How to Optimize Your Cannabis Distribution

The risks of botched cannabis distribution are serious business. As a case in point, take the cautionary tale of Herbl, the California-based distributor who following a mishandled distribution saga in which it claims to have been underpaid in the realm of $10 million, as of this past June, fell into a receivership. If that’s not warning enough, GrassDoor’s recent folding in the aftermath of Green Wednesday should be. Effective immediately, as employees of the company were informed via video message, the entirety of its staff was laid off after the California-based distributor went bankrupt as a result, in part, of less-than-optimal distribution processes.

Implosion stories like these ripple over the industry, in the form of uncollected debts and a general sense of volatility. But the truth is that in a business of margins, as distribution is, with multiple small businesses all taking their respective cut, any operation likely to be stable over the long term must find a way to navigate several obstacles to consistent, streamlined, reliable distribution. Let’s look at what those obstacles are.

The Obstacles to Effective Cannabis Distribution

Just like the risks, the pathways to effective distribution are many, and will vary depending on the operation. You may be a brand trying to place your product in retail stores, or a vertically integrated company assessing several different distribution options. Whatever the case, we’ve identified three common barriers to distribution you’re likely to navigate regardless of size or scale of operation, with tips on how to navigate them.

Barrier 1: Fragmented Cannabis Distribution Supply Chains

By a fragmented supply chain we mean the poorly integrated, non-cohesive movement of product from one stage of the distribution circuit to another–from where it starts, at cultivation, to where it ends, in retail dispensaries. It’s a distribution reality that a number of different products are being sold, and across a number of different markets. Flower sold in bulk, for instance, goes to one person; packaging goes to another; a vape cartridge manufacturer may sell its product to up to forty different retail stores, each with its own set of salespeople, managers, and other employees. And so the challenge for distributors is to bring the multiplicity of products and destinations into an orderly, integrated system, which as the industry modernizes has come often to require the use of software.

Barrier 2: Cannabis Distribution Transportation

After the complexities of a fragmented supply chain, we have the complexities of transportation. One reliable feature of cannabis distribution is that almost every product needs to be transported in bulk from one place to another, which often involves outsourcing transportation to a third party, and with that, an expense. A distributor on top of their game will have a reliable transportation protocol in place, and will have figured out how to keep outsourced expenses to a minimum.

Barrier 3: Cannabis Distribution Terms of Payment

As per Grass Door’s sudden bankruptcy on the cusp of Green Wednesday, plenty of business doesn’t necessarily equate to plenty of profits, especially where no clearly understood payment plan is in order. In fact, an unplanned-for influx of business can spell doom for companies who have failed to work out a reliable payment arrangement with vendors. Whether it be net 30, net 60, or net 90, terms will vary on the basis of individual arrangements. Be tight on your workflows so that failure to deliver as promised never prevents you from being able to sell at scale. And make sure to implement a reliable process around the financial approval of shipping. Nowadays, cannabis software options like Flourish carry the added benefit of being able to pre-load payment terms in your system, automating the process for the sake of reliability. Additional terms of payment features include the option to trigger an alert in the case that a payment is delayed. If you find yourself in the position of having to free up cash on short notice, cannabis-friendly loan options like Lendica can help you by offering real-time loans.

Now that we’ve outlined the three major impediments, on to three essential ways to optimize your distribution. Keep in mind that, though far from comprehensive, the list identifies three prerequisites to ensuring reliable, consistent distribution.

Action Item 1: Systems in Place

With no system of record, you’re not a serious business. And as true as this is across the board, it’s especially true in the cannabis sector where regulatory complexities make record keeping that much more important. Therefore, behind every functioning supply chain is a set of systems capable of syncing with each other and providing easy-to-use, accessible data to distribution operators. You need a system that does this every step of the way, from seed to sale, with no gaps. Before anything else, have your system of record in place.

Action Item 2: A Defined Credit Policy to Manage Your Accounts Receivable

Accounts receivable refers to the outstanding invoices of a company, or the money owed to them by clients. To manage your Accounts Receivable well, this policy should be one, transparent to your employees and clients, and two, reliably enforced. Whether enforcing net 30, net 60, or net 90 terms, it’s being able to expect timely payment and therefore plan accordingly that ensures a functional, streamlined Accounts Receivable setup. Have monitoring steps in place in the case that a payment is late; otherwise you could be in trouble.

Action Item 3: Optimize Distribution Center Capabilities

A distribution center is a warehouse for cannabis products waiting to be sold. Very often, this involves a retail dispensary ordering product wholesale, to be shipped from the distribution center in bulk. Because this process typically involves multiple steps along the way, it’s crucial to have well-defined SOPs (standard operating procedures), with the right people in the right place. The more predictably streamlined the process, the less the margin for error.

Get Ahead of the Distribution Curve with Flourish

If you’re curious about how the right software might help you avoid the barriers to effective distribution, reach out to Flourish, a full-service cannabis software company with an experienced team of experts who love to discuss your options with you. Learn more about our cannabis distribution software.