Supply Chain challenges are affecting many industries today and the Cannabis Industry is no exception. So how do these challenges and disruptions impact Cannabis businesses and what remedies can streamline the supply chain? This article looks at the top supply chain challenges in the cannabis sector to highlight how you can minimize the impact and optimize operations as an entrepreneur in the cannabis sector.
The Top Supply Chain Challenges in the Cannabis Industry
Equipment and Raw Materials Shortages
The most fundamental issue affecting cannabis cultivators, extractors, and producers in the cannabis industry is the scarcity of equipment and raw materials as it is for many other industries. Companies who source their ingredients, equipment, packaging, or empty cartridges from outside sources are seeing higher costs and longer time to delivery. Just recently it was reported by Justin Pierce of Hydroponics in a Forbes article that he is seeing, in some cases a two to three month delay for many cultivation supplies, like pots, lights, and more.
As an example, steel is the most used metal in equipment building and construction in the cannabis industry. Steel forms a key component in the equipment in use in the cannabis sector, from cultivation, extraction, manufacturing, retail, and structures. Other key components and raw materials in short supply include nickel, nitrite, and rubber components sourced from Asia. With surging prices and short supply companies in the cannabis industry depending on steel and other metals are facing skyrocketing prices and longer lead times.
Another example are petroleum products and their derivatives that rely on petroleum products. The cannabis industry uses oil-based petroleum products in almost all products in some form or fashion. By now, you have noted that gas prices are rising, as well as the demand. Frequent disruptions in production and sanctions imposed on major gas producers like Russia have seen a shortage in supply against rising demand.
Most of the products in use in the cannabis sector are imported from overseas for local distribution through trucks or railcars in containers. Once the suppliers deliver the products, the containers are shipped back to their origin to ship more goods. This process over the last 18 months, has been experiencing delayed deliveries, supplies backordered, and severe shortages of raw materials. In addition, the shortage of truck drivers leads to congestion at vital port installations, which delays the delivery of products and equipment. Electronic driver monitoring technology aimed at monitoring long-haul truckers has seen a rise in logistical challenges in the industry. Drivers are spending less time on the road leading to a backlog of deliveries. One executive, Lars Mikael Jensen, SVP and Head of Global Ocean Network with Maersk, is quoted as saying “I’ve never seen anything like this”, as per the New York Times.
All the links in the supply chain are stretched thin. Without containers equipment manufacturers are watching orders piling up on their factory floors and buyers are waiting for long-delayed equipment. The result is product shortages and increased prices. Because of a shift in traditional shipping patterns, thanks to the onset of COVID-19, more people were buying online. This boom to the shipping industry created a backlog of empty containers at the site of import. In addition, many containers are being diverted to conventionally quieter areas of the world, filled with medical supplies and PPE. These containers are now stuck in these neglected ports because shipping companies do not have the capacity to retrieve them. Finally, many busy ports, like Long Beach, California, are weeks behind schedule due to labor shortages and limitations. Container ships sit for weeks out at sea, just waiting to unload at the port. Together, these issues have tripled the price of overseas freight
Legalization Drives Demand
As states adopt medical and recreational cannabis usage, there is an upsurge in demand. That rising cannabis demand is a driver in the shortage of popular supplies and equipment. The opening of new markets has seen cannabis operators ramp up their operations to meet the rising demand by opening new facilities while expanding existing facilities. The move has led to a shortage of essential commodities that propel the sector. With the uptick in demand cannabis cultivators, extraction specialists, and cannabis product manufacturers are also setting new production goals. The players are preparing for the increasing demand and traffic to meet consumer demand. As consumer demand rises, there is a likelihood of continued delays and shortages of raw materials and or for specific products.
Do you want to adopt an integrated Seed-to-Sale Solution and overcome supply chain challenges in your cannabis enterprise? Do you want to partner with a tried and tested business service provider to grow your business? Schedule a call or request a free demo today. We have comprehensive solutions to streamline and optimize your operations and generate more revenue.