Growing Complexity of Cannabis Supply Chains Spurs Logistics and Distribution Competition

Strict state regulations on transport and distribution of marijuana in California has spawned a thriving new ancillary industry: Third-party logistics (3PLs). These are independent companies that don’t grow or produce cannabis or related products, but help ensure orders are accurately filled, delivery demands are met on time and products are properly preserved between destination points. Of course, third-party logistics firms have been around for ages, working within just about every national or international market sector, but as Los Angeles marijuana business attorneys can explain, they’re pretty new to this particular economic sector. In California, the state requires licensing for “distributors” and “transporters,” basically the “mandatory middle-men.” 

One recent report by logistics trade publication Supply Chain 24-7 detailed burgeoning efforts to build a strategy for state-level supply chains, but also for what some believe may sooner than later become a global supply chain. One logistics firm working on this has its sights on Canada, and with development help from its technology and finance partners is hoping to on-board major licensed marijuana producers, retail distribution centers and government regulators.

Most global third-party logistics for cannabis are likely to employ some type of blockchain, given mandates that product be tracked and accounted for from seed-to-sale. Blockchain is a type of digital ledger for sales transactions made on a cryptocurrency platform like bitcoin, which are meticulously recorded in chronological order and recorded for the public. Cyrptocurrency is likely to be the preferred method of payment for ancillary cannabis companies that have expanded to the point of needing a third-party logistics firm to manage its supply chain. This will help not only keep track of cannabis products and sales, it will improve consumer safety and allow for rapid recalls of tainted marijuana, ensure legal sourcing of marijuana products and facilitate automatic tax and legal process requirements.

Given projections that cannabis will explode into a $500 billion industry worldwide, Los Angeles marijuana business attorneys know California cannabis suppliers, product manufacturers and retail distributors were going to have to stay on top of this trend just to stay competitive anyway. Even now as the industry is brand new, most cannabis companies in Southern California don’t have the capacity to handle their own distribution. Growers, concentrate producers, edible makers and others in the industry are in the business of putting out the best product, and logistics is a critical component of the business that requires more workers, vehicles, licensing and precise standard compliance. Many are finding it’s easier to leave the logistics to companies that have already established effective technology, partners and routes. Some firms specialize in distribution of high-maintenance products, such as raw flowers. Others will take on a variety of products.

The biggest conglomerate of distributors – now representing 50 of them – launched in Los Angeles has been operational since 2016, preparing for launch even before recreational marijuana was legal in California, after the state made changes to the medical marijuana regulatory system and designated a specific license type for distributors.

There are some variations of these third-party firms, some focusing solely on preparing, packing, shipping and delivery, while others do that plus marketing for their marijuana business customers. Arranging the right transport and distribution partner is important to your success. A marijuana business plan attorney in California can help you verify licensing and be certain you’re making a sound business choice.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, collectives, patients and those facing marijuana charges. Call us at 949-375-4734.

Additional Resources:

B2B Cannabis Logistics and Compliance Platform WAYV Raises $5 Million Seed Round, Oct. 29, 2018, Business Wire

More Blog Entries:

California Marijuana Attorneys Expect Hemp Farming to Grow Across U.S., Dec. 9, 2018, Los Angeles Marijuana Business Lawyer Blog