How Does a Marijuana Supply Chain Business Operate?

The cannabis industry is highly regulated. Weed products cannot be sold or used elsewhere apart from the state where the plant was cultivated. Because cannabis is technically illegal under federal law, crossing state lines with these plants could lead to adverse legal consequences.

What’s more, every cannabis business must track the movement of cannabis across the supply chain from seed to sale. This is part of state regulatory compliance that shows a clear trail of every finished product’s progress. It also ensures that all cannabis products are accounted for.

For entrepreneurs looking to enter the burgeoning cannabis marketplace, it’s important to understand the entire industry’s supply chain. Supply chains are large systems of companies, activities, personnel, information, and resources that are responsible for supplying goods and services to consumers across the world.

Read on as we keep you in the loop on the cannabis supply chain process.

Cannabis Supply Chain

This comprises five stages:

• Cultivation
• Manufacturing
• Distribution
• Transportation
• Retail

Cultivation

As an agricultural product, marijuana begins with growing or cultivation. The growers or cultivators specialize in cultivating quality cannabis plants with high yields. Remember, the buds are the most important part of the cannabis plant. Quality buds boast more cannabinoids, such as THC and CBD.

Cannabis plants are often grown in greenhouse environments. Ideally, the growers want constant and reliable harvests. So, they adopt growing techniques like temperature control and supplementation to enhance the quality of the buds. These techniques also reduce the period it takes marijuana flower strains to reach the flowering stage and eventually harvest.

The cultivation process comprises six phases. These include:

1. Germination
2. Seedling
3. Vegetative
4. Pre-flowering
5. Flowering
6. Harvesting

The cultivation stage is always the most saturated. Almost everybody wants to grow their own crossbreed strain. So, be prepared to face stiff competition from large-scale farms and backyard growers during this stage.

Before being sold, each batch of harvest is assigned an identification tag and subjected to lab testing. The test report highlights the cannabinoid potency of the flower as well as the presence of any pesticide or foreign matter.

Manufacturing

After harvest, growers can opt to process the flowers themselves or sell them as raw material to a wholesaler. Here, the plants are dried, cured, and trimmed before being converted into finished products.

One of the best things happening at the moment is the diversification of cannabis products. At this stage of the supply chain, manufacturers are looking to extract useful cannabinoids and terpenes from the weed plant. These active compounds add to the overall aroma, flavour, and potency of the final product. Two methods are used to extract the cannabinoids:

• Solvent extraction: Involves the use of solvents like water, ethanol, CO2, and alcohol. Produces a higher purity.
• Non-solvent extraction: No use of chemicals. Also called mechanical extraction. It’s considered safer, unlike the use of flammable solvents.

Through solvent extraction methods, producers create various cannabis extracts, including:

• Cannabis oils
• Shatter
• Butane hash oil
• Wax

On the other hand, non-solvent extraction methods produce concentrates like:

• Rosin
• Hash
• Kief

These concentrates are then converted into topicals, vaporizers, or edibles. Fresh, dried flowers are rolled into joints or blunts ready for sale.

All the products made from the flower undergo laboratory testing. According to state regulations, only a sample of the product is required for testing. The product sample will act as a representative of the whole batch of products. So, after the tests are done and approved, the lab reports are entered into the state’s regulatory software framework.

Distribution

Cannabis distribution is a complex system that is highly regulated by most states. It has the most compliance bottlenecks in the entire cannabis supply chain. Distributors perform various roles beyond just moving products between manufacturers and retailers.

Depending on the state and wishes of the wholesaler, distributors may perform the following roles:

• Shipping products at the behest of the wholesaler
• Storing products
• Serving as an auxiliary sales team
• Collecting money from dispensaries
• Moving cash transactions on behalf of the wholesaler

Distributors are assigned all these tasks because the cannabis industry is only just taking off.

Transportation

After marijuana products have undergone lab testing and approval, the next step in the supply chain is transportation to cannabis dispensaries (retailers) once an order is placed.

Transportation of cannabis goods is under strict regulations. Distributors need a type 11 license if they are to deliver marijuana to retailers. This is because they are mandated to collect excise tax after delivery. They must also remit the taxes to the authorities within a suitable timeframe.

Retail

Retailers are at the tail end of the marijuana supply chain. If you want to buy legal marijuana, you can only shop at licensed dispensaries. Akin to retailers in other industries, dispensaries stock an assortment of products to meet the needs and preferences of their customers. Common products include edibles, concentrates, topicals, creams, pre-rolls, CBD oils, flower, and so on.

There are two main ways by which cannabis goods are retailed to consumers:

• Brick-and-mortar stores
• Online stores

To stay compliant, retailers are required to only stock licensed brands. Additionally, they must provide lab reports for all the cannabis products currently on their shelves. Besides compliance, this show of transparency gives the consumer the confidence that they are buying quality, tested products.

As stated before, state regulators stipulate a particular seed-to-sale software for growers, manufacturers, and dispensaries. Cannabis dispensaries must track their product inventory to ensure each product is accounted for and can be traced back to its original plant.

The Bottom Line

While this overview is not comprehensive, it highlights the main processes involved from seed to sale in a supply chain. If you’re thinking about entering the cannabis industry, you should understand how products move across the supply chain and the regulatory framework in the industry. As such, you can confidently choose which section of the supply chain you want to invest in with a well-versed lens.