Cannabis Supply Chain Companies (Managing Distribution)
Posted on August 30th, 2022 to Education
The cannabis supply chain is no more or less diverse than any other industry supply chain, but it can be more complicated. Due to the many regulatory issues surrounding cannabis, everything from how cannabis is traced and tracked to how it is transported to retailers involves an elite collection of cannabis supply chain companies. Here, we’ll dive into the six primary types of companies in the cannabis supply chain.
Different Types of Cannabis Supply Chain Companies
1. Cannabis Tracking Software Companies
For the sake of compliance, cannabis products must be traced from start to finish. In other words, every cannabis seed that goes into the ground, every plant grown, and every product created must be traced from start to finish throughout all steps in the supply chain. This is one component of the supply chain with cannabis that is a bit different from most other products. This happens with METRC (Marijuana Enforcement, Tracking, Reporting & Compliance) software, such as Backbone IQ or Franwell.
2. Cultivation/Manufacturing Companies
Cannabis begins as a plant, which means cultivators are at the bottom of the supply chain. From seed germination to harvest, drying, curing, and trimming, these companies handle crude cannabis plants and prepare them for distribution. Some cultivators also act as manufacturers; they transform cannabis into other products, such as extracts, edibles, or concentrates. But manufacturers can also be standalone companies that purchase bulk flower from cultivators for processing.
3. Cannabis Warehousing
Warehousing companies in the cannabis industry usually handle short-term storage of cannabis and/or cannabis products. Manufacturers and cultivators often have to work with a cannabis warehousing company to store inventory if they don’t have enough on-site storage to house product. For example, an extract manufacturer may need a place to warehouse bulk flower for future use in making extracts.
4. Cannabis Transporters
Cannabis transport companies can offer a number of different important services that are a must in the supply chain, such as:
- Transporting trimmed cannabis to a manufacturer
- Transporting cannabis products from the manufacturer to a warehouse
- Transporting cannabis products to retailers
- Transporting cash from retailers to financial institutions
Transporters must possess a state-issued marijuana transporter license. For example, in the state of Massachusetts, the Cannabis Control Commission provides a transporter license that allows the company to possess, transport, store, and distribute cannabis to retail establishments and other supply chain locations but not to actual consumers.
Because cannabis transportation must still involve careful tracking and high-level security, it is important to work with a trusted third-party transporter. For example, the best companies will have armored vehicles, armed guards, GPS tracking systems on every vehicle, and follow compliance tracking regulations to the letter.
5. Cannabis Distributors
Cannabis distributors or distribution centers physically warehouse cannabis and cannabis products at a secure location designed specifically for the purpose. Distribution can be complex and heavily regulated but can be a critical component in larger-scale cannabis sales operations. Depending on the regulations in the state, distributors can be tasked with a number of different roles in the supply chain, such as:
- Moving products between cultivators and cannabis retailers
- Shipping products from the warehousing location to a final buyer
- Managing sales for an outlying wholesaler
A distribution center can work in several ways. For example, a retail buyer orders several ounces of flower from a specific wholesaler by placing an order for product held at the distribution center. The distribution center picks the product the retailer ordered, prepares it for shipment, and then transports the product to the retailer.
This distribution process makes it much easier for large-scale manufacturers and growers to handle incoming orders from a large network of buyers. That wholesaler only has to secure the transport of product to the distribution center, and the distributor essentially handles the rest of the process of getting those products to end retail buyers.
For cannabis companies focused on CBD or hemp-derived products, distribution centers currently serve a much larger role in the supply chain. Since hemp-derived products are federally legal, distributors can act as the middle-man between a retailer/product manufacturer and the average consumer. Basically, CBD inventory is held at the facility, customers place orders online through the brand’s website, and the distribution center picks, packs, and ships that order to the customer through the preferred means of shipment. In this process, some cannabis product retailers are using distribution centers as a means of drop-shipping products.
Cannabis retailers are essentially the last stop for cannabis products before they make it to consumer hands. This would include both medical and adult-use cannabis dispensaries. Of course, depending on location, cannabis delivery companies that deliver cannabis to the end consumer may also be involved.
Customers can either walk into a dispensary and purchase products or go online to purchase products from an online menu. In a sense, the online website/menu is like a distribution site for that specific retailer. Orders are input, and retailers work to get those orders prepared and distributed to customers.
Get Industry Insight from a Leading Cannabis Supply Chain Company
Having a cannabis logistics company like Plymouth Armor Group on call is an invaluable resource for anyone in the cannabis industry, whether you’re a cultivator, retailer, or otherwise. If you need help with understanding the supply chain or finding the right support, reach out to get a conversation started about how we can help.