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Volume 3, Issue 8
How can cannabis enterprise resource planning software help organize your data?
The amount of data created within a cannabis operation is extraordinary—from growing to harvesting, production, distribution, and sales. What a company does with that data is critical to the success of its business, allowing it to operate more efficiently and profitably. Cannabis enterprise resource planning (ERP) software provides the ability to accurately collect data, consolidate it within a single, secure database, access it when necessary, and analyze—integrating all business processes effectively. In a competitive market, integrated, centralized data is essential to providing successful cannabis businesses a foundation for not only surviving but also thriving in a world with increasingly tighter profit margins.
An Enterprise Resource planning (ERP) solution is a business management system in which all data is centralized—including accounting, human resources, growing, cultivation, quality, production, inventory, sales, and reporting. Automated data management and record-keeping within the solution streamlines processes, reduces errors, and requires less time than manual methods or juggling multiple disparate systems. Real-time access to information provides visibility to company stakeholders and eliminates previously siloed factions of the business—laying the foundation for transparency of the entire cannabis operation. If the parent company includes multiple entities, divisions, or locations, the system allows for the monitoring, tracking, and recording of information from each warehouse, jurisdiction, or intra-industry vertical (grower, processor, and dispensary)—even for those in different states or countries.
Specifically, there are several areas tracked and managed within the ERP solution for which integrated data is especially important, including the greenhouse, production, inventory, and accounting divisions of the cannabis business. A discussion of the specific information essential in each area provides a complete picture of the integrated functionality of cannabis ERP.
A cultivation management system (CMS) provides virtual management of greenhouse operations—addressing growing, inventory, regulatory, and labor needs. An ERP’s CMS streamlines operations, tracks cultivation stages, and monitors cannabis growth periods. The system utilizes user-specific role permissions in the software to prevent the mishandling of critical information and maintains the integrity of data, increasing security and accountability. Within the integrated solution, tracking of the supply chain includes plant health, growth, harvesting techniques, and batch yields—without any gaps in the information collected.
The CMS solution automatically documents all resources with possible effects on strain-specific plant growth and yields including moisture content, nutrient applications, feeding and pruning schedules, and fertilizer. By capturing this data, factors that improve yield quality and efficiency can be replicated in the future growing season to optimize conditions, thereby increasing revenue per yield.
Genealogy tracking within the CMS records and monitors crossbreeding, plant genetics, and clone potency of each plant batch with origin information. State required tracking of plant inventories occurs throughout the multiple stages in its lifecycle—tracing from the seedling to the plant through the vegetative, flowering, and harvesting phases. Monitoring of the growth schedule in the CMS and integrating with the ERP system allows for future production planning. Tracking at the individual plant level in real-time with a unique plant ID number (including barcode and date) captures information regarding the number of plants, assignment of batch names, container type, wet and dry weight, recording of waste or loss, and can link plants to a particular facility.
Once a plant reaches 8-in., it receives a physical state or governing body ID tag, triggering the requirement for regulatory tracking. Synching this data to state regulatory systems or other third-party bodies is handled seamlessly through the CMS to protect against compliance violations. Audit trails automatically recorded within the solution enable reporting of terpene profiles, tetrahydrocannabinol (THC) and cannabidiol (CBD) potency, and other attributes. Data collection occurs throughout the growing, manufacturing, and production processes. The ERP solution’s centralized database maintains the information, automating the transfer of required reporting data. This electronic transfer of data streamlines the process of regulatory compliance to ensure that reporting is accurate, timely, and meets changing requirements in a complex industry.
As the highest expense incurred by growers, the CMS monitors labor costs to enable efficient greenhouse planning, automation, and workflows. Operation managers can analyze labor by function to identify the actual production and overhead costs down to the strain level, to determine the profitability of the products and make data-driven decisions.
A comprehensive ERP solution provides real-time documentation and visibility of the procedures and processes used to schedule operations and work center availability to optimize and streamline the production workflow. This can include bulk packaging of cannabis plants and buds or the manufacturing of cannabis-infused products such as edible brownies or vape cartridges. The integrated solution allows for future planning and scheduling, as the expected timeframe for when plants are ready for production can be determined.
Planning and Scheduling
By factoring in production capacity and available materials, dynamic production planning and scheduling functionality streamline the allocation of resources. The ERP solution factors in the material lead and lag time, machine and labor availability, cannabis product profitability, approved suppliers, demand for particular strains and products, quantity changes, and variations in strains or types of cannabis products.
An ERP’s automated processes and best practices ensure safe, consistent, and quality products throughout the supply chain. For those in the edibles marketplace, documenting food safety procedures mitigates risk in regards to cannabis-specific concerns (such as aflatoxins, plant pesticide residue, pest contamination, and inconsistent levels of THC or CBD potency), as well as the dangers common to traditional food manufacturers such as improper employee procedures or training. The recording of comprehensive processing controls, such as quality assurance measures with production attributes including potency, dry weight, wet weight, critical control points (CCPs), and so forth is also important. Quality control testing results are stored and managed within the ERP’s centralized database (whether completed on-site or by a third-party laboratory), to aid in the ease of quarantining of raw materials that do not meet standards as well as products that are awaiting test results. Capturing these critical attributes of cannabis products provides accurate information for consistent compliance and consumer-focused labeling and packaging.
Recipes and Formulation Management
With high consumer demand for product consistency in regards to taste, texture, appearance, potency, and expected results, complex recipe and formula management is a requirement for any ERP solution. Keeping detailed information regarding raw material data, production notes, versions, and revisions for each batch helps deliver products that consumers want and expect. Calculating nutritional information with ingredient and allergen information produces accurate labeling, reporting, and product packaging required for consumers in the cannabis edibles market. The labeling history documented in ERP software identifies and locates items quickly in the event of a product recall.
Research and Development
In an ever-changing industry, it is essential to have integrated research and development (R&D) functionality to allow for expansion into new and innovative markets—including the development of new edibles, beverages, and forms of delivery as well as new extractions, tinctures, and concentrates. An ERP solution offers the ability to create new recipes quickly, leveraging current costs and product history within a sandbox software environment. This not only provides the opportunity for development and testing without affecting current processes, but also allows for a seamless transition into live production when ready for the consumer market.
Accountability across the supply chain is increased through utilizing plant tag IDs as well as serial and lot numbers with forward and backward traceability that links product information to batch tickets, shipping documents, certificates of analysis (COAs), and labels. Capturing electronic signatures, timestamps, and recorded approvals within the ERP solution provides a real-time audit trail to demonstrate a complete chain of custody for compliance initiatives —as well as for auditors, certified public accountant (CPAs), and others who need access to the information.
As part of a company’s safety plan, performing mock recalls ensures that cannabis businesses are implementing safety procedures within their facilities, with the ability to modify their plans as necessary. Documentation of these exercises demonstrates that a company can quickly identify and trace raw ingredients and finished goods back to their source as quickly as possible in the event of a recall because of inconsistent, unsafe, or contaminated products. With regular mock recall practices and integrated information available in the ERP, cannabis companies can mitigate the risk of hazardous products entering the marketplace.
Tracking the quantity and location of valuable cannabis inventory is of vital importance to manage regulatory risk and prevent theft. Due to ever-changing regulations, cannabis businesses must be prepared to report on the inventory they have on hand at any given time—needing accurate accounts of stock in case of an audit. Cannabis ERP efficiently utilizes established inventory control measures across multiple locations and warehouses—tracking information scanned from the initial planting of the seeds, through growing and harvesting, and the final sale of products to consumers. User-based software permissions track all employee transactions, ensuring security and accountability of inventory. Mitigating the risk of unsafe products entering the cannabis marketplace is the primary goal of any inventory control system.
In an effort to control costs, the ERP solution tracks safety stock levels to keep a consistent inventory. By setting up criteria for reordering, the automated system can prevent shortages and avoid overproduction, maintaining appropriate levels of raw materials and cannabis products in real-time. To reduce waste, the system monitors expiration dates and facilitates rotation methods. To assure inventory accountability, the solution monitors inventory loss due to damage, product loss, shrinkage, and accidental or purposeful destruction. The recording of plant tag IDs, serial and lot numbers, location and movement details, as well as product measurements down to the milligram maintains robust auditing capabilities.
Material Resource Planning
Cannabis companies can utilize efficient resource planning by incorporating the material resource planning (MRP) functionality of a cannabis ERP solution for the effective and efficient use of resources. MRP ensures the sufficiency of raw materials for production and finished goods on hand to meet customer demands—factoring in supply, demand, and forecasted requirements to help plan production, purchasing, and available-to-promise inventory.
Cannabis ERP software handles all core accounting processes of a cannabis business by gathering financial data in one central location and eliminating the need for duplicate entries or imported information from multiple sources. By offering a complete picture of a company’s overall financial health, the solution tracks expenses, assets, liabilities, cash flow, and profitability. This collection of business data provides the financial reporting tools for invoices, journal postings, purchase orders, cash management, monitoring of inventory, and other report creation. With this data automation, manual reconciliations are obsolete since the information from accounts payable and accounts receivable flow into the general ledger, allowing employees to focus on other tasks. Historical data availability makes past financials easily accessible.
Utilizing its visibility into the entire supply chain, the ERP system calculates the cost of goods and services (COGS) automatically—enabling management to calculate COGS on a per gram or per ounce basis. This accurate cost analysis tracks overhead, accounts for waste, and provides complete cost controls for internal and state-mandated reporting.
With the tax complexities of the cannabis industry, it is important to use a fully integrated software accounting solution that provides financial reporting, meets Generally Accepted Accounting Principles (GAAP) and auditing board compliance standards, and can navigate complex cannabis tax regulations. An integrated ERP solution helps navigate the tax regulation implications of section 280E of the IRS guidelines.
Industry analytics, key performance indicators (KPIs), and forecasting tools available in an ERP solution allow cannabis companies to access data to provide additional insight, foster collaboration, and enhance overall efficiency—offering a competitive advantage. Data provides a complete view of operations from seed to sale to report on operations, financials, and key business metrics for investors and company stakeholders. Whether the business is looking to identify its most profitable strain or forecast the future sales of a new product, reliable data from the ERP solution can provide real-time analytics to make data-driven business decisions.
With the tools and functionality to collect, track, and utilize the data cannabis companies gather every day, it’s no longer necessary to sort through endless spreadsheets and multiple sources to get the information needed to become more efficient and profitable. Integrated data in greenhouse, production, inventory, and accounting operations available in cannabis ERP can provide a competitive advantage for cannabis businesses looking to leverage technological tools to meet their needs.
About the Author
DANIEL ERICKSON is the director of product strategy at ProcessPro. Daniel has been with ProcessPro since 1999. As the Director of Product Strategy, Daniel focuses on driving overall market success by ensuring products meet both current and future market demands. Leveraging his extensive understanding of process manufacturing, the unique business trends of this industry and information gathered from market analysis, customer feedback, and regulatory compliance, he drives product decisions. Daniel has a passion for connecting the benefits of ProcessPro’s ERP solution and analytics software packages to batch process manufacturers and helping to effectively solve their key business challenges. Daniel has held a variety of positions within ProcessPro, including implementation, account management, product consulting, product management and sales, which has provided him an aptitude for manufacturing and the nuances within the food and beverage, nutraceutical, personal care, pharmaceutical, cannabis, and chemical industries. His diverse experience with the customer base and within ProcessPro provides a strong foundation for his position. Direct correspondence to:
D. Erickson, Cannabis Science and Technology 3(8), 46-49 (2020).