Seed-to-Sale: The Software Behind Cannabis Business
Originally featured in Fat Nugs Magazine Vol. 21: Technology Edition. Enjoy the great articles and community at fatnugsmag.com.
A common statement in the cannabis industry is that a year in cannabis is equal to several years in any other industry, similar to one year of life for us being equivalent to seven for dogs. The needs of the business and consumer along with innovation and regulatory requirements continue to evolve rapidly, keeping people on their toes to adjust and adapt.
On the software side of cannabis, this statement is very true. As business requirements change, they need evolving software to support and manage their operations. Cannabis businesses have undergone a digital transformation that I have had a front-row seat to since 2017. I’ve worked on six cannabis software solutions over the last seven years as a Product Manager. I design new features, demo the software, implement it, and fix issues, while working with internal teams and external customers to polish the product offerings and its workflows. In this article, I’d like to explain a little about cannabis software, what it is, and why it matters while highlighting some of the challenges I’ve seen companies face in the industry.
What Is Cannabis Software and Why is it Needed?
Cannabis software covers a variety of different business cases, but the software at the heart of things is known as Seed-to-Sale. Seed-to-Sale software covers the full supply chain of the cannabis industry from Cultivation through Post-Harvest Processing, Manufacturing, Distribution and Retail. This is not new software but an adapted form of an ERP (Enterprise Resource Planning System). ERPs have been used for decades to manage the supply chain and inventory for every other industry from CPGs to construction materials and biomedical devices. ERPs are beasts; they can do it all. Think of them like Cathedrals that took generations to complete and perfect. They can be fantastic for business when implemented and managed correctly, but that implementation and management can take entire teams of dedicated folks to maintain it. Something the cannabis industry rarely has readily available.
To solve this, some traditional ERPs have been customized to work within cannabis by adding cannabis specifics and compliance functionality to run them for the industry. These are called legacy solutions as they ride on the legacy of the standard ERP they are built on top of. They are great, but they are not cheap at all. Instead, what we’ve seen rise up throughout the years are SaaS (Software as a Service) solutions that cover one aspect of an ERP like an app built specifically for Cultivation, another for Finance and another for Distribution and Retail. When you have a stack like this, it is known as a Bespoke ERP. Operators pick and choose the right software to build a perfect stack for them; sounds fun, right?
The downside with bespoke ERP solutions is that instead of having one software partner as you would in a legacy solution you have multiples, and they don’t always play nicely with one another. Integrations can be costly and require development work and time; they also may have flaws that can make certain combinations of software fall short of reaching the goal. The benefits of a bespoke solution are that the operator chooses who they work with and how they build their stack, and it's often much cheaper and easier to implement to run a stack vs a legacy system.
There’s not really a perfect fit, but budget and operation size does mean businesses lean one way or another in their choices. At a certain point in scale, a legacy seed-to-sale solution can be perfect, but for small to medium businesses a bespoke or “stacked” solution tends to be the way to go. Other things to consider are the support operators receive from businesses and the quality of the software. Quality is key in cannabis products and the software running things in the background. You want to make sure to go with a company that provides the support structure you need; one that is willing to listen to its customers and adapt to make changes to the software quickly. Because of how often regulations and requirements can change in the industry, it’s necessary to know how long it takes your software providers to make changes and to know that they can do it right.
For those not in an operation, let me provide an example of what Seed-to-Sale really does. Starting with seeds or clones at the beginning of cultivation, the software can track the cost of all the materials and the locations you have to grow in. It does this while communicating up to Metrc or Biotrack, the state compliance systems, at every step of the process. From here, you’d manage your clones on an order that shows the estimated end date and a list of the tasks that will be necessary to see these clones through their lifecycle. Some apps will allow you to track labor against this and real time task management, where others act more like a schedule for when and where to do things. For example, watering, pruning, culling, up potting, staking and harvesting are all example actions that could be taken against the plants. The software could and should track all of this while forecasting an end date and totaling up the resources in terms of material costs and labor.
After this, a different order would be created to trim, dry, cure and process the plant material into various end products we’re all familiar with. Software assists here by tracking recipes, inventory cost, labor and compliance. Then, it assists in selling said products via distribution and manages your various wholesale customers and sales orders. You can also track and manage purchase orders and know when different items in inventory will run out of stock. Everything rolls up into the financial piece of the seed-to-sale where business decisions can be made based on the estimated and actual costs of operating.
On the Retail side of things, operators have to purchase their inventory, stay compliant and track customer (consumer) transactions and records like loyalty points, average cart totals, profit margins (also in cultivation and manufacturing) and more. Every terminal in a retail operation is running a system to manage their cash drawer, create sales and help the business stay compliant and avoid overselling. We also see a lot of ancillary software companies providing retail functionality like digital menus, delivery, AI budtenders and more. Without software, running a cannabis business can be a nightmare and with the wrong software it can be a very expensive nightmare.
The Early Days: Painter’s Tape and Sharpies
When I originally entered the cannabis industry in 2012 as a cultivator and hash-maker in Denver’s medical days, software was not part of the conversation at all. Operations relied on manual tracking and, in my case, painter’s tape and sharpie markers paired with strategically placed whiteboards to keep facilities running and on track. While this wasn’t ideal, it did (and does) work for small operations but requires a lot of time, training, and attention to detail. With one wrong move, you could erase the harvest date or nutrient recipe the business relied on. I saw the inefficiencies of this around cultivation planning and forecasting firsthand. We churned out some wonderful flower and award-winning products, but it wasn’t scalable or efficient.
Software was quick to rise to the occasion but was far from perfect. Early solutions were cumbersome, to say the least. They had people responsible for the product who had no love for or experience with cannabis. This led to the demise of more than a few companies along the way. Some applications attempted to jump into cannabis from traditional manufacturing using legacy ERPs. The industry wasn’t exactly ready for this complexity early on, and they ended up causing more problems than they solved. That’s where the bespoke solutions quickly became the way to success.
The Future of Cannabis Software
As cannabis sweeps the nation and picks up speed across the globe, the need for efficient, compliant and scalable software will increase. The future of cannabis technology involves software companies working hand in hand with their operators and customers to endlessly perfect their solutions. The work is never done.
I operate Apartment 113 to provide product management for cannabis software companies and help operators find and use the right software solutions. I build integrations, new features, teams and processes to create the best possible products for the industry. A software decision can make or break a company, so it’s important to partner with the right people from the beginning. I’ve seen too many things done incorrectly in the past that have only reaffirmed my dedication to building quality software for the cannabis space.
I can confidently say combining industry knowledge with technical expertise is the way forward for operators and software providers. Know your providers and their leaders to make sure their heart is in the right place and that they are building something right for the industry, not just their bank accounts. I’m optimistic about cannabis software as the industry matures, and I’m always down to talk shop.