Know Before You Invest in Vertical Integration
In the dynamic landscape of the cannabis industry, vertical integration (VI) emerges as an enticing strategy for businesses at various stages of their development.
A vertically integrated company claims ownership of its business processes, ensuring continued growth and stability. This strategy significantly streamlines workflows and advances progress without the need for a vertically integrated company to be dependent on external assistance, avoiding the burdens and uncertainties commonly associated with partnering with other manufacturers, retailers or distributors.
How does vertical integration apply to the cannabis industry?
Within the cannabis industry, vertically integrated companies can control important assets such as grow facilities, retail establishments, and their own packaging and distribution network. This gives them a competitive edge in the market while also saving considerable time and money.
Innovations in artificial intelligence (AI), automation software, and blockchain technology tend to further enhance efficiency and productivity for many of these businesses, which prompts the question: Is implementing VI the right move for your business?
As your company expands, the likelihood of encountering complications and logistical errors also increases, especially when growth occurs rapidly. To address these challenges, it is crucial that you simplify your work processes and pay closer attention to the unique needs of your business. Incorporating advancements in software like AI, automation, and blockchain technology offers an effective approach to achieving your goals.
The importance of AI, automation and blockchain technology
Advancements in AI algorithms are pivotal for more precisely predicting plant and harvest-related issues, which in turn aids in forecasting evolving market trends and demands. On the other hand, automation facilitates streamlining operations and elevating overall operational efficiency. This ensures product uniformity, while simultaneously reducing labor costs and minimizing the likelihood of human error.
Advancements in the area of blockchain technology enhance the transparency of a company’s cannabis supply chain. Blockchain technology guarantees that every transaction and stage of production, from seed-to-sale, is meticulously recorded with attention paid to overall data accuracy.
Automation and software innovation continue to play a critical role in VI and are known for optimizing enterprise resource planning (ERP) systems, enhancing inventory tracking, and automating production lines.
How can technological innovations benefit your business?
These optimizations possess the potential to enhance your company’s operations by optimizing data flow, providing real-time visibility into inventory levels and coordinating production processes across your business’s supply chain. By automating manual tasks and increasing work efficiency, you can achieve improved quality control, fostering a responsive supply chain that can adapt swiftly to evolving market demands.
When discussing how VI applies to your cannabis company, it typically starts with overseeing cultivation, where cannabis plants are grown and prepared for extraction and production. Next is manufacturing, where the extracted cannabis is packaged, weighed, and eventually labeled for retail sale. VI helps you own every facet of your supply chain, streamlining your seed-to-sale process and ensuring success.
What are the pros and cons of vertical integration?
Prior to adopting a VI strategy for your business, you should consider weighing the pros and cons associated with it. The benefits of VI include controlling production, which often translates to lower cost, and offering greater flexibility, improved accuracy, and quality control over your supply chain, which leads to improvements in efficiency and time-management.
One challenge commonly associated with VI adoption is the initial expense of raising funds to implement the strategy, which can be costly for small businesses. Facing the hurdles associated with complying with state requirements can also limit the scope of your product distribution and potentially hinder sales depending on certain legal stipulations.
Depending on the size of your cannabis business and your target goals, leveraging software innovation, and advances in technology by investing in VI may be worth considering as they can provide substantial gains for your company.
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