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Meet Looming Federal Cannabis Regulatory Compliance Management with Automation & Confidence

By Steven Burton
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Federal regulation of the cannabis and hemp sectors is coming sooner rather than later — and this is mostly good news for cannabis businesses and consumers. But cannabis producers already struggling to meet complex and ever-changing local regulations (where they exist) will be facing a new set of challenges with another level of regulatory oversight and compliance.

Navigating multi-jurisdictional regulatory compliance management requirements is near-impossible with legacy manual systems. That’s why it’s time to leverage the right enterprise resource planning (ERP) system, so that you and your team can meet these compliance management complexities with confidence and ease. Whether you manufacture flower, edibles, beverages, supplements or other dispensary products, here’s what you need to know to stay agile and profitable as more changes loom.

Federal Legalization is Coming

To date, there are 18 states with adult use cannabis markets, 37 with medical cannabis programs, and an additional 13 that have some level of decriminalization. At the federal level, there have already been several attempts at cannabis law reform, with even more on the table in the coming year.

One of the most promising is the Republican-led States Reform Act, filed in November 2021. The central tenant of this proposed legislation is to remove cannabis and cannabinoids from listing as a Schedule 1 Drug under the Controlled Substances Act.

Importantly, if this law passes, it would allow individual states to pursue their own cannabis policies and remove the current risks companies face when going against current federal anti-cannabis scheduling.

The States Reform Act also proposes a three percent federal tax on all cannabis sales and that all cannabis sales fall under the ​​Alcohol and Tobacco Tax and Trade Bureau’s (TTB’s) control. The States Reform Act would — finally — guide the regulation of hemp-derived products through the Food and Drug Administration (FDA).

US Senate Majority Leader Chuck Schumer has also been working on another reform bill, specifically the Cannabis Administration and Opportunity Act (CAOA), which he plans to introduce in April 2022 to further emphasize the criminal justice aspects of legal reform in the context of the War on Drugs.

While the government’s track record on cannabis regulatory reform hasn’t been as progressive as many would like, at this point there is widespread public support and proposed bills from both sides of the aisle. As a result, the US may finally see some movement on cannabis law reform in the very near future.

How to Prepare for Federal Regulatory Compliance Management

With federal regulation looming, it’s time for licensed producers to elevate their internal systems. Whether you work with tetrahydrocannabinol (THC) or cannabidiol (CBD), the regulatory protocols in an already complex marketplace are going to change.

This is especially paramount for those producing cannabis or hemp beverages, edibles and supplements. You will need comprehensive and efficient systems to facilitate this transition. An ERP should reduce compliance headaches and ensure your business is ready to scale when a national marketplace launches.

Automate Data Gathering

It is no longer cost effective to manage seed-to-sale traceability with manual data capture. With the thousands, if not tens of thousands, of data points required at most commercial facilities on a routine basis, data logging is by far the best way to start compliance automation.

Automated ERP systems, which capture essential information across your entire operation, ensure access to real-time data for forecasting, accounting, regulatory compliance reporting and traceability. That means using software that captures and logs intel from across your organization about quality control, inventory and traceability, all without arduous manual input.

The best and most successful ERP systems should be used by all employees to collect data, from sorters/pickers to fork lift drivers to supervisors to senior management. For this to happen easily, the solution must be accessible and user friendly for all employees. ERP systems that can be easily integrated with tablets and smartphones (as well as IoT devices) reduce the need for expensive terminals on the production floor and make data collection a straightforward part of daily operations.

Build Systems to Facilitate Growth from the Start

A rigid ERP system that can’t grow with you is not a smart long-term investment. An adaptable multi-platform system evolves with your company and constantly changing regulatory compliance requirements. A solution that provides access to the entire facility, instead of being limited to individual users, ensures that growing teams can easily contribute to data quality from the plant floor all the way up to the executive office for actionable insights.

Markets are opening up across the country and quite soon, many companies will be looking to expand their operations nationally. As a result, you’ll need systems that can scale, cover additional facilities, keep up with increased production, and even work across different jurisdictions.

Having instant access to detailed operational information delivers greater business oversight at the micro and macro levels – insight that is crucial for expansion, profitability, and cost-cutting measures. Companies with the right systems in place will effectively manage the resulting federal complexities to deliver on regulatory expectations and capture a competitive market share.

Leverage Regulatory Frameworks and Technology from the Food Industry

The Canadian example demonstrates clearly that the regulatory frameworks from the food and beverage industry are the most applicable to the cannabis sector – more so than for pharmaceuticals, nutraceuticals or alcohol. This is most obvious in lucrative value-added markets like edibles and extracts, which are actually also food products.

Issues like dosage standardization, controlling common hazards, managing traceability chains and inventory, and introducing quality standards (including third party certifications like organic and SQF) are all crossovers from the food industry.

Just as the compliance automation wave has hit the food industry in recent years, manufacturers of infused products and extracts can then use the same technology to reduce safety and quality control costs as well as documentation and administrative costs. The lesson? Cannabis industry leaders don’t need to totally reinvent the wheel.

Cannabis Producers Need an ERP System Tailored to Their Needs

In Canada, cannabis manufacturers have learned all too well what a few little mistakes can do to reputation and profitability. MJBiz Daily reported in 2021 that the Canadian government had issued more than CDN $1.3 million (USD $1 million) in fines since legalization. That’s a lot of regulatory compliance issues. Considering there are nearly 500 compliance fields to fill out for monthly reporting, mistakes are difficult to avoid, especially if you rely on a manual system.

FDAlogoThe story is similar in the United States. State regulatory compliance management requirements are complex and arduous for individual companies and employees. When federal regulation does come, US-based producers will very likely face even more strenuous reporting requirements to multiple jurisdictions.

Cannabis companies will need a data-driven system in place to align with the FDA’s Cannabis-Derived Products Data Acceleration Plan. Finding food safety and traceability software that makes reporting easier, automatic, and less prone to human error is paramount to success. As you prepare for the looming federal legislation, look for an ERP system that covers all the bases, including one that:

  • Improves Market Agility: Expedites opening new facilities in new markets as they come online
  • Evolves with Regulatory Changes: Facilitates the transition from unregulated markets into federally regulated ones
  • Automates Reporting: Protects you from regulatory compliance management bumbles stemming from manual input and human error
  • Reduces Workload: Optimizes workflow and reduces labor costs associated with manual input
  • Is Comprehensive: Covers all bases, including food safety, quality control, traceability, production management, and even occupational health and safety

If you aren’t automating the capture of essential information across the entire operation, you won’t be prepared for the regulatory burdens likely to come with federal cannabis legislation. To stay compliant and on top of what will likely be an incredibly competitive marketplace, you are going to need real-time data — data that will provide precise seed-to-sale traceability, product recall capability, and reporting.

Digitizing safety, traceability and complex production management through one state-of-the-art ERP system allows cannabis companies to reap the rewards of data-driven, automation technology almost immediately without the significant capital expenditure on large-scale equipment or robotics. From there, navigating regulatory complexity becomes not only streamlined and operationalized, but an actual market advantage for future growth.

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Can Cannabis Avoid Alcohol’s 3-Tier Distribution System?

By Rick Kiley
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As an experiential marketer that works with a lot of vice-oriented brands, I’ve always been fascinated by the story of the rise of spirits in the US – a history marked by ingenuity in the face of heavy restrictions, clashing social norms, crime and political ideals. Since then, those same qualities have emerged in the story of cannabis and how, against all odds, it has recently begun to push its way into the mainstream. But on the path to legalization, cannabis can also learn a lot from the spirits industry about what not to do.

For example, when laws governing the spirits industry were written in the post-Prohibition 1930s, the federal government wanted to create an equitable landscape. So, they created a 3-tier system – manufacturers or importers must sell to wholesalers, wholesalers must then sell to retailers and retailers sell to us. They figured that keeping manufacturing interests separate from wholesale and retail interests would keep any large company from owning an entire supply chain, muscling out smaller competitors.

In theory, it’s not a bad idea. Imagine the consequences of massive companies like Diageo or AB InBev using their money to pay bars and liquor stores to only stock their brands and not competitors. Add on the Tied House Laws, which basically says an entity in one of the three categories cannot have an ownership stake in any of the others, and you get a seemingly even-handed marketplace.

Tied House Laws theoretically limit one entity from monopolizing a supply chain

In truth, it makes it almost impossible to be disruptive or for new brands to break through. Other industries have innovated by cutting out the middleman and selling direct-to-consumer – something that simply cannot happen in alcohol (minus the wineries and distilleries that can sell direct out of their tasting rooms). Also, now distributors are so consolidated that there are only one or two big distribution companies in each state. So, as a company trying to bring a new product to market, you have to get into one of these highly selective and competitive distributors if you are going to be successful – a challenging ask for a small, independent brand.

Protection racket

Now, imagine that same challenge coming to the cannabis space. With legalization around the corner, the adult use (as opposed to medical use) cannabis industry could easily look like alcohol in the rules that will be set up.

The demand for high quality cannabis continues to increase, but the prices need to level out to stave off the black market.

Right now, adult use manufacturers can sell their products to dispensaries directly. Some use a distributor, but there is no nationwide mandate to – which is probably for the best. If a distributor isn’t a requirement, it forces brands to offer something new to differentiate themselves. It will spark innovation, rather than add an extra profit margin that will get rolled into the final price – a price that is already higher than it should be due to the murky federal legal status. Adding complexity and cost will only make it harder to compete with the illicit market. For the industry to grow, costs for illicit cannabis can’t be lower than its legal counterpart.

Of course, we are in the nascent stages of legalization here and we’ve come a long way culturally and technologically since the 30s. But remember, the rules governing alcohol were written nearly 100 years ago along with the passage of the 21st amendment repealing prohibition. Startlingly, those laws haven’t changed that much since they were written, so any mistakes made now in dealing with the cannabis industry could last for a long time.

A new way forward

What the cannabis industry needs is a new model for the adult use/recreational space, keeping some of what exists in the alcohol industry but without ever mandating use of a distributor – the middle tier. This would mean keeping Tied House Laws in place and applying them to cannabis so that a manufacturer could never hold an interest in a retailer, while still allowing them to sell directly to dispensaries and to consumers. Currently, some states allow for vertical integration, which would change under Tied House Laws.

This should be pretty simple, since most states are already separating licenses by type of activity (manufacturer, retailer, etc.) and it would promote competition while bringing the widest array of products possible to each consumer. Also, it would prevent any behemoths from squeezing out the up and comers.

extraction equipment
Constant innovation is a hallmark of the cannabis market and a key factor in continuous growth.

Of course, some retail license allowances could be considered on a case-by-case basis. For example, I would carve out an exception that growers/manufacturers could sell direct to consumers through a single “tasting room” at their brand home. This is similar to the operations of microbreweries, distilleries and wineries. It would encourage education for consumers, and provide great opportunities for brands to show why their products are better or unique.

Given the technology and logistics solutions available to businesses in a 21st century economy, mandated distributors create a sometimes-unnecessary barrier to an already efficient supply chain. If mandated, prices will inflate to cover added margin, thus making it harder to bring consumers over from the legacy market to the legal one. I’m not against the idea of a distributor – they can add tremendous value, but the mandate would seriously curtail industry growth.

Direct-to-retail and direct-to-consumer sales are necessary for the economic health and growth of the industry. Without this, using alcohol as a cautionary tale, at some point the middle tier cannabis brands will inevitably begin to wield an outsized amount of power. We are living at a time where innovation is going to be the key to explosive growth in the cannabis industry, so it’s important to do everything possible to let the market find its way without falling into a century-old trap.

A Q&A with George Mancheril, Founder & CEO of Bespoke Financial

By Cannabis Industry Journal Staff
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Bespoke Financial was the first licensed FinTech lender focused on the legal cannabis industry. Founded in June of 2018, Bespoke offers four types of lending products: Invoice financing, inventory financing, purchase money financing and a general line of credit. With just over two years of originating loans to clients, they have benefitted from being a first mover in the cannabis lending space.

George Mancheril is the founder and CEO of Bespoke Financial. He has over fourteen years of experience in finance, with a special focus on asset-based lending, off balance sheet financing of commercial assets and structured credit. Following a stint with Goldman Sachs, he worked at Guggenheim Partners Investment Management’s Structured Credit Group in Los Angeles where he worked on structuring esoteric asset financing for a variety of commercial assets including airplanes, container leases and receivables.

Since 2018, Mancheril and his team at Bespoke Financial have deployed over $120 million in principal advances without any defaults and across eleven states. We sat down with Mancheril and asked him about the history of his business, how it’s been received so far and how the past few years of financial activity in the cannabis sector might shape the future.

Cannabis Industry Journal: What is Bespoke Financial in a nutshell?

George Mancheril: Bespoke Financial is the first licensed FinTech lender focused on the legal cannabis industry. Bespoke offers legal cannabis businesses revolving lines of credit that address the top problem in the industry – lack of access to non-dilutive, scalable financing to capitalize on growth opportunities and improve profitability. Due to the federal illegality of cannabis, traditional banking institutions cannot work with our clients even though these operators are working within the legal regulatory framework of their state. Bespoke solves this problem for businesses across the cannabis supply chain along with ancillary companies affected by the lack of access to traditional capital markets.

CIJ: How does your company help cannabis businesses?

George Mancheril, Founder & CEO of Bespoke Financial

Mancheril: Bespoke Financial offers 4 lending products – all are structured as a revolving line of credit but each allows our clients to access capital in a unique way based on their specific needs. Our Invoice Financing product, allows businesses to borrow capital against their Accounts Receivables in order to manage general business expenses, particularly if the borrower’s business growth is slowed due to a long cashflow conversion cycle. Inventory Financing and Purchase Money Financing allow our clients to finance payments to their vendors, which helps our clients achieve economies of scale by increasing their purchasing power. Lastly our general Line of Credit allows for the most flexibility for our clients to utilize our financing by either financing payments made directly to vendors or drawing funds into the client’s bank account to manage business expenses.

CIJ: I know the company is only a few years old, but can you tell me about your company’s success so far?

Mancheril: [Clarification, Bespoke was founded in June 2018 so we’ve been around for 3 years but we now have over 2 years of originating loans to clients.] Bespoke Financial has benefitted by being a first mover in the cannabis lending space as the first licensed lender specifically addressing the financing needs of cannabis operators, starting in early 2019. Over the past 2 years we have developed and refined our proprietary underwriting model to identify over 50 active clients spanning the entire cannabis supply chain. Since inception, Bespoke has deployed over $120 million in principal advances without any defaults to date and expanded our geographic footprint across 11 states. Our growth and success highlights our company’s expertise in structuring financing solutions which address the unique capital needs of cannabis companies.

CIJ: Can you discuss how the recent M&A activity, current and recent market trends, as well as the pandemic has affected your company’s growth?

Mancheril: The cannabis industry overcame a variety of challenges presented by the COVID-19 pandemic, ending the year with record sales in both new and existing markets. The support from state and local governments, evidenced by the industry’s essential business designation and the easing of regulations, coupled with increasing consumer adoption of cannabis combined to increase the industry’s demand for capital throughout the pandemic. Bespoke was well positioned to partner with cannabis companies across the supply chain and was proud to help our clients thrive during this pivotal period.

Jeeter was able to grow sales over 1,000% within the first year of working with Bespoke

Coming into 2021, the cannabis industry and investors shared a very positive outlook for the future based on the previous year’s experience and expectations of material easing of federal regulation. While M&A activity in the industry has increased over the past 6 months, the overall consensus has been that both the frequency of exit opportunities and the corresponding valuations will continue to increase as federal decriminalization opens new sources of capital and materially changes investors’ valuation assumptions. In general, we’ve seen cannabis companies focused on both capitalizing on the increasing opportunity presented by the industry’s organic growth and maximizing the benefits of future regulation changes by utilizing the resources and capital currently available to increase revenue, expand into new markets, and work towards profitability. All of these factors have further compounded the industry’s demand for financing and we expect to see continued growth in our lending activity in line with the industry’s growth.

CIJ: Who has been your most successful client?

Mancheril: We have a handful of cases studies and client success stories here on our website. One of the most exciting growth stories we have seen has been our client DreamFields whose in-house brand, Jeeter, is now the #1 pre-roll brand in the state of California. Prior to working with Bespoke, the brand was not ranked in the top 25 but was able to grow sales over 1,000% within the first year of working with us and achieve the #1 spot in their product category.

How Small Dispensaries Can Stay Competitive in Today’s Market

By Claudia Post
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Small cannabis dispensaries face different challenges than those seen with large, multi-state operators. To this end, massive companies like MedMen and Grassroots Cannabis need to accommodate multi-state operations’ compliance challenges. Conversely, small dispensaries must learn to compete with the big box retailers of the cannabis industry.

Small cannabis dispensaries must figure out how to make their size an advantage against larger business entities to stay competitive. To this end, they must critically assess the corporate structure of large cannabis companies like Green Thumb Industries to look for operations and m​arketing opportunities​ still “left on the table” for smaller operators.

Luckily, owning and operating a small cannabis dispensary affords creativity and innovation in the workplace. Namely, because small businesses can quickly implement change and pivot to the demands of the ever-changing cannabis landscape. Conversely, due to corporate structures’ difficult navigation, their larger counterparts must go through far more effort to implement operational changes. To better understand how small dispensaries can stay competitive in today’s market, we put together some criteria to examine.

Cross-Training Employee Teams

The fact that small cannabis dispensaries do not have many employees significantly reduces operating costs. However, to capitalize on the savings of a small employee team, you must cross-train your staff. Because if a small team can handle all the required tasks of a shift, you will never waste money on over-staffing your dispensary operation.

budtenderpic
A bud tender helping customers at a dispensary

Looking at the specific jobs of a small cannabis dispensary, business owners should ensure that budtenders are trained to handle nearly every business task. To illustrate, you should train budtenders to open and close the store, conduct inventory work, recommend products and operate seed-to-sale software. Not only does this cross-training keep you from overstaffing your dispensary when it is slow, but it also insulates your business during busy market fluctuations.

Please note, once you train budtenders to handle a variety of tasks, you should also pay them more than the industry average. In doing so, you insulate yourself from the high turnover rate that plagues the cannabis space.

Lean Operating Principles

Lean operating is a practice that has exploded in popularity across the business world. To help teach lean operating principles, specialty training companies offer Six Sigma certifications. These certifications help business owners and executives save money on operational efficiencies. Methods taken from Six Sigma can be incredibly impactful for small cannabis dispensary businesses.

According to the ASQ professional training w​ebsite​, “Lean Six Sigma … drives customer satisfaction and bottom-line results by reducing variation, waste, and cycle time, while promoting the use of standardization and flow, thereby creating a competitive advantage.”

Lean Six Sigma principles can be beneficial with inventory control in small cannabis dispensaries. To this end, these businesses should apply analytics to track consumer behavior within their stores. After that, they can use data to create precise sales forecasts and conduct highly accurate product procurement. The end goal being to increase liquidity by reducing money tied up in a bloated inventory of unsold cannabis products.

Personalized Experience

Due to their small size, single dispensaries have the luxury of customizing the retail shopping experience. As such, without the added pressures of corporate oversight, small operators have the creative freedom to make for highly memorable shopping experiences within their stores. In going the extra mile on things like interior design, small dispensaries can help ensure customer retention and benefit from word-of-mouth marketing.

The dab bar at Barbary Coast

For example, ​Barbary Coast Dispensary​ in San Francisco, CA, has the look and feel of a high-end speakeasy, making it the perfect match for the Bay Area’s aesthetic sensibilities. The dispensary interior is decorated with a 19th-century touch and features a dab bar, where clients can enjoy the surreal atmosphere while consuming some of California’s best cannabis. A visit to a small dispensary like this will likely leave a lasting impression.

Memorable retail shopping experiences often translate directly to customer loyalty. In turn, this dynamic directly impacts your bottom-line concerning marketing expenses. Notably, a steady base of loyal customers will sustain your business, significantly reducing your marketing costs. In the end, marketing can be directed at retaining clients through loyalty programs and customer engagement – both can be mainly handled “in house” and relatively inexpensively.

Product Differentiation

Small dispensaries can utilize ​product differentiation​ to stay competitive in today’s market. To this end, small operators are blessed with the ability to pivot quickly with new product offerings. Conversely, large dispensary chains with corporate structures must go through rigorous steps before launching new products at their stores.

Offering rare or unique cannabis strains is a great way to differentiate

Small cannabis dispensaries can immediately “get out ahead” on new product trends as they arise. For example, you can offer rare cannabis strains or boutique extracts that none of the larger dispensaries carry.

By the time the larger dispensaries in your area catch up on the current trends, you can move on to the next one. We recommend making alliances with some of the top craft growers in your area to make this possible.

Every year, the cannabis industry grows more competitive. As this business evolves from an underground affair to a multi-billion-dollar enterprise, the scope and sophistication of cannabis dispensary operations grows exponentially. Within this ever-changing dynamic, many small dispensaries fear the wayside will leave them.

Yet, if you approach the market with creativity and zeal, you can make the additional market pressure work to your benefit. By focusing on critical facets like cross-training employees, lean operating principles and product differentiation, you can build a profitable and sustainable cannabis dispensary by making small size a competitive advantage.

Using Spreadsheets as Your ERP? Your Supply Chain Could Take a Hit

By Tom Brennan
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The cannabis supply chain – from seed to sale – is rife with intricacies including regulations and compliance. It requires coordination from multiple vendors responsible for different aspects of the end product. And as the industry either grows or retracts, use of data is vital to right-size supply to demand, enhance operational efficiencies and boost cost effectiveness.

However, there’s an industry-wide, data-management vulnerability among many cannabis companies, and it’s this: many are using spreadsheets in different aspects of data collection, management and analysis. This becomes a shaky foundation on which to manage processes, especially for applications like quality management. And to be fair, it’s not just this industry, but arguably cannabusinesses have more on the line in light of the ever-changing regulatory environment.

Many cannabis companies have some systems in place for order processing, inventory management, production management and the like, but they often still use spreadsheets to fill the intelligence gaps among various systems that don’t talk to one another. Managing supplier quality often falls into one those gaps.

The Problem with Spreadsheets

Most businesspeople understand spreadsheets. They know how to build and use them. Spreadsheets are incredibly powerful tools that are used to run more business processes than perhaps any other software product in the world. When a cannabis business first starts out, spreadsheets offer an affordable data management capability. But there comes a time when the business will need a more sophisticated, end-to-end enterprise solution.

Consider a recent incident in which the use of spreadsheets went terribly wrong. The British Government recently misplaced nearly 16,000 COVID-19 test results due to an Excel spreadsheet error. As a result, potentially infectious people may not have been notified by contact tracers that they should self-quarantine.

Companies can outgrow spreadsheets quickly as their business grows

In the ERP space, spreadsheets have been an issue since the 90’s, but this recent incident serves as a reminder that an overreliance on spreadsheets is still alive and kicking. One of the problems is that spreadsheets are often pushed beyond their intended use. Microsoft Excel has become the software Swiss Army Knife. There’s a development environment inside the software, and the system is often used as a database, not just as a calculation engine.

Companies outgrow spreadsheets when the volume of data fields increase, multiple users need access to the data, iron-clad audit trails are needed and when processes become more complex.

There’s also a breaking point. Cannabis companies may enter a dangerous zone of “too many spreadsheets,” when data security and integrity are at risk. Interestingly enough, this also happens in large companies, as they often have a mish-mash of on-premises legacy systems, acquired systems and new cloud-based systems – and spreadsheets are then used as the data consolidation tool for all these applications.

Applicability to the Cannabis Supply Chain

Visibility into the cannabis supply chain requires detailed track and trace capabilities across many suppliers. Anything left out means guesswork and more opportunities for mistakes. In other words, cobbled-together spreadsheets are the last thing cannabis businesses should rely on. Aggregating data into a spreadsheet from various systems and paper-based processes invites errors and can result in insights that are weeks or months out of date. Worse yet, there’s no drilldown capability when questions arise and no easy roll-up of information for decision-making.

Modern cloud ERP software can integrate an entire supply chain with ease

When supply chain quality must be sustained, the role of a common and integrated cloud platform for quality and ERP cannot be understated. Such a platform can capture sales, operations, inventory and purchasing data, and also integrate with production and quality control. This makes your quality processes and data integral to ERP and eliminates the data fragmentation, control and auditability issues associated with spreadsheets. In addition, companies can leverage operational insights from data reporting and analytics to find areas where they can enhance productivity, optimize inventory, improve planning accuracy and build better forecasts.

Moving to the Cloud

Modern cloud ERP provides this type of seamless platform. It’s easier to implement and does not consume as many IT resources as traditional on-premise ERP systems. Better yet, the more recent versions of cloud ERP are built using low-code technology which enables business users to customize screens, modify workflow processes, build their own apps and embed AI without needing expensive IT consultants or waiting for busy IT staff.

In other words, the flexibility that’s been the lure of spreadsheets is now available in cloud ERP, but the system utilizes proverbial governance guardrails that keep business users from swerving off the road and completely wrecking the system. For example, templates for apps and workflows are provided as a starting point. Business rules and “drag and drop” customization capabilities offer guided options, clearly defining what can and cannot be changed.Rootstock will be presenting during the Cannabis Quality Virtual Conference episode, Supply Chain Quality, on October 27. Click here to learn more

And as a result, quality steps aren’t skipped; audit trails remain intact and data is protected with rock-solid security permissions and data backups. And unlike spreadsheets, new ERP systems are designed for multiple users and remote access via mobile devices. In short, with the latest generation of ERP, companies can leverage the best of both worlds – an end-to-end cloud platform that provides data integration across an organization’s operation and the flexibility and ease-of-use of spreadsheets.

Supply Chain Case in Point

One customer we worked with previously coordinated its supply chain via email and Excel spreadsheets. It cut and pasted requisitions into individual supplier spreadsheets and emailed those out, and it kept a master spreadsheet to keep track of all supplier performance. Team members had to sift through spreadsheet columns and rows to find information they needed.

Today with a cloud platform, the company built an online community so processes could be automated and conducted via real-time connection and communications. Another immediate benefit was the customized supply chain dashboard. All relevant data across their entire supply chain was displayed in one place and in a user-friendly manner.

The dashboard showed production forecasts over a certain period of time. The company could detect whether the supply chain was on track or having issues with certain suppliers. It could see planned requisitions and monitor them until fulfillment was complete. It could also monitor the performance of various suppliers, whether they had on-time deliveries or not – and trace back items received. The company essentially has a snapshot of the overall health of its supply chain and all the underlying activity.

Let’s face it. 2020 has been a difficult year, but perhaps it’s the year that companies finally forego spreadsheets and enlist an industrial-strength cloud platform.

How Barcode Labeling Improves Traceability & Security

By Travis Wayne
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One of the biggest challenges that cultivators, processors and distributors face in doing business is the requirement to track the product at every step in the production process, from seed to sale. When you add the wide range of label sizes and requirements across the supply chain, labeling can feel overwhelming. While business systems such as METRC, BioTrack, MJFreeway and others are key, integrating accurate and secure barcode labeling with those systems will streamline the end-to-end process while meeting traceability requirements. Here are some things to consider, no matter what role in the cannabis supply chain you play.

Cultivation: Where Tracking and Labeling Starts

Cultivation is where the tracking process begins – integrating barcode labeling METRC, BioTrack, MJ Freeway from the start will streamline the end-to-end process

It’s crucial to implement accurate labeling processes from the beginning, whether growing for a customer or your own vertically integrated operation. The cannabis industry is faced with strict labeling regulations for a variety of cannabis products. Start with a labeling system that can integrate with METRC, BioTrack, MJ Freeway or other seed to sale software solutions. Your barcode labeling solution should also include label approval requirements, so you have role-based access and transparency with label changes and print history in case of issues or recalls. Whatever cannabis labeling regulations your business faces, label design software helps you create compliant cannabis labels throughout the supply chain, from grower to consumer.

Radio Frequency Identification (RFID) Labeling

Select regulations require growers to leverage RFID technology to track the location of the plants in their grow houses. RFID technology also enables accurate real-time inventory analysis and helps reduce manual labor costs, as well as errors that can occur with manual counting. To accurately encode RFID tags with variable plant data, be sure you are using a barcode labeling system that can enable easy RFID tag encoding that integrates data from all your business systems. Fastening RFID tags to plants across your grow house floor enables quick and easy location tracking, and RFID reading removes the need for a manual line of sight and allows hundreds of tags to be read at the same time, speeding up shipping and receiving.

Lab Testing

After a plant is cultivated, a certain percentage is sent to a lab to be tested to ensure its proper strain, weight and compound makeup. After your product has been lab tested, leverage the data from your certificate of analysis to accurately display on your cannabis product labels, including:

  • Pass/fail chemical testing
  • Final date of testing & packaging
  • Identification of testing lab
  • Cannabinoid profile & potency levels
  • Efficiently display lab testing results on product labels with the use of a QR code for the consumer to review the independent lab’s certificate of analysis

Processing and Production: Tracking and Labeling After the Plant Has Been Harvested

A lot of information needs to go on a cannabis label. Whether you’re producing pre-rolls, packaged flower, edibles, beverages, topicals or cartridges, your labeling software must have the capability to create a wide variety of label sizes with barcodes that encode a large volume of data, while also being fully compliant and showing consumer appeal.

Your cannabis labeling software should do the following for you:

  • Support database integration to populate variable data from METRC, BioTrack, and other systems
  • Import high-resolution artwork and leverage with dynamic barcodes and variable data
  • Contain barcode creation wizards for 1D & 2D barcodes
  • Automate weigh & print
  • RGB/CMYK color matching
  • Feature secure label approval processes, label change tracking and print history
  • Offer WYSIWYG (What You See is What You Get) printing
  • Automatically trigger printing directly from scales and scanners when cannabis is weighed
Automatically integrating data with your barcode labeling software improves regulatory compliance, security and reduces manual processes that can lead to labeling errors

Integrate labeling with your seed to sale software solution to automatically trigger label printing by an action in your seed to sale system or by monitoring a database. By integrating your label printing system with your seed to sale traceability system, you can expect to minimize errors, increase print speeds and maximize your ROI. Your business system already holds the variable data such as product names, license number, batch or lot codes, allergens, net quantity, cannabis facts, warning statements and more. By systematically sending this data to the right label template at the right time, labeling becomes an efficient and cost-effective process.

Distribution: labeling for consumer and industry demands

The ability to manage and distribute inventory efficiently is critical in the cannabis market. Warehouses and distributors need to ensure proper storage, handling and traceability of product, from the warehouse to the truck.

Leverage your labeling software to easily create:

  • Packaging labels
  • Shipping labels
  • Case & pallet labels
  • Inventory labels

If you use the same data for your documents and labels, consider moving document printing into your label design software for greater efficiency. An advanced label creation and integration software enables label and document printing standardization by allowing multiple database records to be on one file. That means when new documents or labels come into your database, your software can seamlessly integrate.

Dispensaries can benefit from integrated seed to sale labeling for traceability, speed to market

Whether you’re a small outlet or a large dispensary, you benefit from integrated barcode labeling that starts from the beginning of the process. How? When barcode labeling software is integrated with seed to sale software, product is fully traced throughout the entire process, from tagging each plant at cultivation to identifying the consumer at point of sale, and accurately communicating that data back to METRC, BioTrack and other critical systems. Some dispensaries do package raw flower onsite, which many times means manually weighing, recording and entering the weight on the label, which is a time consuming and error-prone process. Integrating weigh and print functionality with barcode software enables dispensaries to use the action of weighing raw flower to automatically trigger the label print job. The variable weight is then accurately and automatically populated on cannabis flower package labels, creating an accurate and efficient on-demand labeling process for dispensaries. With efficient labeling processes, time spent creating, correcting, approving and printing labels will be reduced, getting product on the shelves faster.

8 Mistakes Businesses Make When Managing Product Labels: Part 1

By Rob Freeman
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Editor’s Note: This article contains the first four common labeling mistakes that businesses can make. Click here to view the next four common labeling mistakes


Whether you’re a small business owner or a production manager of a large manufacturer, if you’ve ever experienced problems with your product labels you know it can quickly turn into a serious issue until that problem is resolved. From the time it’s applied to your product all the way to the POS (Point of Sale), labels always seem to be the least significant part of the production process- until something goes wrong. And when it does go wrong, it can create major branding issues and cost your company tens of thousands of dollars due to hefty supply chain late penalties and/or even government fines.

This article aims to provide insight as to how a company like Label Solutions Inc. helps businesses and manufacturers create new labels for their products as well as what to look for should you experience label failure at your retail locations. Topics discussed in this article do not cover all possible issues, but these common mistakes will hopefully help you better understand how creating a product label works, and how to possibly prevent your own problems in the future.

Mistake #1: Not Understanding the Importance Between the “Construction” Versus the “Artwork & Compliance” of the Label

This may seem like common sense, but it is often overlooked. Especially when dealing with fast-track projects.

Construction of the Label is the material selected and production process to produce the label. When creating a new label from the ground up, it is important to factor in how your product will be produced, necessary shipping and supply chain needs, how it is stored in inventory and how it will be presented at the POS. Understanding what environments your product will be exposed to throughout its life cycle will give you an advantage when approving substrate material, inks, and the strength of adhesive that might be necessary for your application.

The Artwork & Compliance of the Label refers to the overall design of the label, artwork, customer messaging, bar codes and regulatory requirements you need to follow in order to avoid serious government fines that might relate to your industry (Referring to agencies such as OSHA, DOT, and the FDA).In most cases the construction of the label does not apply to the compliance of the label.

Most label providers do not have the in-house expertise to offer compliance assistance. Although it is still the manufacturer who is liable for all final artwork approvals on their product, label providers that do offer advisory services can help update label content when regulatory changes are enacted. This “safety net” can save your company from extra production costs and, potentially, excessive legal time and material costs. In short, you should always review final label artwork approvals with your compliance team and/or legal expert, but it never hurts to have a “safety net” to help eliminate unnecessary orders or production delays.

In most cases the construction of the label does not apply to the compliance of the label. An exception to this statement would be industries such as the electronics industry that use UL (Underwriter Laboratories) labels that must meet UL specifications and be produced under recognized UL files. In other words, the compliance of a UL label is the construction of the label.

Best Method Approach: An excellent example of companies that understand the difference between the Construction vs. Artwork & Compliance of the label would be the compressed gas industry. Gas suppliers and distributors require long term regulatory compliant labels on their cylinders and micro-bulk tanks. These gas tanks are used in a wide variety of industries such as for manufacturing, welding, medical procedures, and specialty gas mixes for the micro-electronics industry.

The compressed gas industry requires that their labels follow strict, up-to-date OHSA and DOT compliance requirements. As for the construction of the label, it is common practice that the label remains legible on the cylinder for an average of five years. The 5-year duration is due to the millions of tanks that are in circulation throughout the US and Canada. What’s more, each label is produced to adhere to the cylinder’s metal surface during extreme outdoor weather conditions such as fluctuating temperatures, freezing rain, high winds, and direct sunlight year-round.

Mistake #2: Applying Labels Incorrectly to Your Products

Whether the label is applied to the product surface by hand or automatically with a label applicator, the label itself may not be applied level or evenly. Besides this being a major branding issue, this could also affect how the bar codes are scanned and could eventually impact your delivery times while trying to correct a batch.

Best Method Approach: There are construction alternatives that you can choose from to potentially reduce the impact of incorrect label application. For example, products with certain label adhesives allow your production team to reposition the label within a few minutes before the tack completely sets to the surface. The type of surface (cardboard, metal, plastic, glass, etc.) and the type of adhesive will determine how much time your production team will have before the tack sets.

The best practice is to apply labels prior to filling the bottles and cans as opposed to filling first and then applying the label in your production line.A good example of this best practice can be seen in the beverage market. Whether the client produces a uniquely crafted beer, or a rare ingredient infused into a new health drink, labels that are auto-applied to bottles and cans will sometimes experience equipment tension issues that need to be recalibrated. Once labels are applied off-alignment, a delayed tack setting can allow the label to be quickly repositioned by hand when needed. The best practice is to apply labels prior to filling the bottles and cans as opposed to filling first and then applying the label in your production line. The reason, excess spillage from filling can interfere with most adhesives.

This same repositionable adhesive is excellent to keep in mind for large equipment production assembly lines that apply prime (branding) labels and warning labels by hand. Even with large wide-format labels, the adhesive tack can be formulated so your employees have a few minutes to adjust, straighten, and smooth away trapped air bubbles once it has been placed on the surface. Knowing you have this option can help reduce label inventory waste, additional production material wastes and avoid delaying production time. More importantly, this option keeps your brand and your warning/instructional labels looking fresh.

Mistake #3: Not Sharing Your Production Run Schedules with Your Label ProviderSupply chain management (SCM) models are excellent examples of the best approach.

Some of Label Solutions’ largest accounts have the most efficient real-time tracking supply chain models in North America, but even they cannot avoid sudden increased orders for their products stemming from high customer demand or similar issues. It is a good problem to have, but it is a problem, nonetheless. Manufacturers utilize supply chain management tools to notify their suppliers of their monthly order forecasts, which in turn helps suppliers manage their materials and deliveries more efficiently.

On the other side of the spectrum, when small businesses share their production schedules with a supplier it means that both parties (the manufacturer and label provider) understand when to expect higher or lower order quantities each month. Label providers should back date their label production schedules, so they have the materials available to handle your busier months while ensuring on-time deliveries.

Best Method Approach: Supply chain management (SCM) models are excellent examples of the best approach. Although SCM’s are designed for scalability and real-time tracking, the benefit to you also helps your label supplier. For example, our large retail and industrial manufacturing clients notify the Label Solutions team to produce their labels according to their Supply Chain portal demand schedules. This, in turn, allows label suppliers to allocate production time and materials more efficiently for your last-minute rush orders.

Smaller companies can take a much more simplified approach (without the SCM tracking) to help their suppliers manage their orders – even if they do not use supply chain management. A simple Excel report of production runs over a 12-month time frame is ideal. If your label provider does not already practice this or similar methodology, it might be time to start looking for a more proactive label provider. If you’re unsure you want to share your information, then you might consider requiring your label provider to sign an NDA (Non-disclosure Agreement).

Mistake #4: Not Accepting Alternative Sizes of the Label to Allow for Better Pricing

If your product needs a label with, for example, a dimension of 5.25 X 6.75 inches, there might be a much better price point offered to you if you’re open to switching to a slightly different dimension label of, say, 5 X 7 inches.  Obviously, you need to make sure the new dimension would fit your product(s) and work with your production line. But, if alternate dimensions are within the scope of the project, a modified SKU could potentially cut down on cost and production time.

Best Method Approach: You might not have the time or ability to change your label if you already market that product in retail stores. But, if you are changing your branding, creating a new style of label, or releasing a completely new product, this is the ideal time to consider implementing better continuity between your products. This could include elements such as matching colors and label/packaging design.

In addition to updating your SKU’s, this might also be an opportunity for your company to consolidate multiple products onto a universal label size. By applying the same sized labels to multiple SKU’s, you can increase efficiency regarding repeated label orders, especially for label printers that use digital printers. Combine this approach with your expected annual quantity estimates and you’ll be positioned for very efficient ordering options as your company grows.


Editor’s Note: We’ll cover the next four most common labeling mistakes in Part Two coming next week. Stay tuned for more!

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ERP’s Role in Ensuring Traceability & Compliance in the Cannabis Market

By Daniel Erickson
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Recent trends in the cannabis space and media headlines reveal the challenges and complexities of the evolving cannabis industry with regard to traceability and compliance. Keeping abreast of the evolving state of legislative requirements is complex and requires effective procedures to ensure your business will flourish. At the forefront is the need to provide complete seed-to-sale traceability from the cannabis plant to the consumer, increasing the demand for effective tracking and reporting technologies to assure cultivators, manufacturers, processors and dispensaries are able to meet regulatory compliance requirements. An enterprise resource planning (ERP) solution offers a business management solution designed to integrate all aspects from the greenhouse and growing to inventory, recipe/formulation, production, quality and sales, providing complete traceability to meet compliance regulations.

The main force driving cannabusinesses’ adoption of strict traceability and secure systems to monitor the growth, production and distribution of cannabis is the Cole Memorandum of 2013 issued by former US Deputy Attorney General James Cole. The document was designed to prevent the distribution of cannabis to minors, as well as prevent marijuana revenue from being used for criminal enterprises. Due to the non-legal status of cannabis on the federal level, the memo provides guidance for states whose voters have passed legislation permitting recreational or medical cannabis use. If states institute procedures for transparent inventory control and tracking documentation, the memo indicates that the federal government will refrain from interference and/or prosecution. Despite the Trump administration rescinding the memo in early 2018, companies have largely continued to follow its guidelines in an attempt to avoid targeted enforcement of federal law. Local government reporting is a primary reason for strict inventory control, necessitating reliable traceability documentation of the chain-of-custody. 

Process metrics within an ERP solution are essential in providing the accountability necessary to meet required cannabis compliance initiatives. With a centralized, streamlined and secure system, each process becomes documented and repeatable – enabling best practices to provide an audit trail for accountability in all cannabis activities. Whether cultivating, extracting, manufacturing or dispensing cannabis, an ERP’s functionality assists with compliance demands to manage and support traceability and other state-level requirements.

An ERP solution solves the traceability and compliance issues faced by the industry by providing inventory control management and best practices that automates track and trace record keeping from seed to consumer. Growers are also implementing cultivation management solutions within their ERP and highly secure plant identification methods to mobilize greenhouse and inventory to support real-time tracking. Monitoring the loss of inventory due to damage, shrinkage, accidentally or purposeful destruction is efficiently documented to assure that inventory is accounted for. Similar to other process manufacturing industries, it is possible to produce tainted or unsafe products, therefore an ERP solution that supports product recall capabilities is fundamental. With a centralized framework for forward and backward lot, serial and plant ID tracking, the solution streamlines supply chain and inventory transactions to further ensure compliance-driven track and trace record keeping is met.

Local government reporting is a primary reason for strict inventory control, necessitating reliable traceability documentation of the chain-of-custody. Data regarding inventory audit and inspection details, complete with any discrepancies, must be reported to a states’ seed-to-sale tracking system to conform with legal requirements. An ERP utilizes cGMP best practices and reporting as safeguards to keep your company from violating compliance regulations. Failure to complete audits and meet reporting guidelines can be detrimental to your bottom line and lead to criminal penalties or a loss of license from a variety of entities including state regulators, auditors and law enforcement agencies. A comprehensive ERP solution integrates with the state-administered traceability systems more easily and reliably as compared to manual or stand-alone systems – saving time, money and detriment resulting from non-compliance.

Similar to other food and beverage manufacturers, the growing market for cannabis edibles can benefit from employing an ERP system to handle compliance with food safety initiatives – encompassing current and future requirements. Producers of cannabis-infused products for recreational and medicinal use are pursuing Global Food Safety Initiative (GFSI) certification, employing food safety professionals and implementing comprehensive food safety practices–taking advantage of ERP functionality and processes currently in place in similarly FDA regulated industries.

As legalization continues and reporting regulations standardize, dynamic cannabis ERP solutions for growers, processors and dispensaries will evolve to meet the demands and allow for operations to grow profitably.In addition to lot, serial and plant ID tracking, tracing a product back to the strain is equally important. An ERP can efficiently trace a cannabis strain from seedling through the final product, monitoring its genealogy, ongoing clone potency, CBD and THC content ratios and other attributes. The health, weight and required growing conditions of each individual plant or group of plants in the growing stages may be recorded throughout the plant’s lifecycle. In addition, unique plant identification regarding the performance of a particular strain or variety, how it was received by the market and other critical elements are tracked within ERP system. This tracking of particular strains assists with compliance-focused labeling and determining the specific market for selling and distribution of cannabis products.

Collecting, maintaining and accessing traceability and compliance data in a centralized ERP system is significant, but ensuring that information is safe from theft or corruption is imperative as well. An ERP solution with a secure platform that employs automated backups and redundancy plans is essential as it uses best practices to ensure proper procedures are followed within the company. User-based role permissions provide secure accessibility restricted to those with proper authorization. This level of security allows for monitoring and recording of processes and transactions throughout the growing stages, production and distribution; ensuring accountability and proper procedures are being followed. Investing in an ERP solution that implements this level of security aids companies in their data assurance measures and provides proper audit trails to meet regulations.

In this ever-changing industry, regulatory compliance is being met by cannabusinesses through the implementation of an ERP solution designed for the cannabis industry. Industry-specific ERP provides functionality to manage critical business metrics, inventory control, local and state reporting and record keeping, and data security ensuring complete seed-to-sale traceability while offering an integrated business management solution that supports growth and competitive advantage in the marketplace. As legalization continues and reporting regulations standardize, dynamic cannabis ERP solutions for growers, processors and dispensaries will evolve to meet the demands and allow for operations to grow profitably.

Logistics and Supply Chain Management in California

By Aaron G. Biros
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Just a couple weeks away, the California Cannabis Business Conference, taking place in Anaheim, CA October 22-23, will host a series of panel discussions where attendees can expect to learn from industry leaders on a variety of topics. As businesses in the state adjust to new regulations and the market matures, one particular topic seems to highlight a challenging new space: distribution.

Track 1 at the CA Cannabis Business Conference, Distribution, Retail and Delivery, will begin early afternoon on Monday at the show, where a panel discussion titled State of Cannabis Distribution: Scaling Cannabis Distribution and Expectations of a Distributor, will tackle a range of issues involving logistics and supply chain management in California’s cannabis industry.

Michael Wheeler, vice president of Policy Initiatives at Flow Kana, will host the panel, joined by Chris Coulombe, CEO of Pacific Expeditors, Jesse Parenti, programs director of Nine Point Strategies and Brian Roth, vice president of sales at KUDU Technologies. According to the agenda, the session will cover inventory management, shipping and transport, managing product data, order fulfillment, manifest creation and reporting on it all. Michael Wheeler says regulatory compliance is one issue they plan on discussing. “Currently the biggest pressure on compliance is the desire by some operators to live under the proposed regulations, instead of the current emergency regulations,” says Wheeler. “Add to this recently signed legislation and we have lots of opportunistic actions each with their own perception of compliance.”

Another important topic they plan on discussing is driver training and hiring practices. According to Chris Coulombe, drivers are one of the top two most important customer-facing teams in the organization. “Between the sales team and the fleet operation, drivers represent half of the face of your company,” says Coulombe. “Much like the sales team, they interface with your retail partners directly, and subsequently provide a sizable portion of the foundation that retailers will use to judge your company’s competency and efficiency.”

Chris Coulombe, CEO of Pacific Expeditors
Chris Coulombe, CEO of Pacific Expeditors

When hiring new drivers, Coulombe recommends the standard background and driver record checks, but urges looking for experience in sales and driving as well. “Find those that have leadership experience and are comfortable operating in quasi-structured environments,” says Coulombe. “To that end, we seek solution oriented candidates that are personable, experienced in troubleshooting on their feet, and understand how to operate inside the structure of an organization.”

Coulombe also emphasizes the importance of driver training in any distribution company. “We built our driver training from scratch based on collective experiences from the military,” says Coulombe. “However, creating this from scratch is not necessary at this point, some insurance companies, such as our broker, Vantreo, provide in house driver training and certification solutions as a risk mitigation measure for companies that they represent. We recommend speaking with your insurance company to find what packages they have available.” Proper training for your drivers can help increase efficiency in operations, decrease maintenance and insurance costs and provide for better employee engagement. Coulombe also says many insurance companies have standard operating procedures for drivers to help supplement your company’s protocols.

Chris Coulombe and the other panelists will dive much deeper into this issue and other supply chain topics at the upcoming California Cannabis Business Conference, taking place in Anaheim, CA October 22-23.