How can cannabis companies survive supply chain disruptions?
Remember when you could walk into the grocery store and buy whatever you wanted? The shelves are beautifully displayed – if the store doesn’t have one, you can order online and wait for two-day delivery.
It was a luxury many took for granted until the pandemic brought the illusion of abundance to an abrupt end. Supply chain shortages are shaking up industries from auto parts to cannabis.
These shortages are dire for consumers, but downright disaster for business owners. Look at any industry right now and you’ll see the impact of pandemic shutdowns, labor shortages, raw material shortages, and shipping delays.
Affect every industry
Soaring plastic prices are challenging several departments. United Solutions President David Reilly told Reuters His plastics company is being crushed by resin prices. This is costly news for cannabis packaging companies.
He estimates that prices for certain types of resins have risen 100 percent over the past year. Before the pandemic, Riley would have sourced cheaper materials overseas, but shipping delays added to shipping costs.
“Currently, North American producers will not face stiff competition if container prices come down,” Reilly said.
Some companies have even reduced orders to avoid disappointing customers with delays.
Tracee McAfee, CEO of cannabis technology company Cryo Cure, said they were scaling up but were reluctant to take too many orders.
“We have enough supply chain issues right now. Believe it or not, something like a super easy part that takes a day or two now takes two months. It’s very frustrating,” McAfee said.
She also sees the impact of her manufacturing partners.
“Even our manufacturers say, ‘I can’t even buy a wire brush for my polisher.’ The simplest things, like caulk, you can’t find locally.”
Vaping companies were hit the hardest in the early months of the pandemic. The cartridges are mostly made in China, which closed many factories during the initial lockdown.
Now, cannabis tech companies are struggling to buy computer chips that have taken nearly a year to receive new orders. Traffic is one of the factors of delays.
The shortage of shipping containers began nearly a year ago as consumers in Europe and the US began buying in bulk online.
The desire to avoid face-to-face contact and stock up on extra supplies has led to a flood of shipments from Asia. Empty containers stay in port for weeks or more when cargo ships are unloaded.
Slow ports are filled with empty containers because shipping companies are too busy to retrieve them, while busy ports are severely lacking in labor, with ships circling for weeks waiting to unload.
Shipping rates from Asia to the U.S. are five times higher than a year earlier, according to Freightos, a digital booking platform for international shipping.
Shipping rates from Asia to Europe are eight times the average.
Anomalies such as the Ever Given cargo ship blocking the Suez Canal have added to the chaos.
In an interview with Channel 10 News in Ohio, Paul Hong, a professor of global supply chain management at the University of Toledo, noted that $10 billion in trade flows through the canal every day.
Every hour the canal is blocked costs the global economy an estimated $416 million.
Unusual weather events further complicate matters. Massive flooding has caused delays around the world. In the United States, Hurricane Ida suspended all shipments through the Port of New Orleans.
Liz Geiselman, Chief Brand Officer, 710 Spirits Extract MJBizDaily Her company in Golden, Colorado, is also feeling the effects hundreds of miles away.
“We’re seeing huge logistical issues with freight and shipping. At this point, we’re close to panic,” Geiselman said.
Natural disasters are changing the routes of trucks and drivers, or causing them to carry relief supplies instead of their normal cargo. These same factors are disrupting the supply of oil and gas, causing fuel prices to rise.
Lamenting lack of labor
Skilled and unskilled labor is in short supply. A shortage of factory workers can lead to a cascade of supply problems, compounded by a lack of truck drivers to move goods from factories to distribution centers.
Who works in the warehouse to unload trucks? More importantly, where are the retail workers and installers needed to get the goods to the customer?
Bill Conerly, Senior Economics Writer Forbes This issue was explored in a recent article, “Labor Shortages Are the Cause of Supply Chain Disruptions.”
He said many felt that companies that couldn’t find workers were not offering enough compensation to attract new talent. “Today’s circumstances do not justify such suspicions,” Connery said.
Companies offer higher salaries but receive few applicants. Many businesses are reluctant to pass these costs on to their customers.
“A given company may be able to raise its wages high enough to attract workers from other businesses, but it’s not an economy-wide solution if the prices customers pay don’t rise substantially,” Connelly said.
“We’ve seen some inflation, but not enough – yet – to justify significant wage increases.”
Many in the cannabis space are looking for local partners with different logistical issues than overseas or multinational suppliers.
It’s also wise to have multiple suppliers for the same supplies; you have other options if you’re affected by shipping or labor issues.
fleeta technology company that builds software for delivery businesses, has an up-close look at the disruptions impacting the cannabis space.
“Going forward, operators need to build a resilient supply chain that not only relies on the choice of one region, but also takes into account potential future disruptions,” the company said in a recent statement.
Onfleet advises retailers to ask their partners detailed questions, such as where suppliers source materials, what setbacks they have seen during the pandemic, and how they have dealt with supply chain disruptions in the past.
While this is a tough time for business owners around the world, these shortages are also building resilience for surviving companies.
As unpredictable weather patterns become more frequent, being resourceful in the face of adversity will be a near prerequisite for maintaining business.
“It’s very challenging in manufacturing right now. We may have chosen the worst period in manufacturing history to get into it, but I feel like if we can get through it — we’ll be better off in the future,” McAfee said.
Article first shared in the Fall 2021 issue of Cannabis & Tech Today.read the whole question here.