Tag Archives: lean

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.

Operational Inefficiencies in Commercial Cannabis Cultivation

By Drew Plebani
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From the perspective of sustainable cannabis cultivation models, it seems clear that outside of the particular cultivation methodology adopted, that operational efficiency and the implementation of lean manufacturing principles will be necessary for successful and truly “sustainable” businesses, in the current, ever growing, cannabis space.

Implementing lean manufacturing principles as an integral part of the cannabis cultivation facility just makes sense- it is a manufacturing operation after all. From a lean perspective, doing away with the non-value-added costs in the supply chain and production model are quite important.

Let’s look at this case study as evidence for the necessity of operational efficiency:

A 300-light flowering, indoor cultivation facility in Colorado.

The system was purchased with ongoing pest/disease issues, recent updates to Colorado’s approved pesticide list, had prompted the implementation of an updated integrated pest management (IPM) program, which had been moderately successful in developing an albeit short-term solution to keeping ongoing root aphids, powdery mildew, and botrytis, to name a few, at bay.

This existing facility was producing roughly 60 pounds of trimmed cannabis per week, equivalent to almost $6M annual gross, however they were losing a percentage of their yields to product that did not pass Colorado’s contaminant testing requirements.

It is important to note that any deviation from the existing manufacturing schedule and system would create a change to the potential productivity of the system, for better or worse.

At the most basic level, one would hope that a new operator taking over an existing facility would analyze the system and implement incremental or perhaps major changes to create more efficient and profitable outcomes. That being said, currently the average grower likely doesn’t have much understanding of the lean manufacturing process. That will undoubtedly change.

When we look at basic manufacturing facility operations, on an annual gross potential basis, each daily task not completed on the existing manufacturing timeline is, at least, a 0.3% (1/365) loss in potential productivity. In monetary terms, for this particular facility, each 0.3% equates to a potential $18,000 in lost productivity.

The information that follows is taken from observations during the first week of this facility ownership transition and below is a generalized outline representing just one aspect of the operational inefficiencies (created or existing) that were observed :

  • Plant group A put into flowering 4 days behind schedule (4 days x 0.3%) =1.2%
  • Plant group B transplanted 3 days behind =0.9%
  • Plant group C transplanted 7 days behind =2.1%
  • Plant group D (clones) taken 7 days behind =2.1%
  • IPM applications not completed for 7+ days

That equals a 6.3% loss in potential annual productivity, which translates into a rough estimate of up to $378,000 in lost revenue.

Changes to the nutrient program in the midst of the plant’s life cycle had created nutrient deficient plants in all stages of vegetative and flowering growth, coupled with changes to the existing IPM program, all add to the potential losses incurred. Deviations in the plant nutrition program and IPM scheduling are hard to quantify mid-cycle, but will certainly be quantifiable when the hard numbers come home to roost.

These inefficiencies, once compounded, could potentially equal more than a 20% loss in potential productivity during the subsequent 3.5 month plant cycle. The current 60 pounds-per-week would likely be reduced for the next 2 months, down to roughly 50 pounds, or even much less, per-week. This could become a loss upwards of $500,000 in annual potential revenue in the first quarter of operation alone.

These seemingly small and incremental delays in the plant production cycle are all greatly compounded. The end result is that each subsequent cycle of plants is slightly smaller due to delays in transplanting and less days at maximized vegetative growth, etc. Undoubtedly, the cumulative effect of these operational inefficiencies creates a significant drop in the existing level of productivity, with the end result being a significant, undesired loss of revenue.

The sum of the lessons learned from this cultivation facility, is this: a sustainable operation, in the most pragmatic sense, is an efficient one both in terms of productivity and in terms of the carbon footprint and waste generated. The more streamlined and successful the operations are, the greater likelihood of success. Perhaps all of this is to say don’t forget about all the little parts that make up the whole, and strive to create a work environment/corporate culture that empowers your employees, your managers and all involved to participate and contribute to the process of improving the operations for mutual benefit.

Lessons learned from the aerospace manufacturing industry: Even the smallest zip tie on a spaceship matters! Some food for thought: If it’s truly beneficial it should stick around… If it is beneficial and it’s not sticking around, then there are limiting factors in the system that need to be addressed.