Over time, more states are on their way to legalizing cannabis consumption. While this is positive news for the cannabis industry, certain hurdles create issues within the supply chain.
Apart from the global pandemic, there are numerous shortages, legalization issues, and problems with licensing and supply chains for cannabis companies.
Join us in this article as we discuss the whys and hows of all the problems occurring within cannabis companies’ supply chains.
Shortage of Raw Materials
Raw materials are the building blocks of any industry. So, their shortage causes chaos and an eventual collapse. Currently, the industry is suffering from a shortage of raw materials, which include steel, petroleum, nickel, and nitrile.
Let’s look at the major concerns here: steel and petroleum.
Steel
The importance of steel in every industry is significantly prominent. It’s also visible in the cannabis industry since it is used for multiple purposes, such as construction, packaging, filtration, treatment, etc.
However, since former President Trump increased the tariff (25%) on steel, the pressure has increased since many businesses struggle to make up for the cost of these goods. This is clear from the skyrocketed domestic steel prices that are now up 70% to the global market value!
Petroleum
Petroleum and its derived products are directly or indirectly related to every item these days. However, since the rising inflation and the ongoing Russia-Ukraine war – cannabis companies are dealing with high fuel costs as well.
Not long ago, the United States went on to see an all-time high increase in fuel prices. This badly affects the cannabis supply chains and increases transportation costs.
Shipping Issues
Most of the materials that cannabis industries use are imported from China. However, due to slow delivery time, management, and administrative issues, cannabis delivery fails to meet the masses' demand.
To put the cherry on top, goods-carrying trucks are currently forbidden to transport cannabis-related items across the country. This adds up to the pressure as cannabis companies fail to work their way around the high marijuana demand and constricted means of transportation.
Obsolete Supply Chain Planning Methods
We live in an era where modern technology assists us in every aspect. For a host of reasons, the cannabis industry is yet to embrace technology in the same way which makes for large volumes of messy data (which is where Distru's Cannabis ERP comes in!). In its current state, the industry also lacks proper supply chain planning, mainly due to a lack of skilled human labor and financial resources for small cannabis startups.
The methods of planning include fax, prints, papers, and whatnot. Although this has some positivity, the outcome is inefficient working of the cannabis supply chain in the long run.
Without a proper management system or software – keeping track of inventory and logistics gets hectic. This also introduces human error and puts companies at risk of mismanagement and theft.
A full-on efficient supply chain software is needed to counter the currently poor management of the cannabis supply chain. Such software will help store credible data and make it easier to maintain the check and balance of inventory.
Banking Issues
Since marijuana has become legal in nearly every state across the U.S., one hopes for financial legalization, however, that’s not the case with business owners in this field.
Since cannabis is not legalized at a federal level, cannabis-related businesses and companies cannot operate financially with FDIC. So, they have to reside towards other modes of financial payments, which include the usage of apps and physical cash balance.
Talks are going on to eliminate this issue. Until then, cannabis companies remain in serious financial insecurity.
Distribution Issues
Intrastate distribution continues to grow since more states are stepping up to legalize medicinal marijuana. You may think that this proves to favor the cannabis industry. However, shipping problems, shortage of truck drivers, and delays pile up more work, creating fewer outcomes.
On the bright side, many third-party companies have started to lend their hands to cannabis businesses and aid them in legalized distribution across the U.S. This includes a storage facility, packaging, shipping aid, and state licensing approval.
Low Demand, High Production
There is no doubt that the demand for cannabis is increasing in the U.S. day by day, but, in some cases, it doesn’t always reach up to the mark. Farmers that grow hemp usually tend to do so during October since the season provides the necessary elements to grow these flowers.
Unlike 2021, 2022 saw increased production and led to a bumper harvest. However, the demand wasn’t enough to satisfy this increase. Companies went on to buy these goods but ended up in losses because they couldn’t sell enough products.
Cannabis overproduction is still a fear for many cannabis company owners, and they need to learn to protect businesses in bumper harvest vs. low demand.
Endnote
The growing cannabis demand is undoubtedly paying a toll on the cannabis supply chain. However, the main problem in the cannabis supply chain lies in management, shipping, licensing, and distribution.
But cannabis companies face a ton of other risks as well. If you own a cannabis business or you’re starting out, learning about cannabis risk management will eliminate the risk affiliated with this field.
