Cannabis firms should use data, backups to strengthen supply chain

Just Released! Get realistic market forecasts, state-by-state insights and benchmarks with the new 2024 MJBiz Factbook member program, now with quarterly updates. Make informed decisions.

Cannabis companies that rely on the international supply chain need to keep a watchful eye on their suppliers and avoid spreading their businesses too thin, industry experts said Wednesday on the third, and final, day of Marijuana Business Daily‘s virtual conference, MJBizConNEXT Direct.

The marijuana industry has seen a disruption to the global supply chain from the coronavirus pandemic, but some companies that rely on products from overseas have fared better than others.

“People in the cannabis industry run their supply chain too lean,” said Beau Whitney, chief economist and director of Oregon-based Whitney Economics.

It only takes running out of one part to shut down your entire revenue stream, he added. Often, producers or suppliers will run out of inventory, then try to make up for it by rushing an order.

“If you’re expediting everything, you’re expediting nothing,” Whitney said.

Those comments came during a panel discussion titled, “Critical Planning: Building the Resilience of Your Supply Chain.”

Arnaud Dumas de Rauly, co-founder and CEO of New York-based vape manufacturer The Blinc Group, agreed, saying scrambling to order “is the worst possible scenario.”

He explained that shipping freight by sea is 5% of the cost of the product and air freight is 10-11%, which is a “huge difference and can have a huge impact financially.”

Cannabis companies need to use data to pinpoint and problem-solve delays throughout the supply chain, De Rauly said.

“Even data as basic as time of departure and time of arrival” – if you have that for six months – can help a business evaluate its product timetables, he added.

Whitney recommended marijuana businesses have at least a one-month buffer for some products and agreed that knowing lead times for shipments is very important.

“Understanding your suppliers and the risks associated with them is really critical,” Whitney added.

If you can drive costs out of your billed materials and streamline your supply, he said, “that’ll be the difference between success and failure.”

– Bart Schaneman