News and Best Practices

Tackle Disruptions in Your Supply Chain

November 8, 2016

Does this sound familiar? Let’s say you have an edible that’s flying off your shelves. Your customers can’t get enough of it. But when you try to order more, you learn you won’t be receiving it anytime soon, due to a product shortage or contamination issue.

Although the number of manufacturers and producers of cannabis products has surged, shortages still plague the industry. Fortunately, by using some creative strategies, you can blunt the impact that these shortages can have on your business.

The causes of disruptions

When asked if supply chain disruptions were an issue for dispensaries, Tracey Hornsby’s answer was simple. “Absolutely,” she said.

She would know. She’s the owner of Green Paw Solutions, a Boulder, Colo.-based consulting firm that works with cannabis professionals around the country. Her career in the industry spans 17 years and includes experience with cultivation and dispensary operations, as well as caregiving for medical marijuana patients.

Tracey Hornsby, pictured here, is the owner of Green Paw Solutions, a Boulder, Colo.-based consulting firm. (Photo courtesy of Tracey Hornsby)

Tracey Hornsby, pictured here, is the owner of Green Paw Solutions, a Boulder, Colo.-based consulting firm. (Photo courtesy of Tracey Hornsby)

Hornsby identified two factors as the main contributors to the problem. The first is a simple case of supply and demand. High-potency, high-quality products tend to sell quickly, and sometimes the producer just can’t keep up.

The second is a result of stricter laws some states have enacted to crack down on contaminated cannabis and infused products. In some cases, the law mandates that infused products must undergo a series of tests.

“Everything has to be tested multiple times for contaminants—all the way down the line, not just in flower form or trim form that [the manufacturer is] turning into another product, like oil or concentrate or an edible,” Hornsby said. “But then you have to test the actual concentrate or edible after you manufacture it” to make sure you haven’t concentrated contaminants as well. If a product tests positive for contamination, it can be yanked from the shelves.

The effect that these measures could have on product supply wasn’t a surprise to industry analysts. Comprehensive Cannabis Consulting, a consultancy and think tank, predicted in March that tighter quality control and safety testing regulations in Colorado and Oregon would “knock significant amounts of cannabis out of circulation due to noncompliance for contamination and pesticide residues,” the firm reported.

Hornsby’s experience seems to validate that prediction. “There have been numerous contaminants issues here,” she said. “We’ve had lots of [infused product manufacturers] that have had quarantines and recalls.”

Unfortunately, a disruption at any stage in process—which includes cultivation and product manufacturing—can put the squeeze on dispensaries at the end of the supply chain. “The industry is like a domino game, and it’s very much dependent on the piece before it,” Hornsby said.

The remedy to disruptions

You can’t control the various factors that influence cannabis product availability. However, you can take charge of your inventory strategy. The key, Hornsby said, is variety.

She counsels dispensaries to stock their shelves with a range of products from a variety of vendors, ensuring that they’re not dependent on a single supplier. Specifically, she advises dispensary operators to order similar types of products from other suppliers. That way, when the supply of one product dries up, they have a temporary substitute on hand.

“Duplication of product from different manufacturers is another way to avoid shortages of products that are really popular,” Hornsby said.

Invariably, customers get attached to a particular brand of infused product or concentrate, and they can get upset when it’s temporarily unavailable. However, providing a similar item at a discount can go a long way toward retaining their business.

“When you educate someone on the product that they’re waiting for and show them an alternative and then give them a discount on the alternative, you really do calm them,” she said.

From Hornsby’s perspective, variety is good advice for dispensary operators and customers. Shortages can encourage customers to branch out and experience a wide array of products that, until recently, weren’t available in the industry. “I encourage any consumer to try variety, even if it’s trying variety of one particular type of product,” she said.

By Bridget Manley
Dispensary Management Today articles are for informational purposes only and should not be considered legal guidance or advice on dispensary operations. You should contact an attorney or a qualified cannabis consultant for specific compliance and dispensary/retailing advice.
© 2016 CAN Performance Group, LLC. All rights reserved.
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