How to solve a problem like the cannabis supply chain

“The black market had many drawbacks but it did a better job of balancing supply and demand nationally than the regulated market has so far.” This line from the Stamford Advocate resonated with me today as I was digesting the day’s feed of cannabis news. As we continue to adjust to an over-supplied Oregon market sitting on a million pounds of unsold inventory, it’s easy to reminisce about what we lost in the transition to recreational cannabis markets.

When Oregon’s early recreational sales began in October 2015, the old guard of OMMP producers gained a wider customer base overnight, prices rose, and even the outdoor bumper crop didn’t slow down sales for over a year. At its height, Oregon’s OMMP program had around 70,000 card holders. Recreational sales opened up the approximately 16% of the state’s population that previously qualified as illicit users. With that barrier to consumption gone, the future looked bright. And green.

We all know the rest of the story. Out-of-state money and low barriers to entry crushed the mom-and-pop cannabis producers as Oregon quickly produced more than it could consume on its own. Market efficiency runs into a grinding halt when inventory exceeds consumption.

While the One Fix Campaign and Senate Bill 582 aim to create a path for interstate cannabis sales, it’s a ways off from reality. Meanwhile, we also have internal supply chain problems to solve as an industry within Oregon. As the Stamford Advocate article rightly points out, the deluge of producers with excess inventory is overwhelming retail intake managers.

Online marketplaces and software solutions are enticing, but they have limitations because of the way cannabis is bought and sold in business-to-business transactions. At the low end, cheap cannabis is a commodity. Outdoor flower, b-buds, and byproduct can be bought in bulk by wholesalers and processors sight unseen if the price is right. Quality material, though, the so-called “craft cannabis” that Oregon prides itself on (and which we at the Boring Weed Co. specialize in) still needs to pass the eye, nose, and taste test from our retail partners. This is especially the case when there is so much product available on the market. Every October, the state’s outdoor producers harvest approximately what the state’s indoor market harvests in a year.

Another problem is integration with the state-mandated inventory tracking system. Simply put, Metrc’s API makes it hard for third-party software providers to integrate properly, which means there is always duplicate entry. That alone is a deterrent to adopting new software solutions. Even if the double entry problem could be solved, getting to a critical mass on these platforms would require some consensus between the state’s 600 retailers and 2000 total licensees combined, each with different point-of-sale systems, accounting software, and procedures they use in conjunction with Metrc.

These are all growing pains for an industry that is really in its infancy. As the market stabilizes with fewer new entrants, less outdoor production from farms that transition to hemp, and the possibility of interstate sales, things will run smoother. Better supply chain management and software solutions will eventually be part of that transition. But until the industry arrives at a consensus, cold calling, direct message, and email remain the standard solicitation methods to unload a million pounds of inventory.