Supply Chain Systems Are Broken. Can RFID Fix Them?

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Image: julia.m / Shutterstock.com

No one who has a toll transponder in their car misses the days of scrambling for loose change while drivers behind you in line at the toll booth honk. Alas, when it comes to inventory-tracking software, too many in the cannabis industry are still digging for dimes in the cupholder.

The lightning-speed growth of the industry has left business owners scrambling to catch up with the times. Conventional cannabis software tools are too often inefficient, insecure, and technologically out-of-date—but they don’t have to stay that way. Advances in the use of radio frequency identification (RFID) technology remedy these weaknesses and make many complex business processes as frictionless as cruising through an electronic toll booth.

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Legacy software doesn’t cut it

Cannabis needs its own modern software solutions, designed specifically with the industry’s extended and heavily regulated supply chain in mind. Unfortunately, much of today’s cannabis software is derived from a hodgepodge of legacy systems that simply aren’t working efficiently, especially at scale. The first-generation systems were created for mainstream industries such as health care or food distribution, then tweaked for cannabis tracking. Compliance-focused state regulators required tracking, but early solutions were rushed to market and weren’t designed from the ground up with supply chain traceability, enterprise scalability, or ease of use in mind.

Old code bases also are problematic because, unlike wine, software does not get better with age. Antiquated code leaves businesses vulnerable to hacking, system failures, and major business disruptions. Clearly, a new-millennium industry needs a new level of technology. The nimbleness of RFID-enabled business software offers a wide-reaching solution with its ability to shave countless hours off inventory management and provide valuable operations data across the supply chain.

Cultivation needs RFID automation

Software requiring extensive manual data entry simply doesn’t work for high-volume cannabis operations. Some current systems still require growers to use their phones to scan barcodes, which are located somewhere in the plant canopy. Performing that operation manually requires jostling the plant to find the barcode (which likely is covered with some combination of soil, water, and other debris) and then wiping it down before scanning. Locating, cleaning, and manually scanning 50,000 plants is not the right answer.

Considering how inefficient and time-consuming that process is, it’s no wonder so many time-crunched employees have gone back to using clipboards. Systems that don’t account for user experience are bad for plants and a waste of resources—and they create far too much room for human error.

RFID tags broadcast a signal that identifies the specific plant or product to which they’re attached. With associated IDs, the inventory database can be expanded further to track any number of things. For example, once an RFID tag is attached to a plant, growers can use a reader to scan each transaction related to that plant—or a batch of plants—and create a detailed history of when they moved and who moved them, without the need for manual entry and potential human error.

The technology allows a cultivation manager to audit an entire facility in about twenty minutes instead of twenty hours. What’s even better is the ability to automatically record and document weights for compliance tracking when cannabis plants are harvested—one of the most labor-intensive and time-consuming processes in the cultivation cycle. RFID tags also can be used to track the batch’s fertilization and lighting schedules for yield optimization, among other data collection opportunities. An efficient, automated process is better for plants and, unlike cumbersome barcode systems, actually will be used by employees.

There’s a widespread misconception that RFID doesn’t work in cultivation environments, but that’s simply not the case. The problem is a lack of experience in both enterprise supply chain management and RFID in the cannabis space. Global brands such as Nike, Under Armour, and Target have adopted RFID and shown great improvements in shortening lead times, reducing out-of-stocks, and boosting inventory accuracy.

Ghost inventory: even scarier than it sounds

Ghost inventory, also known as phantom inventory, is the term for products that are listed in the store’s systems but don’t exist among its stock. Phantom products can be caused by human error or system outages or failure, and the situation is a major hazard for dispensaries when it comes to compliance.

When variances pile up and the system is not calculating properly, dispensary managers don’t know what they have in stock—but they also don’t know what’s selling or whether products have been misplaced or stolen. Inaccurate inventory counts not only trigger on-site audits by state regulators, but they also disrupt a dispensary’s daily business operations, derail forecast plans, and wreak havoc with financial accounting and compliance.

For retailers, RFID technology solves these problems by making it easy to audit secured supply rooms and the sales floor to reconcile inventory.

Many legacy software systems aren’t capable of giving a top-level view of how inventory is moving, sell-through rates, or where product is moving—again, because they were designed with a compliance focus for small- and mid-sized businesses rather than multi-state operators (MSOs), which need full-fledged supply chain management capabilities. RFID is necessary to give these businesses real-time inventory visibility, helping them stay on top of inventory management that spans several states.

RFID is cannabis’s magic bullet

Modern cannabis businesses and MSOs require a streamlined approach to keeping their supply chain compliant—a user-friendly tool that handles high volume and detailed tracking as plants move out of the harvest room and into extraction, manufacturing, and retail. RFID-based systems improve operational efficiencies, saving countless hours throughout the supply chain.

In the patchwork regulatory world of American cannabis, operators in states that have adopted the Metrc compliance system already have a leg up for utilizing the required RFID tags to improve their own internal business operations.

As the industry ramps up and profit margins narrow, cultivators and dispensary owners must focus on operational efficiencies and systems that automate as much as possible to make the process simpler and more efficient. RFID is the key to staying competitive—and staying sane.


Jeremy-OKeefe-Yobi-contributor-mg-magazine-mgretailerJeremy O’Keefe is founder and chief executive officer at Yobi, a next-generation cannabis operations platform that automates compliance and is designed to meet the unique needs of all sectors in the supply chain: cultivation, processing, manufacturing, and retail. A software engineer by trade who specializes in cyber security, his experience includes developing retail and operational software for global brands including Amazon and Zappos.

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