Grow Your Own Blockchain-Integrated Cannabis Delivery System
This Budding Industry Could Use a Helping Hand from Blockchain Tech
More often than not, technological innovation is the primary driver of growth within industries. Still, certain industries will occasionally begin to boom for other reasons. Changes in government regulation or increases in globalization are two common examples of this.
When this type of growth occurs, there is commonly an unfortunate gap between the expansion of the industry and the tech that’s needed to help smooth out its inevitable kinks. New jobs are created, customers are engaged, and problems involving scalability, transactional efficiency, and logistics quickly arise.
This predicament is especially palpable within the recently surging realm of legal cannabis.
The cannabis industry is expected to grow from $9.2B to $47.3B over the course of the next decade.
While modern advancements in marijuana cultivation and THC extraction have actually been pretty astounding, the obvious cause of this rise is the recent shift in cannabis legislation across the U.S. And so, as budding marijuana businesses are rapidly sprouting throughout the nation, the tech that’s needed to power these organizations is somewhat struggling to keep up.
Issues with Cannabis Distribution Are Slowing Growth
Cannabis supply-chains demonstrate the most discernible need for efficiency creating innovations within the industry. Specifically, logistical complications concerning security, legitimacy, and regulatory compliance have crippled much of the currently existing marijuana distribution systems.
Even in mainstream industries, transportation services frequently act as bottlenecks that drive up costs and muck up inventory operations and customer relationship management (CRM). When you add in the complex and constantly shifting legal hurdles that cannabis businesses are forced to reckon with, the various logistics nightmares quickly start piling up.
The main issues that drive up costs for cannabis distribution involve security, legality, and standard logistical inefficiencies. As the bulk of marijuana sales are still made in cash and the product itself is both valuable and difficult to trace, theft and other forms of criminal disruption are a major concern for cannabis business owners.
Some in the industry have resorted to using armored vehicles and outsourced transportation security firms to tackle this problem. Still, the entire structure of cannabis logistics, from wholesale distribution to last-mile delivery, creates certain complexities that armored trucks can’t entirely resolve.
Among these complexities is the fact that most cannabis distribution is based on frequent, highly varied deliveries of relatively small quantities for both retailers and wholesalers. This causes obvious problems with security, while also complicating the processes of routing, dispatching, and vehicle outfitting/maintenance. And many distribution services are still operating in somewhat of a legal grey area, furthering exacerbating all of these issues.
There is a dire need for businesses to be able to quickly and effectively prove their regulatory compliance, protect their products, and find route standardization while distributing and delivering marijuana products.
Big businesses are still mostly avoiding the industry due to fear of federal regulation and customer alienation. This leaves the realm of cannabis primarily populated by small to mid-sized businesses (SMBs) with less capability to create widespread and technologically advanced distribution methods.
Unfortunately, the traditional forms of delivery tech make it nearly impossible for transportation services to turn a profit without functioning at a large scale. And so many cannabis operations have begun to rely on turnkey, Uber-like solutions to help them overcome these technical hurdles with varied and largely underwhelming results.
Current Distribution Solutions Have Yet to Fully Bloom
In 2017, cannabis ventures in the U.S. received roughly $1.6B in public and private investment funds. Unsurprisingly, there are several tech startups currently vying to dominate the realm of innovative cannabis delivery and distribution while capturing some of that capital. A few of the more recognizable names in this space include Eaze, Meadow, SpeedWeed, and ApexTrading.
Eaze made headlines late last year for burning over $1M per month in an effort to expand their distribution network. Even in mainstream industries, delivery services require a large reach in order to have enough volume to be profitable.
So it makes sense that Eaze is willing to spend so much money on expansion. Still, when you couple the typical pitfalls of delivery businesses with regulatory issues specific to the cannabis industry, the margins become slimmer and the inefficiencies quickly escalate.
According to MarketWatch, Eaze was incurring costs of about $10-$12 per delivery in 2017, with highs reaching upwards of $30 in certain areas with less desirable markets and more decentralized geographical layouts.
In response to this, Khaled Naim, CEO of OnFleet, stated that those costs are actually manageable when operators can sell a high quality product with a roughly 30% margin. But, in order to maintain that margin, delivery services need to create large, complicated, and high volume networks, and increase inventory prices, all while avoiding regulatory headaches along the while. This is a feat that’s certainly achievable, but there is definitely a better way to approach these problems while driving delivery/distribution costs down and increasing margins throughout the entire cannabis supply-chain.
Other solutions like Meadow, SpeedWeed, and ApexTrading are similarly helping farmers, wholesalers, retailers, and consumers connect in a more streamlined fashion by providing “uber-esque” services and more standardized logistics platforms. While these companies offer an approachable means for creating efficiencies in supply-chains, they still leave a lot to be desired.
Sure, applying the available delivery tech to this issue is certainly a step in the right direction. However, it’s the newly developing tech, like blockchain, that will likely be the real saving grace of the cannabis industry as a whole.
How Can Blockchain Provide a Spark?
Logistics provide some of the heftiest and most frequent opportunities for potentially helping or hurting a business’s supply-chain. This is true throughout all industries and cannabis is no exception.
Let’s take a closer look at what current cannabis distribution solutions lack and how blockchain can fill in those gaps while also creating supplementary efficiencies.
The Needs…
- As the volume and velocity of cannabis distribution increases, so too will the need to continuously and efficiently provide proof of regulatory compliance during both routine and unplanned inspections.
- Cannabis businesses require better ways to track their products and methods for distribution such as vehicles and operators in order to maintain complete visibility into the chain of custody.
- There is a definitive need for more detailed and immutable ways for organizations to register the exchanges and interactions that take place between themselves, their distributors, their customers, and obviously, their products. This is particularly difficult in a primarily cash driven marketplace.
- Small to mid-sized businesses (SMBs) make up the bulk of the growing cannabis industry. These smaller organization often struggle to collect, analyze, and act upon large troves of data. Real-time data-driven decision making is a necessity in modern logistics operations.
- Cannabis distribution services require automated systems for route optimization, data-driven methods for dispatching, and diagnostic and prescriptive fleet maintenance.
- There is an obvious need for improving transparency and trust into the distribution and delivery processes at all levels within a cannabis supply-chain. This helps with security, transactional efficiency, customer relationship and inventory management, and regulatory/industry compliance.
The Blockchain Solutions…
- Using distributed ledger technology, blockchain-integrated logistics can immutably register everything that happens along a supply-chain. That means that all interactions and exchanges that take place between people and products will be recorded in a way that all members of system can access without being able to manipulate.
This will ensure that regulators can see the entire chain of custody for cannabis shipments and will streamline any inevitable inspection processes. Recording logistical and other supply-chain data on a blockchain distributed ledger also enables the cannabis businesses to track the entire life-cycle and movement of their products from seed-to-sale (or from farmer to consumer).
- As large amounts of data get collected within a blockchain system, it becomes much easier for SMBs to make real-time and automated data-driven decisions based on pattern recognition and other forms of technical analysis. Due to the lower infrastructural costs of blockchain databases, implementing machine learning and automation processes is actually incredibly viable for startups on a tight budget.
With this transparent and immutable collection/analysis of data, cannabis distribution can benefit from real-time route optimizations, highly efficient dispatching, and prescriptive fleet maintenance on an as-needed basis. This will save time, money, and create a safer and more secure environment for cannabis exchanges.
- With a blockchain-integrated logistics application, cannabis businesses can easily work with fast, secure, and cost-effective cryptocurrency transactions. This will create less opportunities for fraud, corruption, and other forms of criminal activity while also opening up their markets to new audiences. Other types of transactions can be automated and secured via smart contracts that function within the blockchain system.
A smart contract is essentially an unchangeable digitized agreement that can be used both internally within an organization and between two separate entities. The idea is as soon as “this” happens, then “that” will automatically happen. For example, as soon as a payment is processed, a delivery vehicle will automatically be dispatched. Both cryptocurrency and smart contracts have endless potential to streamline cannabis logistics.
Growing Your Own Blockchain Logistics Applications with SupplyBloc
So now that we understand why blockchain-based distribution methods offer so much more than traditional approaches within the cannabis industry, we should discuss the benefits of developing logistics applications using the SupplyBloc platform.
SupplyBloc is a blockchain-integrated Platform as a Service (BaaS/PaaS) that provides APIs and SDKs to businesses for the development of highly customizable supply-chain management applications. Businesses can use SupplyBloc to harness the power of blockchain distributed ledgers, smart contracts, and cryptocurrency along with our application development tools to create custom solutions for their specific needs.
While SupplyBloc is focused on managing the entire supply-chain, our foundation is built upon an On-Demand Logistics API that is perfect for optimizing cannabis distribution and delivery.
With SupplyBloc’s On-Demand Logistics API, cannabis organizations can create blockchain-based applications distribution and delivery applications that they retain full control over. This means that they can tweak whatever elements of their logistics app that they see fit, while still maintaining a foundation built atop powerful blockchain technology.
An added benefit to this type of solution is that cannabis businesses can easily integrate the apps that they build using SupplyBloc into their existing systems. This type of “plug and play” methodology ensures that businesses have the ultimate say for exactly how things are structured within their organization.
While the current turnkey ‘uber-like’ solutions to cannabis logistics might seem tempting, the businesses that opt create their own blockchain applications using the SupplyBloc platform will be much more scalable, cost efficient, and will ultimately grow to dominate their markets. This technology has endless potential, and SupplyBloc is a low cost way for small to mid-sized cannabis organizations to take it and run with it, however they please.
In an industry where careful cultivation is the name of the game, growing your own blockchain-integrated logistics applications is the best way to solve distribution and delivery conundrums in a customizable and controllable fashion.
You can read up on our On-Demand Logistics API here, or go to supplybloc.io to learn more.
