Challenges in the CBD Supply Chain
What is the Cannabinoids Supply Chain?
The CBD supply chain involves the production and distribution of CBD products. From “cultivating hemp plants to extract CBD” to “refining it into various products such as gummies and then distributing them through various channels and distributors” is all a part of the CBD supply chain. The CBD industry operates under specific regulations to ensure compliance with legal limits and product safety. However, it is crucial to note that regulations may have evolved beyond my last update in September 2021, and it is essential to consult up-to-date sources for the most current information on the CBD industry and distribution processes.
It’s hard to deny a bigger trend in consumer products than Cannabidiol, known as CBD. A naturally occurring compound found in the flower of cannabis, CBD does not produce the typical “high” of cannabis and is marketed as a relief for inflammation, anxiety, and even depression. While CBD is in a variety of products ranging from creams and supplements to infused cocktails and makeup, this growing industry faces many hurdles. According to the Brightfield Group, “the hemp-CBD market is projected to grow from just under $600MM in 2018 to $22BB by 2022”. This sudden emergence of a global market has lead to a myriad of supply chain challenges.
Keeping Up with CBD Demand
As demand increases for cannabis extracts, farmers struggle to keep up. The process to produce a high quality medicinal extract is not an easy one. Farmers must perfect every step of the production process from selecting the right seeds to drying a finished product and scaling supply to fulfill the demand. This has put a massive pressure on companies to properly select suppliers and track the quality of raw materials.
Managing Rigorous Testing
Although not legally required, third-party testing has become almost mandatory for CBD products to make it to retail. Companies are typically testing products for potency, terpenes, residual solvents, residual pesticides, and heavy metals. Once tested, results must be stored, associated to suppliers, and typically made available online.
In addition to supply and quality challenges, companies have to maneuver through a web of national and state regulations. In December 2018, Congress passed the Farm Bill, which made the production of hemp federally legal and removed CBD from the Controlled Substances Act. Although a huge first step toward the acceptance of CBD in consumer products, the laws are still murky and companies face regulatory uncertainty.
Navigating the Regulatory Landscape
While the FDA does not have precise guidelines for CBD products today, most companies follow existing food & supplement requirements. This means ensuring they have proper labeling that outlines nutritional facts and ingredient statements, while excluding medical claims.
Outdated Inventory Management
Outdated inventory management practices can hinder the effectiveness of the cannabis supply chain. Hemp farmers and businesses must keep track of various stages of production, distribution, and sales. Implementing modern inventory management systems can improve transparency, optimize stock levels, and reduce wastage, enhancing overall operational efficiency.
Material Shortages
The hemp industry relies on key materials such as steel and petroleum derivatives for various applications, including infrastructure, packaging, and processing equipment. Material shortages can disrupt production and lead to increased costs. Developing strategic partnerships with suppliers and exploring sustainable alternatives to traditional materials can help mitigate the impact of material shortages.
Shipping Logistics
Efficient shipping logistics are crucial to ensuring the timely delivery of hemp products to consumers. Delays in transportation can lead to product spoilage, stockouts, and dissatisfied customers. Hemp businesses need to work closely with reliable shipping companies and optimize their supply chain routes to minimize delivery lead times and maintain product freshness.
Preparing for the Future of CBD with Specification Data Management™
While regulations are still in flux, CBD companies can take steps to create nimble supply chains to prepare for future changes. This starts will managing critical specifications.Today, many CBD companies are using spreadsheets or shared drives to manage critical information such as formulas, ingredients, and packaging. By using Specification Data Management™ software, CBD companies can easily manage all aspects of an ever-changing supply chain.
This results in multiple benefits for CBD companies, ranging from supplier management to quality and traceability. First, CBD companies can easily standardize raw materials, formulas, and ingredients into cloud-based specifications. This helps ensure product consistency. Companies can also create, manage, and version all packaging and label specs directly in the platform, making it easy to see what's in market so they can stay compliant with changing regulations.
Second, companies can share these specifications with suppliers to ensure accuracy and traceability. Sharing specifications with farmers, testing labs, and others ensures everyone in the CBD supply chain is accessing the right data. For example, suppliers and third-party testing labs can upload critical documents such as Certificate of Analysis to products for traceability. This enables CBD brands to quickly compare expected versus actual results. Co-manufacturers can access the most up-to-date formula or be notified of changes instead of having to dig through emails or spreadsheets.
Third, CBD companies can leverage reporting and dashboards to visualize any kind of specification data. This visibility is critical, as future regulations may require sweeping changes to existing packaging, labels, or formulas.
Conclusion
While the CBD supply chain is filled with challenges, consumer demand continues to rise. For a CBD company to survive the uncertainty and competition, they must document and manage all steps of the production process.
With Specification Data Management™, CBD companies can start to digitize specifications and create connected, nimble supply chains. In a fast growing industry, the right systems will allow CBD companies to focus on scaling businesses instead of managing data.
