From Rogue to Regulated

January 28, 2019

From Rogue to Regulated

Managing and securing the cannabis supply chain

By Kelly Smith

It’s no secret that cannabis is a budding industry. Once operating primarily underground from local dealers’ backpacks, the marijuana industry has become increasingly more mainstream due to a growing climate of state-level medicinal and recreational legalization.

Legalization first began in the 1990s with five states and Washington D.C. passing medicinal marijuana laws. Over the coming year, widespread legalization for medicinal purposes swept the nation, and in 2012, Colorado and Washington became the first states to legalize recreational use. Today, ten states and Washington D.C have legalized recreational cannabis for adults over 21 and 33 states have legalized medicinal use of the drug. Adoption has not been limited to the United States alone. In 2018, Canada became the first G7 country to legalize marijuana federally and Mexico’s Supreme Court ruled that marijuana prohibition is unconstitutional—leaving open the possibility for Mexico’s federal government to follow in Canada’s footsteps.

Not only are there a host of taxes levied on the substance,

there are also a number of stringent regulatory requirements that impact production and distribution.

With legalization has come a proliferation of commerce—the proverbial “from seed to sale,” including seeds, plants, and processing of tobacco, oils, edibles, and paraphernalia. And while the cannabis industry has come a long way from the back-alley activity of the past, it is still challenged to reorient itself from an illicit movement to a transparent and trustworthy industry. This includes overcoming a wide range of regulatory and supply chain challenges that come with legalization.

In an industry that has transformed from backpacks to briefcases, following are four of the top supply chain challenges facing the legalized cannabis industry:

1. Complying with State and Federal Regulation and Tax Compliance

With legalization comes regulation. For the historically illegal—and therefore, unmonitored—industry, complying with rising regulations can be an onerous task. Not only are there a host of taxes levied on the substance, there are also a number of stringent regulatory requirements that impact production and distribution.

Most notably, federal outlawing of marijuana means the product cannot cross state lines, even if two neighboring states have legalized use. To remain in compliance, legitimate operations must diligently monitor their supply chains to guarantee their product does not exit the state—or else risk facing illegal drug trafficking charges. In addition, producers face strict packaging and testing laws. In California, for instance, all cannabis goods must be tested in a licensed facility and be contained in child-proof packaging that includes a label displaying the amount of THC and other ingredients contained.

2. Optimizing Operations on an Industrial Scale

Historically, the cannabis industry lent itself to the small-scale mom-and-pop grower. With legalization, however, has come an unprecedented demand to scale operations and produce far more product than ever before. Such a high level of demand coupled with limited experience scaling operations challenges producers with a steep learning curve to deliver quality product in a condensed timeframe.

The cannabis plant itself acts as an obstacle to scalability. Notoriously high-maintenance, these plants are highly susceptible to pests, mold, and mildew, and must be precisely cared for and monitored. With undeveloped benchmarks for operating at scale, manufacturers are forging their own paths to improve production and reduce costs. One notable example, a facility in Colorado, developed a highly efficient LED lighting system to provide round-the-clock light to plants to help maximize production. While the technology reduced electrical costs nearly 33%, the producer still pays a staggering $150,000 per month on electricity. As time goes on, manufacturers will continue to seek out better solutions to empower profitable scalability. The supply chain is no exception. As manufacturers expand their operations, they must maintain granular traceability and control at every stage of the product lifecycle.

3. Protecting and Informing Users

A third supply chain challenge surrounds product safety and user trust. Unfortunately, despite regulatory efforts to ensure growers are licensed, product safety remains a top of mind issue for marijuana users. Articles like this one are still all too common, citing serious safety concerns due to pesticides, mold, and—worst of all—marijuana intentionally laced with dangerous substances like Fentanyl.

A growing body of users still faces mounting trust concerns over the origin, quality, and safety of product. It is critical to note that, for legitimate manufacturers, consumer transparency is not only a safety necessity but also a powerful opportunity to build a brand that commands a premium price point. Many brands have successfully positioned themselves as luxury growers, known for quality, consistency, and style. For niche luxury and mainstream growers alike, it is therefore critical to implement universal serialization and product authentication from the very beginning of the lifecycle—from field, to production, distribution, retail, and end user.

As a result, technologies to optimize the supply chain are often few and far between or

simply lack the scalability that booming cannabis producers require.

4. Redefining a Decades Old ‘Industry’

Let’s be frank: the cannabis industry did not spring up the day marijuana was first legalized, but rather has been operating behind closed doors for decades. Though illegitimate, the pre-legalized cannabis supply chain successfully managed growth, production, and distribution for years, and consequently, developed a series of de facto standard operational practices. For instance, historically, the grower and deliverer of the end product were the same person, and could assure quality for the user. In today’s large-scale operations, however, this is no longer the case. That means growers, distributors, and sellers no longer have the same control over the supply chain as they once did. This requires technology to step in as a universal middleman to track and guarantee the integrity of goods.

Yet, the cannabis industry is still marked by heavy stigma. As a result, technologies to optimize the supply chain are often few and far between or simply lack the scalability that booming cannabis producers require. As cannabis manufacturers further establish their foothold in the market, they will require industrial-grade solutions with a unique understanding of their industry requirements, balanced with a proven track record serving manufacturers in well-established sectors.

Taking Your Cannabis Operation to New Heights

At Ashton Potter, we are leveraging nearly a century of knowledge serving highly complex and regulated supply chains to deliver the comprehensive security and traceability the cannabis industry requires. With the ability to serialize, authenticate, and track products individually from the field to the end user, and the scalability to serve both the niche player and the billion-gram producer, ProLinc is an ideal “seed to sale” product security solution for marijuana manufacturers who are looking to grow their operations.

Ready to power your cannabis supply chain with the same technology that’s powering today’s market leaders? Get started with Ashton Potter’s team today.

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