The Cannabis Supply Chain Explained

The cannabis industry has experienced unprecedented growth in recent years, evolving from a largely underground market to a booming legal industry in many parts of the world. As the industry matures, understanding the intricacies of the cannabis supply chain becomes crucial for businesses, consumers, and regulators alike. This article will delve into the journey of cannabis products from seed to sale, exploring the key stages of cultivation, manufacturing, distribution, testing, and retail

1. Cannabis Cultivation

The cannabis supply chain begins with cultivation, the process of growing cannabis plants. This stage is critical as it lays the foundation for the quality and characteristics of the final product.

Germination and seeding

Germination: Germination is the first stage of growth for a Cannabis plant, where the seed sprouts and the root emerges, typically taking 12 hours – 8 days. To start the process the cannabis plant needs warmth, darkness and moisture. This leads to the activation of hormones that trigger the embryo within the seed to expand – the seed coat then cracks open and an embryonic root emerges.

‍Seeding: The seeding phase starts when two embryonic leaves (cotyledons) start appearing from the root, pushing away the remaining seed shell in search for light. This phase lasts 1- 4 weeks and is the most vulnerable period in the life cycle of the plant. It requires moderate humidity levels, medium to high light intensity and a good amount of soil moisture.

Vegetative and flowering stages

Vegetative: In this stage of the growth cycle the root system expands downwards, in search of more water and food. A strong root system is needed for a healthy floral development and the plant requires significant amounts of light and nutrition. This phase lasts 1-2 months indoors. When the sex of the plant starts to reveal itself, it’s an indication that the next stage begins.  

Pre-flowering: This stage, also known as "the stretch," is a critical transition period lasting about one day to two weeks, typically 10-14 days after switching to a 12/12 light cycle. During this time, cannabis plants can double or even triple in height, with increased internodal spacing to develop more potential bud sites. Hormonal shifts prepare the plant for flowering, and sex expression becomes apparent, with males developing pollen sacs and females producing pistils. New branches and nodes form rapidly, and bracts (bracteoles) begin to appear at branch intersections, eventually housing the flowers. This stage is crucial for cultivators to manage plant structure, identify and separate males if necessary, and adjust environmental conditions. The duration and intensity of the stretch can vary significantly between strains, with sativas often experiencing a more pronounced elongation than indicas.

Harvesting techniques

The process of harvesting can vary depending on what the cannabis plant is used for. Hemp grown for fibre is harvested before flowering, while cannabis grown for smoking or cannabis products is harvested when the trichrome have turned cloudy and 5-15 % of them are a reddish or brown amber in color.

Directly following harvesting comes the procedure of drying and curing the cannabis. Growers will either undertake this step themselves or pass the raw material on to a wholesaler. To avoid deterioration, the drying process should start immediately after harvesting. This is a crucial step since it affects the smell and flavor of the product. It also increases the potency and quality of smoke.

With cultivation and harvesting complete the next step in the process of Drying.

Drying

This step includes trimming the plant and slowly drying it, with the ideal temperature of 65-70°F and 50% humidity.

The cannabis branches are typically hung upside-down or placed on a rack to ensure even drying. It takes 3-7 days for the buds to dry completely in a dark room as sunlight at this stage in the process can lead to a suboptimal end result.

Curing

When curing cannabis the buds are placed in well-sealed jars and stored in a cool, dark and dry spot. During the first few days the jars need to be opened regularly to let moisture out and to provide oxygen. After about three weeks the cannabis should be ready.

Trimming

This is the final phase of cannabis harvesting whereby buds are trimmed and prepared for separation from each other by quality / grade and to be placed into jars. Trimming can be done by machines en masse or by particular individuals who are hired to hand trim, leading to higher quality but higher costs as well.

Importance of quality control in cultivation

Cultivators must maintain strict quality control measures, including pest management, nutrient balance, and environmental control, to ensure consistent, high-quality yields.

2. Cannabis Manufacturing

Extraction

Extraction is the process where you create natural by-products from the cannabis plant. While the main goal is to collect the desirable compounds, there’s also fats and chlorophyll that extractors try to avoid.

During this process, producers are looking to extract the cannabinoids and terpenes from the cannabis plant – this is where you can find the aroma, flavor and effect of the final product. There are many methods for cannabis extraction but the two main methods for removing the cannabinoids: solvent or non-solvent extraction.

Solvent extraction methods

This is the most popular method and is used to make cannabis extracts like wax/budder, cannabis oils, shatter and and Butane Hash Oil (BHO). Most forms of extracts can be vaporized, dabbed or ingested.

Common solvents used in this process are alcohol, hydrocarbons, CO2, water and ethanol.

Non-solvent extraction methods

Non-solvent extraction, sometimes referred to as mechanical extraction, is a method without the use of chemicals – resulting in concentrates like kief, hash or rosin.

Charas is one of the easiest methods of hash production, where you hand-rub live cannabis flowers to remove the resin. Dry sifting or shaking is a method for producing kief, usually made by grinding  the plant and running it through a silk screen machine.

Light Manufacturing

Manufacturers of all types can engage in light manufacturing, which consists of packaging bulk flowers into eight jars, turning the flowers and shaking them into pre-rolls, breaking down buds into smalls, tops, mids, and  kief. Distributors are also able to carry out light manufacturing. There is a special Type P license in California that has the power to package or repackage cannabis products or label and relabel the container.

Cannabis Infusion

Cannabis infusion is the process in which you infuse some sort of baked good or beverage or other consumable with distillate to make what are known as edibles. This method is becoming increasingly popular and expected to hit over $4B+ by 2022 according to a report by ArcView.

Unlike concentrates and extractions, infusions are made to be used in cooking and baking – not to be consumed on their own.

There is no “best method” for extracting cannabis and different methods have their pros and cons. Non-solvent extraction is generally considered safer, without the risks associated with using flammable solvents. Although solvent extraction boasts a higher purity for manufacturers in most cases.

Product Types

Manufacturing results in various products:

• Flower (dried buds)
• Concentrates (wax, shatter, oil)
• Edibles
• Topicals
• Tinctures

Packaging and Labeling

Products must be packaged and labeled according to state regulations, typically including THC/CBD content, batch numbers, and warning labels.

3. Cannabis Testing

Lab testing is an essential part of the legal cannabis industry. Every state has its own regulations around testing, but they all help to ensure that products are safe to consume and easy to dose. A cannabis product can only be distributed and sold once it has gone through lab testing and been approved.

Types of Tests Performed:

• Potency (THC, CBD, and other cannabinoid levels)
• Terpene profiling
• Pesticide screening
• Microbial testing
• Heavy metal analysis

All products can also get additional tests to work out their cannabinoid and terpene profile, but these aren’t necessary for compliance. However, testing the potency of the product is important for accurate labeling.

Cannabis is tested in two stages within the supply chain. The first stage takes place before selling the harvest, where batches are assigned ID tags and sent in for lab testing. Secondly, products that have been altered from the original flower must be tested again.

Most states need a sample of the product, for example an edible or a concentrate, which they’ll test on behalf of the entire batch made from the same harvest. These results will then be linked to that specific batch in the state’s seed to sale software.  

Quality Assurance

The final step before shipping cannabis to retailers is quality assurance. Distributors will then ensure that packaging looks correct, labeling meets the state’s guidelines and contains everything needed to be compliant. The requirements around labeling differ from state to state, but they typically consist of chemical information (THC, CBD levels), weight, serial number and specific dates (cultivation, testing, expiration, etc).

Storage

When distributors receive the products they place them in storage. During testing the storage needs to be a quarantine area, but once products have passed the tests they can be stored safely on shelves. Having a secure and safe protocol for storing cannabis products is imperative. Some edibles may require storing in low temperatures, in which case the distributors keep them in freezers.

4. Cannabis Distribution

Distributors play a crucial role in moving products from manufacturers to retailers. Their responsibilities are multifaceted and essential to the smooth functioning of the cannabis supply chain. The role of distributors extends beyond mere transportation; they are also responsible for storage and sometimes act as wholesalers. This comprehensive involvement allows them to manage the flow of products efficiently from production facilities to retail outlets.

Licensing is a critical aspect of cannabis distribution. Distributors must obtain specific licenses to operate legally within the industry. These licensing requirements vary by state, reflecting the complex and diverse regulatory landscape of the cannabis market across different jurisdictions. The variation in licensing requirements underscores the need for distributors to be well-versed in local regulations and to maintain strict compliance.

Challenges in distribution

Distribution in the cannabis industry comes with its own set of unique challenges. Security is a primary concern, particularly during the transport of products. Distributors must implement robust security measures to protect valuable cannabis goods from theft or diversion. Another significant challenge is maintaining product quality during storage. Cannabis products often require specific environmental conditions to preserve their efficacy and safety, necessitating specialized storage facilities. Additionally, distributors must navigate complex regulatory landscapes, which can vary significantly between different regions and jurisdictions.

The cannabis industry faces a unique hurdle in the form of interstate commerce restrictions. Federal law prohibits the transport of cannabis across state lines, even between states where cannabis is legal. This restriction creates distinct challenges for multi-state operators in the cannabis industry. It necessitates the establishment of separate supply chains within each state, limiting efficiency and scalability. This federal prohibition significantly shapes the structure of the cannabis market, creating isolated state markets rather than a unified national market.

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5. Cannabis Retail (Dispensaries)

The retail stage represents the culmination of the cannabis supply chain, where products finally reach consumers. Dispensaries serve as the primary point of contact between the cannabis industry and its end-users, playing a crucial role in product distribution, consumer education, and regulatory compliance.

Types of Cannabis Retailers

Medical dispensaries:

This dispensaries cater specifically to patients with qualifying conditions and typically require a doctor's recommendation or medical marijuana card for entry. These dispensaries often offer a range of products tailored to treat specific symptoms or conditions.

Adult-use (recreational) dispensaries

serve customers aged 21 and over (in most jurisdictions) and offer a wide variety of cannabis products for general consumption.

Cannabis Delivery services

In recent years, delivery services have gained popularity, especially in urban areas and in response to the COVID-19 pandemic. These services allow consumers to order products online for home delivery, providing convenience and discretion.

Where Do Dispensaries Get Their Products?‍

Dispensaries source their products from a network of licensed cultivators, manufacturers, and distributors within their state. Due to federal prohibition and interstate commerce restrictions, cannabis products cannot be transported across state lines, even between two legal states. This creates a closed-loop system where all products sold in a dispensary must be produced and processed within the same state. Dispensary owners and managers must build relationships with various suppliers to ensure a diverse and consistent product selection. They must also stay informed about new products, trends, and changes in the supply chain that might affect their inventory.

Inventory Management and Compliance

Inventory management and regulatory compliance are critical aspects of dispensary operations. Retailers must maintain meticulous records of all products received, sold, and in stock. This often involves using specialized cannabis point-of-sale (POS) and inventory management systems that integrate with state-mandated track-and-trace platforms. These systems help dispensaries monitor stock levels, track sales trends, and generate required reports for regulatory bodies. Compliance extends beyond inventory tracking to include adherence to packaging and labeling requirements, product testing standards, and sales limits. Dispensaries must also implement strict age verification processes and maintain secure storage for their products.

Customer Education and Product Selection

‍Budtenders play a crucial role in educating customers and helping them select appropriate products. As the cannabis industry evolves, many dispensaries are expanding their services and product offerings. Some are incorporating on-site consumption lounges where customers can use products in a social setting. Others are focusing on niche markets, such as high-end luxury products or wellness-oriented offerings. The integration of technology is also reshaping the retail experience, with many dispensaries offering online pre-ordering, loyalty programs, and personalized product recommendations based on purchase history and preferences.

Track and Trace Systems in the Cannabis Supply Chain

Track and trace systems, also known as seed-to-sale tracking, are integral to the cannabis supply chain.‍

Explanation of Seed-to-Sale Tracking

Seed-to-sale tracking is a cornerstone of the regulated cannabis industry, providing comprehensive oversight of cannabis products throughout their lifecycle. These systems assign unique identifiers to each plant and product, tracking them from cultivation through processing, testing, distribution, and ultimately to the point of sale. This meticulous tracking ensures regulatory compliance, prevents diversion to the illicit market, and enables swift product recalls if necessary.

Advanced cannabis Enterprise Resource Planning (ERP) systems, such as Distru, have emerged to meet this complex need. Distru's cannabis ERP integrates seed-to-sale tracking with other crucial business operations, offering a holistic solution for inventory management, order processing, compliance reporting, and financial tracking. By seamlessly connecting with state-mandated track-and-trace platforms, Distru and similar seed-to-sale software streamline compliance efforts, reduce manual data entry, and provide real-time visibility into the entire supply chain. This technology not only satisfies regulatory requirements but also empowers cannabis businesses with valuable data insights, enabling them to optimize operations, manage growth, and navigate the complex cannabis marketplace more effectively.

Overview of Metrc and Other Systems

In the cannabis industry, tracking systems like Metrc (Marijuana Enforcement Tracking Reporting Compliance), and BioTrack play a crucial role in regulatory compliance and preventing illicit market diversion. Metrc, being the most widely adopted, has become a focal point for integration with advanced ERP solutions. Distru, for instance, offers comprehensive Metrc integration, featuring real-time, two-way inventory synchronization that streamlines operations and compliance workflows. Built on industry experience, Distru's platform expedites processes like package assignment, COA management, and manifest handling, while also providing resilience against Metrc outages. This integration, supported by responsive customer service, exemplifies how modern cannabis ERP systems are evolving to meet both regulatory requirements and operational needs, marking a significant advancement in cannabis supply chain management.

Challenges in the Cannabis Supply Chain

The cannabis industry faces unique challenges due to its regulatory status.

• Federal Restrictions: Cannabis remains federally illegal, complicating banking, taxation, and interstate commerce.
• Banking and Financial Hurdles: Limited access to banking services forces many businesses to operate in cash, creating security risks.
• Inconsistent State Regulations: Varying regulations between states create compliance challenges for multi-state operators.
• Competition with the Illicit Market: High taxes and regulatory costs can make it difficult for legal operators to compete with the illicit market.

Innovations and Future Trends in the Cannabis Supply Chain

The cannabis supply chain, a complex system spanning from cultivation to retail, is undergoing rapid evolution driven by technological advancements and changing regulations. Each stage of this intricate process faces unique challenges and regulatory hurdles, all aimed at delivering safe, high-quality products to consumers. Emerging trends are reshaping the industry landscape: increased automation in cultivation and manufacturing is boosting efficiency and consistency, while a growing focus on sustainability is promoting eco-friendly practices in both production and packaging. The potential for interstate commerce, contingent on federal law changes, could dramatically restructure existing supply chains, opening new market opportunities. Furthermore, the introduction of novel product categories, such as cannabis-infused beverages, is compelling businesses to adapt their supply chain strategies. As the industry matures, it's evolving into a more sophisticated and diverse sector, with stakeholders across the board – from businesses to consumers and regulators – needing to stay informed about these dynamic supply chain developments to navigate the transforming cannabis marketplace effectively.

FAQs

Q: How long does it take for cannabis to go from seed to sale?A: The process typically takes 3-6 months, depending on the strain and product type.

Q: Can dispensaries grow their own cannabis?A: This depends on state regulations. Some states allow vertical integration, while others require separate licenses for cultivation and retail.

Q: How do dispensaries ensure product quality?A: Dispensaries rely on state-mandated testing and often conduct their own quality checks. They also build relationships with reputable suppliers.

Q: What's the difference between medical and recreational cannabis supply chains?A: While similar, medical cannabis often has stricter testing requirements and may have different distribution channels.

Q: How is the price of cannabis determined in dispensaries?A: Prices are influenced by production costs, taxes, testing fees, and market demand. Each stage of the supply chain contributes to the final retail price.