Cannabis sector, ready for a supply chain apocalypse?

The 4 horsemen of the supply chain apocalypse are impacting North American cannabis: OpEx inflation, input shortages & delays, increased volatility and labour shortages. 

To wit, raw materials, labor and freight have become significantly more expensive and harder to come by.  Especially hard hit is imported components & packaging, ingredients for edibles and domestic wages & labour turnover.  

Profit margins and service levels are already feeling the pinch, impacting an industry already struggling to make money.  And long term supply chain woes may dampen cannabis investor sentiment and hinder capital inflows just when they are needed.

These problems trace primarily to C19 and the $10T+ in global stimulus spending. The difficulties, however, may last much longer. Jerome Powell, the chair of the Federal Reserve, said that supply-chain problems may last “well into next year,” while The Economist Magazine believes that growing trade protectionism and decarbonisation could generate more persistent inflation and shortages.  

My clients are pre-empting and mitigating these challenges by:
  
1.     Diversifying their supplier base including prioritizing domestic producers;

2.     Reengineering their bill of materials to reduce cost and move away from hard to source inputs;

3. Cross training staff to improve flexibility and reduce vulnerability;

4. Financially hedging to lock in input costs and exchange rates.

#supplychain #covid #labourshortages #inflation #china #disruption #volatility