Supply Chain Management In the Cannabis Industry
Across the cannabis supply chain, procurement managers are required to both seek out supplies and then purchase them. Due to fragmentation across the organization, and lack of federal regulation, most operators assume these actions must be mutually exclusive. However, by investing in an integrated procurement platform, like MainStem, organizations can reduce time spent searching for materials, increase the bottom-line on overall COGS spend, and streamline their entire ordering process.
But exactly what is an integrated Procurement Platform?
When it comes to searching for products, operators are typically required to “source.” The act of sourcing is where procurement teams spend most of their time. This action is prompted by a product need and then seeking out vendors to fill that need. Usually, a person will compare up to four vendors before deciding upon one that meets their criteria — lower price, faster shipping, or even sustainability all factor into the sourcing process. After a supplier is selected, negotiations have been agreed upon, and emails have been passed back and forth, a purchase takes place. This initiates a purchase order, that can be forwarded to the accounting or finance department. Seems simple, however, this model leads to confusion, inefficiencies, unexpected expenses, and unnecessary time spent.
Based on client feedback, MainStem estimates that this typical sourcing process can take anywhere from two to four hours weekly, and if it is a special project like customized packaging, the process can take weeks. Operators in cannabis are also overwhelmingly forced to deal with unreliable, non-compliant, or cost-ineffective suppliers due to the lack of standardization and a disjointed supply chain leading to longer sourcing times. Also, because the industry consists of fragmented companies and distributed workforces across multiple geographies, this model tends to lead to accounting teams being responsible for policing departmental spending and having to manually reconcile invoices. With limited visibility across the whole organization, this process leads to duplicate or mistake purchases, erroneous and unnecessary purchasing, and the inability to forecast for the future. While simple, this process is ultimately, ineffective. This is where an integrated procurement solution comes in, benefiting both the operations and finance teams.
An integrated purchasing platform leverages smart technology to help organizations adopt a leaner company spend model, cut time spent seeking out materials, and reduce the mistakes caused by human error. MainStem’s Digital Supplier Network, for example, allows operators to source strategically, comparing hundreds of vendors, centralizing the ordering process, and increasing the cost savings. Users can take it one step further by not only strategically sourcing materials but also incorporating intelligent purchasing. This model allows users to set permissions, control product purchases, build compliant catalogs, and maintain all the organization’s purchases into one centralized repository.
Why do cannabis operators need a centralized procurement solution?
Further maturity in the cannabis space, and the inevitable federal legalization, mean cannabis companies will now have to scale or prepare for acquisition. Both require visibility into company overhead, with COGS-related purchasing, besides labor, being the epicenter. With an integrated procurement platform, companies can evaluate total spending, identify areas of cost savings, and place controls on future purchasing. The ability for supply order automation and a centralized vendor network also reduces human error and time wasted. By strategically implementing an integrated purchasing platform, you improve the company’s bottom line. In fact, on average MainStem saves an operator up to 20% on an individual items and up to 10% on overall company spend.
Another reason for an integrated purchasing solution is business continuity. Cannabis is risky and operators typically deal with a disruption to the supply chain. Whether it is COVID or the ‘Vape Mailing Ban' that was implemented in October 2021, operators are forced to pivot to continue doing business. By centralizing all purchases and vendors in one place, with a transparent and holistic view of a company’s purchasing, operators can make better business decisions. The ability to immediately cost compare and introduce new vendors will let your company continue.
Another area of risk is compliance. Recently, a cultivator in Washington was fined $15K after buying third-party “food-safe gloves.” Staying compliant with state regulations is critical to every cannabis organization. MainStem vets and rates our suppliers, and gives users control over what departments can purchase. Our multiple entity & location support combined with custom catalogs and product controls can accommodate state-specific regulations to mitigate risk and enforce compliance throughout your organization. Automating rules and restricting the ordering process reduces the risk of business disruptions.
Why do operators need a cannabis-specific Procurement Platform?
Since 2015, MainStem has been helping operators leverage strategic sourcing with smart purchasing, recognizing and customizing ourselves to the nuances of the cannabis industry, all while creating an integrated procurement platform that reduces costs, increases purchasing effectiveness, and minimizes overall business risks. By using MainStem, departments can control their own spending, eliminate ad-hoc purchases, streamline invoices to finance teams and establish a simplified standard purchasing process. We make your life easier by consolidating all your procurement and accounting workflows into a single platform. We were built specifically for the cannabis industry, and we understand the complexities of regulations, licensing, M&A and growth, and with that understanding, we structured our software and our subscriptions to accommodate unlimited users, unlimited locations, and expansion across state lines, so you will never be penalized for your growth.