry and trim 65,000-100,000 pounds of cannabis through next fall – and with that volume, anti-contamination practices are top of mind.

TCD has teams of 36 trimmers who work with two quality-control leads and a floor manager in client-specific rows, and there are never more than two clients’ products on each trimming floor at any given time.

Trim staffers use a vacuum, isopropyl alcohol to remove buildup, and hydrogen peroxide to kill bacteria on trim bins, separation bins, scissors, trim trays, tables and chairs. They also replace butcher paper on tables for every client’s product.

Anyone who steps on to the trimming floor is required to wear medical booties, and floors are swept daily and mopped weekly. Trimmers also wear gloves that are never reused.

TCD is transparent with its clients and has an open-door policy, meaning clients can peek in on operations at any time.

The result of TCD’s diligent anti-contamination efforts: zero events of cross-contamination as of this past fall.

“The diligence in our anti-cross-contamination work is how we’ve gotten where we are,” Pelzner said. “Anyone can trim bud. It’s how we trim and how we guarantee your product is safe in our hands.”

Looking ahead, such diligence could allow CannaGuard, TCD and the other businesses that make up OmniTek Holdings to become trendsetters for the marijuana industry.

“Our ultimate goal is to have this really beautiful cycle, where CannaGuard starts with a company during the application and works with them through the licensing period. Then, once they’re licensed, TCD can help them take their product to market, or help them find products to fill their shelves,” said Stokes, the CEO. “We’re building new infrastructure, policies, processes and software from the ground up.”

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