There’s no question that the cannabis industry is booming. With new states legalizing both medical and recreational marijuana usage there’s plenty of opportunity to get in on the ground floor. For anyone looking to start a cannabis business however, it’s important to note that the supply chain for this industry is complicated. Currently, the infrastructure of the industry is not sufficient to meet increasing demands, largely because of restrictive regulations. Let’s look at some of the factors impacting the cannabis supply chain and limiting cannabis distribution.
- As with many industries in the US, the cannabis industry is being affected by raw materials shortages. You may not know this, but the steel shortage affecting other businesses also has a major impact on cannabis distribution. Steel is a big part of the cannabis industry because it is found in equipment used it every stage of production. Cultivation, extraction, manufacturing, and even retail require items made of steel. Another shortage that is having an impact is that of petroleum products, since petroleum is found in almost all products in one way or another.
- The logistics of a marijuana supply chain are complicated. It starts with international commerce because many of the products used in the industry are imported. Issues with shipping are causing delays in many industries, including the cannabis industry. What’s more a shortage of truck drivers is impacting shipments within the United States. Another complication specific to this industry is restrictive regulation by the Department of Transportation. Currently, freight trucks regulated by the US Department of Transportation are prohibited from transporting marijuana and marijuana derived products. This limits the size of shipments the growers and manufacturers can provide and will need to be addressed as the industry grows and matures.
- The laws surrounding licensing are confusing. Cannabis can only be distributed within the company’s home state, but legal distribution channels vary, as to licensing regulations. There are strict licensing guidelines for every facet of the cannabis industry, and these restrictions are state specific. in many cases, businesses must hold multiple licenses if they want to control their supply chain internally, from cultivation through production to retail distribution. Some states, though, marijuana-related businesses are only allowed to hold one license and participate in one stage of the supply chain. even as cannabis legislation attracts attention at the federal level, these state-specific supply chain policies make it difficult to formulate a plan for a streamlined supply chain.
- Navigating seed to sale software can be overwhelming. In states that have legalized cannabis, either for medical or recreational use, growers, processors, testing labs, wholesalers, and retailers, must use seed to sales software databases. These databases don’t just log every cannabis harvest from each licensed grower, but also track lab testing, final products, distribution, and inventory from retailers and wholesalers. These records are necessary because they allow the state to track cannabis production. However, for small business owners and those new to the industry, these systems can be overwhelming and time-consuming. The concern of not properly meeting reporting requirements can be daunting, and accidentally misreported transactions can lead to supply chain issues.
- Banking can be overcomplicated for a cannabis related business. Someone new to the business might not realize how federal regulations can hinder the legal and efficient establishment of a cannabis related business. These businesses must navigate financial hurdles because FDIC insured banks are prohibited from conducting business with organizations that deal with cannabis. This complicates every financial aspect of the business, including payroll, sales, business expenses, tax records, vendor payments, and compliance records. Business owners must then find financial alternatives to manage their companies, and this can be difficult. Some companies choose to maintain all cash operations, but this can be a nightmare when dealing with compliance issues. Other cannabis related businesses use apps as a workaround. Many states are working to legislate better solutions, but in the meantime, marijuana-related businesses are navigating the safety and documentation concerns that go along with an all-cash supply chain.
If you’re interested in getting into the cannabis business, it makes sense to partner with an experienced distributor. Since 2017, RUKLI has been licensed and operating as a cannabis distributor in California. Now that we’re experienced veterans, we have a vast distribution network that serves both Southern and Northern California, and we operate out of facilities in both regions. Coordinating product intake using a precise “Track & Trace” system, we manage inventory, make compliance testing arrangements, and take on picking and packing in time to ensure next-day deliveries. We handle invoicing and collection, as well as tax payments and filings. We service some of the top brands, but we do not have our own brands or compete against our customers. To learn more about how RUKLI can provide supply chain management to meet your distribution needs, call (909) 300-0000, contact us through the website, or schedule an appointment.