Step Right Out: Time for More Cannabis Outsourcing

Outsourcing is an established and proven way to reduce cost and improve operational agility. 

Every MSO and LP would be remiss if they didn’t explore and consider outsourcing initiatives.

Outsourcing is when companies use 3rd party providers to carry out tasks or operations that would otherwise be handled internally. Outsourcing can also involve lift outs i.e. transferring the status and management - but not location - of employees and assets from your company to another. An outsourcer could be offshore or inshore (i.e. close by).

There are many benefits to outsourcing, including:

1) Supports a CapEx lite, core competency-focused business strategy;

2) Significantly reduces OpEx (10-15% on average) plus the work/hassle involved with hiring/managing your own employees;

3) In many cases, you get access to cutting-edge capabilities and technologies versus what you currently have;

4) Its easier and faster to scale or shrink your enterprise

There are many examples of outsourcing, ranging from using an outside bookkeeper to having an external firm manage your greenhouse operations.

Despite having a solid ROI, outsourcing has not been embraced as much as it could be by the cannabis industry.

There are many reasons for this including the young age of many firms, a lack of standardized practices & technologies and the dearth of credible outsourcing partners.

When outsourcing does happen in cannabis it typically involves a limited number of tasks and employees.  This differs from more mature sectors like telecom, IT and financial services, where 3rd parties deliver key operations within the business model. 

In weed firms, call centres, IT services and sales & marketing are ripe candidates to farm off to another company. 

To be fair, outsourcing doesn’t always deliver the goods.  For example, many cannabis firms have been disappointed with the results they’ve received from sales agencies. However, these poor experiences is often a reflection of agency performance and the deal negotiated, not the strategy itself. 

Below are 5 lessons I’ve gleaned from negotiating and managing multimillion dollar outsourcing deals:

> Think strategically - how does outsourcing support the delivery of your value proposition?

> Do your homework - there are many good & bad providers and commercial arrangements.

> Understand your importance to the outsourcer – When it comes to resourcing and pricing, the golden client rule applies;

> You can’t offload and walk away – outsourcers need to be actively managed;

> The devil is in the details – pay close attention to what’s in the service level agreements.   

Lets talk about how you can significantly decrease your costs while improving operational performance.

#outsourcing #operations #costreduction #strategy