5 Supply Chain Bottlenecks and How to Solve Them

Supply chain bottlenecks are a point in the flow of goods or services where the process slows down or stops. Despite often being preventable, these bottlenecks cripple operations, increase costs, and erode customer satisfaction. 

Implementing efficient supply chain management strategies will mitigate the impact of unexpected supply chain issues or even prevent them in the first place. Businesses in the cannabis industry must first pinpoint where issues are occurring in order to smooth out hitches in their supply chains.

1. Failure to Forecast Demand

Failing to forecast demand causes problems when brands can’t fulfill orders due to a lack of products, labor, or packaging. Though a sudden upsurge in demand may seem like a best-case scenario, not being able to keep up with demand can damage your brand reputation in the long run as customers will turn to vendors they know can fulfill their orders, or retailer partners will simply stock other more prepared brands.

Many factors can cause a huge boom in customer demand such as:

• Viral Trends:

• A viral social media post, a celebrity endorsement, or a trending hashtag can quickly generate massive demand for a product.
• Products featured on platforms like TikTok and Instagram can experience explosive demand overnight, overwhelming supply chains.

• Natural Disasters: Events like hurricanes, wildfires, and earthquakes can disrupt normal supply chains and create localized surges in demand for essential goods.

• Seasonal Fluctuations: While predictable to some extent, seasonal surges in demand, such as those experienced during holidays (Christmas, Thanksgiving, 420) can strain supply chains if not adequately prepared for.

• Economic Factors: Economic downturns or unexpected economic growth can significantly impact consumer spending and create sudden shifts in demand for certain products.

Social media has heightened consumer demand for a number of different products and services, from restaurants to health products. Ozempic—a drug popularly used to lose weight—is a great example of how being unprepared for greater demand can cause supply chain challenges.

Ozempic is primarily a drug prescribed to patients suffering from type 2 diabetes. However, its popularization on social media caused a huge upswing in demand, threatening the health of those who relied on the drug.

Plan Supply Around Historical Sales Data and Marketing Drives

Using data analytics to plan future supply is a smart way to prepare for fluctuating demand. Use the data available to you to proactively foresee spikes and troughs in demand and work around them accordingly.

Remember to also factor in your packaging needs when forecasting demand. Failure to do so leaves cannabis businesses—big or small—with the devastating prospect of having their product ready to go but no packaging to send it off in. 

This is a common problem when brands solely outsource their packaging needs to overseas companies that can't react quickly to increases in demand. Packaging delays are especially damaging for brands specializing in fresh or perishable products like cannabis where speed is the name of the game.

Specialized cannabis packaging suppliers that guarantee short lead times ensure your packaging isn't the cause of a bottleneck. Choose a diversified packaging platform that has access to domestic, nearshore, and overseas production. This will prevent your supplier from being negatively impacted by overseas production queues or unpredictable shipping delays. Ultimately, it maintains the speed and efficiency your business demands. 

In reality, you need to mitigate risk in packaging by cultivating and leveraging a network of sources. Packaging companies that specialize in cannabis can mitigate you away from supply chain issues no matter where the actual packaging is sourced from while maintaining the quality control mid-sized or larger brands would need.

A nimble packaging supplier will keep you supplied with just the right number of packaging units when you need them to keep your revenue flowing without burning through unnecessary capital or leaving you with packaging shortages.

2. Packaging Non-Compliance

Non-compliance in packaging is a major bottleneck in the supply chain that is wholly preventable. Working with experts in cannabis packaging design who understand the ins and outs of regulatory compliance in the U.S. is one of the top ways to increase speed to market. 

Trusting your packaging needs to industry professionals also means lightening-quick reactions to changes in the regulatory landscape and standout packaging that doesn't contravene state or federal law. This is because you won’t be over-inventoried with packaging and at the mercy of mercurial state regulations around cannabis; this is especially important for the emerging state markets.

Balance Compliance with Customer Appeal

A 2024 study into cannabis edibles packaging preferences among adults found that they preferred youth-appealing features on edibles packaging. 

However, this preference is in direct opposition to compliance regulations on cannabis packaging in the U.S. and Canada that ban (to various degrees) the use of youth-appealing features like cartoon characters, bright colors, and bubble fonts.

The issue of balancing customer appeal with compliance is further complicated by the fact that regulations vary from state to state. 

Businesses must therefore find the balance between designing packaging that appeals to the customer—and meeting child-resistant packaging requirements—while complying with state and federal packaging regulations. Cannabis companies that fail to find this balance risk massive bottlenecks in the supply chain and possible legal issues.

3. Poor Inventory Management

Poor inventory management can significantly contribute to supply chain bottlenecks in several ways. For example, businesses that don't keep track of inventory can experience stockouts and end up unable to fulfill customer orders. This leads to lost sales, disappointed customers, and damage to your brand reputation.

Conversely, excess inventory can also cause significant problems in the supply chain. Excess inventory can overwhelm warehouse space, leading to inefficient warehouse operations, increased handling costs, and product spoilage. 

In the worst cases, inaccurate inventory data can lead to order fulfillment errors, such as shipping the wrong items or shipping incomplete orders. 

How to Improve Inventory Management

Smooth inventory management is an essential part of a successful business. Investing in systems that improve it is a must for long-term efficiency and savings. Key steps to improving your inventory management include:

1. Improving Demand Forecasting:

• Utilize historical data, market trends, and predictive analytics to accurately forecast future demand.
• Account for seasonal fluctuations, promotional events, and emerging trends to avoid stockouts or overstocking.
• Proper SKU management systems with digital asset management. For brands operating in several states, having this at a state by state level makes the process of fulfilling packaging far easier.

2. Optimizing Inventory Levels:

• Minimize inventory holding costs by ordering and receiving goods just in time for production or when the customer demands it.
• Maintain appropriate safety stock levels to buffer against unexpected demand surges or supply chain disruptions.

Protect Your Product from Potential Supply Chain Bottlenecks

Sometimes, supply chain disruptions are inevitable despite all the contingency plans you put in place. Tariffs, foreign holidays, natural disasters all play a role in disrupting supply chains and keeping packaging materials from reaching your doors. 

This is where packaging selection comes in. 

Vacuum-sealed jars like POP VAC jars significantly lengthen cannabis flower and concentrate shelf life by protecting them from exposure to damaging environmental factors like oxygen, light, and moisture. This offers the perfect way for high-end cannabis brands to ensure that their premium flower and concentrates arrive in prime condition even when a normally resilient supply chain fails.

It's estimated that an incredible 40% of food loss and waste occurs at the supply chain level in developed countries like the United States. While those numbers in cannabis likely are not as high, there is surely waste there when packaging form factors don’t align to the characteristics of a harvest yield. Research suggests that using advanced packaging technologies minimizes cross-contamination and ensures safe handling of food and other perishable products like cannabis, thus reducing waste in the supply chain.

4. Lack of Contingency Plans

Most supply chain bottleneck causes can ultimately be attributed to a lack of contingency plans for when things go pear-shaped. As most companies will know—but not all act on—is that failing to plan is planning to fail.

Preventing supply chain bottlenecks and protecting your speed to market is largely down to having a plan B in place for when outside factors disrupt global supply chains or your usual supply routes let you down. Some common causes of supply chain disruptions that can be mitigated with proactive and forward-thinking include:

Global Crises

Global crises can significantly disrupt supply chains, leading to delays, shortages, and increased costs. For example, wars and geopolitical conflicts can lead to the disruption of critical trade routes, delays, and increased costs for shipping goods. Sanctions and embargoes are also consequences of political instability that restrict the free flow of goods and raw materials.

Increased business uncertainty also tends to go hand in hand with global crises. This makes it difficult to plan and forecast future demand and supply. Add to this changes in government policies like trade tariffs or environmental regulations and you have a recipe for a significantly disrupted supply chain.

Be Prepared to React to Global Events

Significant global crises can impact the entire supply chain and throw your business operations into disarray. Being prepared by taking proactive measures—and being willing to react to big changes in the business climate—will put your business in good stead to ride out the storm.

Some global crises also increase demand for certain goods or services. Be prepared to react to fluctuations in demand by having a flexible supply of your product and having quick access to more packaging when required.

Natural Disasters

Natural disasters have a huge impact on U.S. businesses and have considerable potential to cause significant supply chain bottlenecks. According to the United States Environmental Protection Agency, the National Interagency Fire Center has recorded an average of around 70,000 wildfires per year between 1983 and 2022.

This is particularly concerning for cannabis brands as cannabis in California is more likely to be farmed in fire hazard severity zones than pasture or general crops. This makes it particularly vulnerable to supply issues caused by wildfires.

How to Mitigate Supply Chain Issues Caused by Natural Disasters

Natural disasters, though potentially devastating, can be planned for. This is especially true if your product comes from a region known for severe weather or prone to natural disasters like wildfires. 

Companies that take proactive steps to protect themselves from the possible consequences of a natural disaster will invariably suffer fewer supply chain issues. Consider the following ways to reduce the impact natural disasters have on your supply chain:

• Diversification:
  • Supplier diversification: Sourcing materials from multiple suppliers in different geographic locations reduces reliance on a single source and minimizes the impact of localized disruptions. Vendors who can source quickly and cost effectively within the United States, Mexico, and China keep you very well protected from supply chain disruptions.
  • Manufacturing diversification: Establishing production facilities in multiple locations can help mitigate the impact of localized disasters.

Please note: Diversification may be challenging for premium cannabis producers who wish to guarantee consistent quality through their product range. 

• Risk Assessment and Planning:
  • Hazard Mapping: Identify potential risks in your supply chain, such as areas prone to earthquakes, floods, or hurricanes. True packaging partners will plan this for you and keep you abreast based on risks on the horizon and the inventory you have.
  • Business Continuity Planning: Develop and regularly test business continuity plans that outline alternative courses of action in case of disruptions.
  • Emergency Response Plans: Establish clear communication protocols and emergency response procedures to ensure a rapid response and minimize disruption.

• Building Resilience:
  • Invest in Infrastructure: Invest in resilient infrastructure, such as flood-resistant warehouses and hardened transportation routes.
  • Develop Strong Supplier Relationships: Foster strong and collaborative relationships with suppliers to enhance communication and facilitate a rapid response to disruptions.
  • Engage With Local Communities: Collaborate with local communities and emergency response agencies to ensure effective communication and coordination during and after disasters.

Labor Shortages

Labor shortages are a significant contributor to supply chain bottlenecks at every stage as they cause delays in production, transportation, and delivery. Supply chains often rely on many different workers from various companies and often in multiple locations. This makes it a challenging issue for a single business to control or solve.

Cannabis brands attract a lot of passionate people in the space. People who believe in the mission of the brand and the mission of the industry at large. Channeling that passion into a pipeline of talent for your business is doable with the right values consistently showcased. Word of mouth is a powerful, earned attribution in the business world, and by doing right by your current staff, you will find them eager to recommend your business to their peers.

5. Miscommunication With Suppliers and Vendors

Your cannabis brand likely relies on many outsourced companies for supplies and deliveries, and to provide business services like marketing, website design, and packaging. All of these components must work in harmony for your business operations to run smoothly. This makes communication and organization key to preventing hitches in the supply chain.

Some examples we have seen from reputable, multi-state cannabis operators is that their process for starting a new SKU takes 12 weeks on average due to all of the orchestration across design, manufacturing, and sourcing. That doesn’t even include state approval timelines.

This makes the aspects of communication critical, and even a long timeline like that can be severely delayed by one link in the chain dropping the ball.

Miscommunication is a common problem that can lead to order errors, forecasting inaccuracies, quality issues, and delayed responses. Together, these issues can lead to business operations grinding to a halt, impacting your ability to meet deadlines and fulfill orders.

Efficient use of technology is a great way to keep on top of communications with all the stakeholders in your business. Leverage the invaluable supply chain data offered by real-time tracking technologies (GPS, RFID) to monitor the location and movement of goods. 

This enables faster identification of your packages and allows you to correct errors caused by miscommunication. Data analytics can also be used to forecast potential disruptions and proactively adjust supply chain operations.

Proactive Action Minimizes Supply Chain Bottlenecks

Navigating supply chain bottlenecks is all about having the right systems in place to respond to unexpected issues that impact the smooth running of your business. Having contingency plans helps you meet customer demand and promote loyalty among your satisfied customers.

One important way to avoid supply chain bottlenecks and maintain your speed to market is to work with diversified vendors who can ensure fulfillment when delays are affecting suppliers in a specific region. The other is choosing packaging that protects your product even when unforeseen circumstances delay its arrival.