Author Archives: thedoctor

Supply Chain & Distribution in the Age of Legalized Marijuana

Now, some readers will feel this topic is inappropriate for Sourcing Innovation. However, regardless of your personal view on the subject, it is a valid one given the continuing legalization of Marijuana around the world, and, more importantly, the fact it has medical uses. If you are personally against it, you can avoid the industry. But a healthcare provider cannot, especially once a licensed medical doctor has prescribed the drug.

As a result, today we welcome a guest post from Brian Seipel a Procurement Consultant at Source One Management Services focused on helping corporations understand their spend profile and develop actionable strategies for cost reduction and supplier relationship management. Brian has a lot of real-world project experience in supply chain distribution, and brings some unique insight on the topic.

(Dear reader: I need you to know how hard it was to resist writing a pot-infused pun into my headline.)

There are a lot of headaches attached to supply chain and distribution, faced by distributors and their clients alike. I can list a few, not that I likely need to – most readers will be familiar with them:

  • Regulations are, bluntly, a pain in the ass. This one doesn’t need much of an explanation. From city to city, state to state, country to country, there are a lot of rules to follow, and a lot of frustration for anyone who doesn’t dot the right “I’s” or cross the right “T’s.” If compliance is key, then regulators must have some pretty heavy doors.
  • Supply chains are often pretty inflexible. Any hiccups along the way can be devastating and, while good planning can ease the pain, nothing is sure fire. Want an easy example? For those in the north, think back to the last bad winter you faced. Any seafaring shippers can point to the last hurricane that graced their shipping lanes. Probably enough said.
  • Costs are rising. Fuel for trucks and wages for their drivers have frequently been a concern. Adding some strategic creativity to your supply chain can help stretch dollars, but the rubber can’t meet the road without expensive fuel to get it there. And a driver, of course, to keep it there.
  • Forecasting can be tricky, and demand can outstrip supply. Predicting demand (and predicting the uncertainty in that prediction) are crucial to gaining efficiencies in your supply chain. It can also be very difficult, leaving many to base decisions on assumptions and gut checks. One known factor at play here is the fact that demand far outstrips supply. There’s a shortage of truck drivers out there, and that isn’t good for anyone trying to move shipments.

Again, I likely didn’t need to remind any of you of these and many other challenges your supply chain faces. One thing you blessedly don’t need to worry about, however, is committing a felony just for shipping product.

In the Age of Legalized Pot, Distribution will be … Tricky

Sorry to bury the lead, there. However, I think it was important to do so. Given all those issues above that we all face, at least we can keep in mind that “someone out there has it a lot worse.”

You think regulations on your end are bad? States can barely get their own minds made up about the legal status of Marijuana, and that’s not even considering the fact that the stuff is still illegal on a federal level, regardless of what the states decide. That brings the regulatory landscape to a whole new level. On that note, what do you think the legal ambiguity means to an already fragile supply chain? Distributors of marijuana face a level of uncertainty not seen elsewhere.

If America has a truck driver shortage, imagine adding felony charges, stiff fines, and jail time into the equations – you can’t fault the labor pool for being cautious to enter this new arena. And even if you solve these supply chain risks in the here and now, predicting the demand of a product that is legal today but potentially a crime again tomorrow would make the best soothsayer’s head spin.

Still, this is an emerging market that has caught everyone’s attention. As Procurement pros with an eye on industry news and trends, this growing industry is, at a minimum, an interesting one to keep an eye on. So let’s dig a little further.

Weed Distribution: A Brief Review

To take a closer look, let’s travel to California’s sunny coastlines. It’s weird to think of the marijuana growers and dispensaries dotting the golden state as mon-and-pop outfits. “Not my parents,” right? Still, the term applies. Most don’t have the resources nor inclination to own most of the vertical elements of marijuana industry. Many dispensaries are happy to leave the cultivation and processing of marijuana plants to growers and act simply as the retail operation. Many growers simply want to focus on producing a high quality product, and have little time for the retail side of it all.

On one hand, it makes a lot of sense for the two to meet in the middle, forming partnerships. On the other, however, it can be painful for an organization on one side to deal with a dozen small outfits on the other. Not to mention the fact that some of those small outfits may land on the weaker end of the business acumen continuum. Besides, neither end necessarily wants to deal with the tax and regulatory management or logistics of the industry.

Enter California’s Cannabis Distributor License. Organizations under this license take up this relationship, and work with growers and dispensers to not only manage the logistics of the industry, but also myriad steps along the way – before handling the actual shipments, these organizations may also take part in the processing and packaging of the products, performing required quality control measures, and deal with the regulatory hassles that come with the territory. Just as importantly, growers and dispensaries can get a range of products from a much smaller, more reputable source.

This is a win for all parties involved. So, what is the issue?

For one thing, the California supply chain is being disrupted by a – very relatable for the rest of us – greater demand for distribution than there is right now. Plenty of dispensaries stocked up on product early on to ward against disruption, but there simply aren’t enough operators being granted licenses to keep the pipeline full.

This shortage isn’t the only concern. Plenty of attention is paid to high tax rate on one side and a banking industry that refuses to get involved in an industry still illegal on a federal level on the other. Both factors are squeezing the industry from a financial perspective.

A Look towards the Future

You may be asking, “won’t all of this get better as more states legalize?” This may be true over a long term. However, the federal government isn’t budging so far, which means every state is an island in terms of marijuana distribution. It wouldn’t matter if two neighboring states were both weed-friendly. That adjacency won’t count for anything, as state borders fall under federal jurisdiction. Hell, don’t even think about getting near some state borders as a cannabis distributor – simply approaching a border crossing zone between countries could land you in hot water, even if the distribution of marijuana within that border state is legal.

So let’s look towards what that longer future could look like. The biggest “if” factor out there is regulatory. Either states get their own ducks in a row and the federal government follows suit… or they don’t.

If they do, the cannabis distribution market could be a huge industry (we already see it growing quickly, albeit not quickly enough, in California). Limit the number of hoops to jump through and clear the way for distribution from a legal standpoint, and watch an industry thrive. If they don’t, however, I can see a slide back into the black market, regardless of the legality on a per-state basis. The lack of regulation and taxation could be too much of a draw for some to ignore.

And that would be a shame – from a quality and safety standpoint for the consumer and a revenue standpoint for the state, there are a lot of reasons advocates across the industry and interested in its success.

Thanks, Brian.

Dreamers …

We’re all dreamers on the yellow brick road
but on schemers the hand of fate has bestowed
wealth and power that’s the envy of kings
zero hour, the toll bell always rings

So we wait for the day to come
when expression can be free and clear
and debate will not be challenged
as transgression against the overseer

As we are dreamers, the keepers of hope
steadfast believers, we walk a tightrope
through fiction and fact, we balance the line
and hold our heads high for a better time

There once was a time when the jester was no fool
the ear of the king, he influenced the king’s rule
with his artistry, he would inspire a gentle hand
and his humbleness would leave no reprimand

and the architect, he knew the golden rule
strive for majesty, inspire and don’t befool
inspire all with awe, and growth will be obtained
as common minds will soar, for it is preordained

So we are dreamers, the keepers of hope
steadfast believers, we walk a tightrope
through fiction and fact, we balance the line
and hold our heads high for a better time

But the pharaohs of fallow now rule from the sand
since the dust of the desert now covers the land
they traded our passion for money and fame
and gave up our vision in their jealous game

We want to build up, while our leaders tear down
we want to share wealth, while our leaders shakedown
we want to inspire, but they make us digress
we aim for progress, but they want to regress

But we are dreamers, the keepers of hope
steadfast believers, we walk a tightrope
through fiction and fact, we balance the line
and hold our heads high for the better times

So we wait for the day, when we can unlock
our freedom to share, turn back the clock
bring back the republic, share in the vote
and all work together, to strike a new note

Will the age of machine enable the day
where we can move forward, dispatch the old ways
and share in the knowledge, engage in the art
and set free our spirit, in a new start

’cause we are dreamers, the keepers of hope
steadfast believers, we walk a tightrope
through fiction and fact, we balance the line
and hold our heads high for the better times

Maybe it will. Distributed Computing. Secure Identification. AI. Blockchain.

Welcome to the New World!
The New Community-Written AI-scored BlockChain Anthem
by Taryn Southern

2020 Is Fast Approaching — Better Get on Your Tech Capabilities Part IV

Last week we asked what would you accomplish by 2020, which is less than 16 months away. Between 2008 and 2013, all the big analyst firms and thought leadership vendors painted a glorious picture of where Procurement would be by 2020 — a picture which isn’t even close to being a reality. Simply put, the vendors haven’t advanced technology to the point where it was supposed to be and, as a result, while you got more integrated, streamlined, easier to use platforms with friendlier, and sometimes even mobile, interfaces, you haven’t really obtained new functionality.

By 2020, our software was supposed to be smart. It was supposed to be doing most of our work for us. Tactical procurement was supposed to be a thing of the past. Paperwork was supposed to be over and done with. Data processing and verification automated. And Sourcing was supposed to be smart … not just more functional. But that’s what your average S2P platform is. More functional. All of the great advances we were supposed to have in the average platform aren’t there.

But, fortunately, if you’ll step outside the S2P marketplace and look at the best of breed players, across the entire space, you’ll see that most of the functionality you were promised is there, just in bits and pieces across a dozen or so best-of-breed players. So in addition to:

  • Invoice Automation
  • Supplier Identification
  • Automated Supplier Discovery
  • RFX Process Automation
  • Should Cost Modelling
  • Guided Workflows
  • Automated Spot Buys

What else is there?

Cognitive Buying

This was the holy grail we were promised, but not the holy grail we were delivered. Instead of AI helping us buy better, we are running on glorified decades old tech that just helps out collect data and do tactical paperwork processing faster, but we still have to do all the data collection and review all the paperwork. Even dumb tactical work hasn’t been eliminated in the average platform. It’s no wonder that most people don’t even know what cognitive is.

But there are so many low-value, minimally strategic purchases that need to be properly sourced, and which take up way too much buyer time for the value that is delivered. But if a sourcing system could not only automate most of the work, but make rather obvious decisions based on simple process rules, that could eliminate most of the manual effort. A buyer would only have to review the suggested decisions at key points where there is a shadow of a doubt.

And even then, if there is a high probability a buyer would make a certain decision, why shouldn’t the system make them automatically if the dollar value is low enough, the strategic importance is low enough, or the risk is low enough that the decision doesn’t really need to be analyzed when the confidence factor is high enough.

So how much would you really need to make this happen? Not as much as you think. The core capabilities are:

  • Rules-based workflow
    that allows the sourcing process to be well defined with gated decision-based branching points
  • Should-Cost Models
    that allows the program to compute precisely what the average / expected market cost for the product / service should be
  • Risk Models
    that capture both a product-based risk profile and a supplier-based risk profile
  • Market-Data Feeds
    that contain current raw-material, energy, labour, and average mark-ups for the industry
  • RPA
    that can automate execution of the rules-based workflow based upon automatically derived (and human initiated) decisions
  • Behavioural Modelling
    that can monitor human decisions and actions and learn what a buyer would do under atypical or borderline circumstances
  • Machine Learning
    that will take the outputs of behavioural modelling and human decisions and derive modified rule-based workflows, risk models, and automations to allow more fully automated processes in the future

And if you’ve been following along, you’ll know that there are a number of new best-of-breed systems out there with much of this capability, albeit most providers don’t have this in one system. However, as per yesterday’s post, Xeeva is pretty close. With the exception of behavioural modelling, Xeeva is pretty much there.

But if you happen to be a lucky buyer in electronics, you have a solution that meets all the criteria that goes by the name of LevaData. It’s one of the handful of providers trying to take Sourcing where it needs to be. Like every solution provider mentioned in these posts, they’re another company to keep an eye on.

And this is where Sourcing should be. So why isn’t it?