The Grass Is Greener on The Other Side: Logistics in Cannabis
The cannabis industry is booming, and it shows no signs of slowing down. In fact, it’s currently the fastest growing industry in the United States. There’s even a term to describe the remarkable growth of the cannabis industry: The Green Rush.
Like the Gold Rush that inspired its name, the Green Rush started in California when the state legalized medicinal marijuana in 1996. But, it took a bit of time for the Green Rush to really pick up steam; it didn’t begin in earnest until 2012 when Washington and Colorado both authorized the recreational use of marijuana.
Since then, its growth has been unprecedented. In 2020 alone, legal sales of cannabis products reached 17.5 billion dollars, a 46% increase from the year prior. But the exponential growth rate has been somewhat stymied by a series of hurdles facing the cannabis industry –– some of them due to logistics issues. Let’s take a closer look at the challenges facing the cannabis industry and what’s being done to solve them.
Challenges Facing the Cannabis Industry
As with any new industry, legal cannabis is facing a series of challenges as it grows. But with the additional burden of being a controlled substance that’s legal in most states but illegal at the federal level, the cannabis industry must deal with additional complications that other industries don’t typically experience. Some of the biggest challenges currently facing the cannabis industry are:
Banking
Perhaps the biggest barrier to growth in the cannabis industry is a lack of access to the traditional banking system. Because cannabis is a highly regulated industry and illegal at the federal level, many financial institutions are reluctant to do business with any marijuana-related businesses.
This lack of access causes cannabis business owners a whole host of problems. For starters, anyone who wants to open a marijuana-related business is immediately put at a disadvantage because they’re unlikely to secure a loan to fund the venture. That means potential owners have to get creative when it comes to financing by maxing out credit cards, taking out a second mortgage, or borrowing from family, friends, or other investors.
Another issue created by the lack of access to banking services is that cannabis businesses often have to resort to using a cash-only model. Relying on cash alone leaves businesses vulnerable to crime. It also limits their ability to distribute payroll, make vendor payments, keep records for taxes, etc. But since banks are reluctant to accept money generated from the sale of cannabis, business owners are left with few options.
Transportation
Conflicting state and federal regulations have created a nightmare scenario when it comes to transporting cannabis products. The primary issue is that these products cannot be carried across state lines – not at all, under any circumstances.
That means that a state-licensed cannabis company has to cultivate, produce, and sell their products within state lines. Even if the business is licensed to operate in two contiguous states, it’s still considered illegal to move product between the two states.
Marijuana-related companies also have limited options when finding carriers to transport products within their state. All trucks that are registered with the United States Department of Transportation –– which includes any vehicle weighing over 10,000 pounds –– are prohibited from transporting cannabis products. That means cannabis companies are limited to using small vehicles only, like cargo vans.
Employment
Because the cannabis industry is so new, there’s a bit of a gap between the employees that cannabis businesses need and the staff they have, especially when it comes to the supply chain and logistics. When cannabis started being legalized at the state level, many in the industry rushed to start companies before considering all their hiring needs. Once supply chain and logistics issues became evident, cannabis companies began to recognize the need to hire experts to help overcome these hurdles.
Unfortunately, identifying a need doesn’t mean it’s automatically filled. The novelty of the cannabis industry has made it difficult for businesses to find qualified supply chain and logistics professionals. Those candidates who have worked in more traditional industries are likely a bit wary of working in a sector with such conflicting and burdensome regulations.
Solutions
While nationwide legalization would certainly remove many of the hurdles faced by the industry, cannabis businesses are not standing around waiting for that to happen. This is an industry that’s known for being resourceful, dedicated, and innovative; they’re already finding solutions to their most challenging problems.
Banking: Marijuana-related companies are finding various workarounds to traditional banks. Some business owners have been able to secure funding and set up accounts at small, local credit unions (while avoiding national banks.) They’re also making use of credit card processing services that don’t prohibit cannabis purchases.
But once the need for financial services was made evident, the cannabis industry started to innovate; there are now several apps (like Hypur and CanPay) specifically designed to provide marijuana-related businesses with a secure way to accept payment.
Transportation: The laws governing the transport of cannabis products unfortunately haven’t changed, but that hasn’t totally impeded progress in the cannabis industry. Instead, it has spurred innovation; the cannabis industry had a transportation problem and trailblazing businesses stepped in to help.
New companies were created just to fill the niche needs of the cannabis supply chain. Take cannabis-specific delivery companies like Pineapple Express and Blackbird, for example. Though they operate in different locations (Pineapple Express in Canada and Blackbird in Nevada) the entrepreneurs who launched these businesses had the same idea –– to help the cannabis industry overcome its transportation issues.
Those are just two examples of many. There are also logistics companies, management software, ordering platforms, and more that cater solely to the cannabis industry. And as marijuana-related business has expanded, companies that traditionally operated in more mainstream sectors have started modifying their products and services to be used in the cannabis industry.
Employment: The cannabis industry has one of the fastest growing job markets in the United States, and it’s only expected to increase as states continue to legalize. Because of this staggering growth, there’s still a discrepancy between actual and required staffing numbers. But as the success of the cannabis industry becomes widely recognized and its businesses gain legitimacy, more qualified candidates –– including those in logistics –– are willing to apply.
Join the Green Rush
The cannabis industry has come a long way since 1996, when California first legalized medicinal marijuana. With medicinal marijuana approved in 36 states and recreational use legalized in 19 states, the industry’s growth rate continues to accelerate. The Green Rush is most definitely upon us, and companies that want to profit from the success of the cannabis industry can certainly do so. All it takes is commitment, courage, and an innovative spirit.