Why demand planning is essential for commercial cannabis cultivation
October 11, 2022 By Carson Clugston
Demand planning can be understood as market demand for products and how they meet consumer needs. This process includes product development, production planning and inventory management.
During my time working with large Canadian and international cannabis producers, I’ve detected a common attitude of “let’s just produce it and we’ll decide what to do with it later.” However, this mentality is leading to bloated inventories of potentially lower quality product packed away in storage facilities to then later be thrown out.
Sales are essential for ensuring the expected revenues are generated. But if the retailer doesn’t have your product in stock, obviously they cannot sell it. Or if you overestimate your demand and oversupply, you can create returns from provincial cannabis boards due to your packed-on date, which can be very costly.
Whether retailers are not able to purchase your products, or dispensaries overstock them, savvy consumers may develop a lasting impression of a company based on the way they met their needs. Demand planning works to see that companies have exactly the required amount of inventory at the right place to avoid stock-outs and remain prepared for the next order.
Producing cannabis without a specific end in mind is generally a waste of production resources and can be a catastrophic lesson learned for an operation with limited funds. Product development requires demand planning to quantify the appetite in the market for your product, in addition to whether the market is mature enough to consume it.
When conceptualizing new products, producers must ensure all steps throughout the production process are completed with the intent of reducing resource waste and overhead. Selecting the right genetics is one way to dial in productivity per square foot.
Most products are created based on the grade of flower, such as using trim to make extracts and premium bud for packaged flower. Sometimes these decisions are made ad hoc, and the product category is determined once the flower is in storage.
Reasons for this may be due to a lack of cannabis production knowledge required to predict and execute a new genetic with its desired outcome. For instance, if an LP wants to produce a live resin extract or hash product, they should be looking to produce high quality cannabis as, again, savvy consumers will sniff out subpar flower or trim.
Demand planning requires a collection of data to understand and predict trends within the market. Internal inventories and production schedules are required in order to keep up with said demand.
Implementing data collection software for batch production documents, and other inventory tracking such as seed-to-sale software, is critical for the extrapolation of data and a deeper understanding of overall supply chain management.
Supply chain management is a higher-level mechanism, but it directly correlates to demand planning due to its significance in company resource management and procurement of materials for packaged goods.
To stay relevant in this competitive industry, producers can evolve supply chain processes into intelligent workflows and reach new levels of responsiveness and innovation internally.
Producers should also continue to challenge siloed processes, discover efficiencies, empower their teams, and use emerging technologies to unlock opportunities in the value chain from demand planning, purchase orders and order fulfilment.
Carson is an experienced horticulturist with eight years of cannabis cultivation experience. He is a specialist in selecting genetics, product categories, and is experienced in bringing products to market. He expanded outdoor operations for clients in the United States, and managed 50,000sqft of EU-GMP cultivation for one of Canada’s first publicly traded companies. He has designed, budgeted, and developed operations for clients in the US as lead project manager, and has experience scaling within the Americas and Europe during his time at a Canadian investment and management firm.
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