Today’s cannabis manufacturing market is digitally driven and ever-competitive. Where cost and just-in-time manufacturing used to be the primary drivers of supply chain functions, in a post-pandemic environment, growing cannabis companies across the board are finding ways to focus on a broader array of factors beyond cost.
If your supply chain model is too cost-centric, now is the time to move to one that remains agile and connected across an entire organization. After all, it is possible to have a supply chain model that thrives despite the changing customer needs and market trends.
Here is a quick outline of how and why your cost-centric model will no longer allow you to compete in today’s market.
Limitations of the Cost-Centric Approach
Before the pandemic, cannabis process manufacturing companies flourished on creating and maintaining high-quality supplier relationships that were equally cost-effective and dependable. As a result, most process manufacturing companies sourced their products from international markets like China, where raw materials and labor remained cheap.
But because of the quarantine measures, most of these trade routes shut down entirely while the rest slowed production. As such, meeting customer demand was no longer dependent on the cost of raw materials or production. Instead, process manufacturing companies started to look at available options elsewhere.
While there are domestic cannabis suppliers in the United States, the legislation and regulations in most states provide that only a few American facilities are willing to produce vaping hardware and packaging for cannabis products.
We all know the demand for cannabis products increased significantly during the pandemic. At the same time, the supply chain in Wuhan through China was experiencing issues because of factory closures, which meant cannabis operators had to move quickly to source produce from Mexico and India to fill the shortages.
This shift meant that:
- Process manufacturers started to rely on new and unvetted suppliers
- The cost of raw materials was no longer a primary concern.
- What mattered most was meeting customer demand
- Shaky supply chains put customer relationships in jeopardy, risking revenue and ROI for cannabis manufacturers
In a word, the cost-centric supply chain model was no longer sustainable in a volatile market where the supply chain shifted from one moment to the next. Cannabis process manufacturers needed to change strategy fast and efficiently. This transition is where the risk-centric approach comes in.
Who Needs A Risk-Centric Approach To Supply Chain?
Every cannabis process manufacturing company should aim for a model that increases the supply chain’s resilience and agility without compromising the quality of ingredients. This strategy is known as the risk-centric approach to the supply chain.
Sure, the cost of raw materials for cannabis manufacturing companies will always remain significant factors to the supply chain. Nonetheless, your supply chain model should be strong enough to handle any market disruptions.
This means identifying the risk areas in your supply chain and implementing strategies that mitigate those risks. Instead of relying on one supply source, start cultivating relationships with supplies from different regions in the world.
The cannabis market continues to expand in the U.S, which means, finding high-quality domestic cannabis suppliers is not as challenging as it was pre-pandemic. For those looking for good alternatives to China, try Mexico, Japan, Taiwan, and India.
Don’t forget to look for local suppliers as well.
A domestic supply chain would mean reducing your carbon footprint. Another option is to consider expanding your warehouse and inventory by shifting from a just-in-time model to a just-in-case supply chain model. While this demands an extra cost, it will be a safe cushion when the supply chain faces unexpected disruptions.
The Goal is Resilience, Agility, and Flexibility
The only way to maintain a healthy supply chain performance for your process manufacturing company is to adopt strategies that enhance your resilience, agility, and flexibility. An excellent place to start is to adopt a cannabis ERP solution that offers you visibility into the process manufacturing market.
Visibility gives real-time insight into the influential factors in your market and supply chain. As a result, you can easily and quickly prioritize and manage costs, inventory, and demand despite the market conditions. In addition, an excellent process manufacturing ERP solution will help you determine your customer needs and create a benchmark of trusted suppliers for your supply chain.