Look, it’s no secret that the ERP now plays a crucial role in any business – regardless of size, sector, or industry.
An ERP’s primary goal is to provide a foundation for running a business. It represents the precursor for all digital transformation efforts, enables organizations to drive strategic change, and provides the visibility and flexibility needed to adapt to changing circumstances – in near real-time.
It only follows that cannabis companies, just like everyone else, need a reliable ERP.
In this article, we’ll cover the “what” and “why” of cannabis-specific ERP solutions, talk platform selection criteria, and provide a brief overview of what to expect from the implementation process.
Why You Need a Cannabis ERP Solution
Cannabis ERPs serve as a centralized business management system that helps companies meet their core demands. They unify all front and back-end operations and handle universal tasks like accounting, finance, sales, inventory, and so on.
Now, if you’re thinking, “hey, that just sounds like anERP,” you’re spot on. Cannabis ERPs and “regular” ERPs are largely the same. But here’s the thing: ERPs are both generic and hyper-specific. So, while cannabis ERPs cover most of the same functions as their counterparts in other industries, they also address the unique requirements and challenges of operating within this complex industry.
Unfortunately, many marijuana businesses use a standalone seed-to-sale system to keep up with state and federal compliance requirements. Then, they might also use a separate system for accounting, and depending on the business model, additional solutions for POS, inventory management, and so on.
The cannabis industry is highly-regulated, which means that maintaining data integrity, control, and end-to-end visibility is a matter of life and death for a business.
And, all of these things are very hard to achieve when you’re working with fragmented, and/or outdated systems – which make it difficult to gather reliable data and put it to work.
That in turn, leads to serious problems that can undermine your business. For example, bad data can lead to regulatory non-compliance, recalls, or just plain bad decision-making. Complex, fragmented systems can also be hard to improve or replace – so, you don’t have the flexibility you need to respond to customer needs and market conditions as they change.
By contrast, working from a single source of truth allows cannabis companies to manage business processes, maintain compliance, track resources, and leverage data to achieve specific business outcomes.
Key Benefits of Using a Cannabis ERP
As mentioned, the ERP is the first step toward helping your business secure and sustain a competitive advantage. Here’s a look at some of the biggest benefits of implementing the right all-in-one solution:
- Data-driven decision-making. Working from a unified ERP provides cannabis companies with end-to-end visibility – allowing them to see everything that’s happening inside the business in one place. Additionally, baked-in intelligence and intuitive reporting tools give users the ability to make the right decisions faster and start driving improvements ASAP.
- Supply chain transparency. Cannabis ERPs help teams track plants, finished products, manufacturing processes, forecast crop yield, and continuously monitor improve products, processes, and performance.
- More profits & cost-savings. ERP systems unify and streamline all business operations – which in turn, means greater efficiency and increased productivity. Business leaders can identify and eliminate waste centers and make profitable decisions. Employees and external collaborators benefit from improved collaboration. And – AI insights and automations promise faster turnarounds, fewer errors, and more consistent products and services. Overall, cannabis ERPs boost the bottom line from both ends.
- Automate manual tasks and workflows. ERPs enable organizations to eliminate manual processes, avoid bottlenecks, and mitigate risks by simplifying and streamlining tasks that range from data entry to compliance and quality testing.
- Tighter controls & security. Modern cloud ERP solutions come with some of the tightest security and compliance protections around. Companies like Microsoft, AWS, and IBM work with businesses operating under complex conditions and regulatory requirements – think finance, healthcare, etc. While the rules of the cannabis game are a bit different, top ERPs were built with complexity and high-stakes regulations in mind.
How to Choose the Right Cannabis ERP Solution for Your Business
Choosing the right cannabis ERP for your company follows the same process as any other ERP evaluation. While this is a super-condensed list, here’s a basic overview of what the selection process might look like:
Take a Holistic View of Your Business
First of all, selecting an ERP starts with getting a zoomed-out view of the entire business. It’s important to break away from single-purpose solutions like seed-to-sale systems and start mapping all business functions, processes. Here, your goal is gaining an understanding of how each part of the business is connected and begin to identify goals, gaps, and areas of improvement.
Define Business Requirements
Once you’ve mapped out your business processes, systems, personnel, and so on, you’ll want to define your business requirements.
In other words, what solutions will you need to manage end-to-end operations as they are right now, and what solutions will you need to fill gaps and drive improvements that will get you where you need to go?
Generally, a cannabis ERP should include the following:
- Finance & accounting. Financial data is central to any ERP system. It serves as the basis for everything from forecasting and budgeting to sales and marketing, procurement, and more.
- Product tracking & cultivation. For cannabis companies, you’ll need to make sure that any ERP solution includes a seed-to-sale component to maintain compliance with state and federal regulations. Keep in mind that out-of-the-box ERPs don’t include these capabilities, so you’ll need to look for add-ons and ISV solutions or consider building your own. That said, D365 BC integrates easily with state tracking systems like Leaf Data Systems, Metrc, and BioTrackTHC.
- Automated compliance & control. Modern ERP systems rely heavily on AI, ML, and automations that protect critical data and maintain compliance with regulations, branding, and internal governance. In the context of the cannabis industry, you’ll want to look for an ERP solution that can automatically adapt as regulations and tax requirements continue to change.
- Distribution & logistics. You’ll need to make sure that you choose a solution that keeps track of all raw materials, finished goods, and incoming orders. Additionally, if you’re shipping products to wholesale accounts or end customers, it’s also a good idea to look for ERP solutions with fleet management capabilities, IoT integration, and features like route optimization.
- Retail & sales. Will you be selling products through your own website? Partnering with delivery services? Selling to wholesalers? Even if you’re not pursuing these strategies right now, you’ll want to have the flexibility to do so in the future. Additionally, if you’re running a dispensary, you’ll need to look for a solution with a built-in POS system to process and track in-person transactions.
Now, it’s also important to note that these requirements are only a starting point.
You’ll also need to account for the unique workflows, services, and solutions that only exist within your business.
SMB vs. Enterprise
Another (major) factor you’ll need to consider is whether you’re an SMB or an enterprise, as this will determine your choice of core ERP system. Within the context of Microsoft, you’re looking at D365 Business Central or D365 Enterprise (where you’ll choose among a selection of Finance & Operations apps).
Many conversations about cannabis companies tend to lump them into the SMB category. Which makes sense, as the patchwork system of laws and regulations in the US alone (not to mention the rest of the world) make it harder to do business across state lines and international borders. That said, it’s not impossible.
Ultimately, you’ll need to look at factors like your business model, growth projections, complexity, and others to make the final call. We take a deeper dive into “enterprise qualification criteria” in another recent post if you’re interested in learning more about this topic.
Implementing Cannabis ERP
With greater control of your supply chain, end-to-end-visibility, and intelligent automation, your cannabis ERP stands to provide everything you need to respond to changing conditions and make profitable decisions. That is, if you can manage to nail the implementation.
Here, we’ll share a few things you’ll need to include in your ERP implementation strategy.
Keep in mind, implementation is a complicated process with many nuances, stages, and moving parts (for a deeper dive, check out another recent post: best practices for implementing your ERP).
Define Measurable Goals and KPIs
Like most industries, the cannabis industry is defined by constant change. But unlike many other industries, cannabis businesses need to keep up with more than shifting market conditions and rising customer demands. It’s also about keeping up with new laws, changes in the tax code, licensing requirements, and so on.
The only way to survive amid shifting regulations, rising demand, and uncertain future is with a flexible ERP system that supports your processes and aligns with your goals, requirements, and budget.
As such, it’s crucial that you spend some time defining what it is you hope to gain from this investment and how you’ll measure success.
Companies often neglect this step, but it’s important to get a clear picture of the outcomes you’d like to see in the pre-, intra-, and post-implementation periods. And it’s equally important to identify the KPIs you’ll use to track progress against those goals, a baseline you can use as a starting point, and values for where KPIs should be at each stage.
Get Everyone on the Same Page
As with any organization-wide change, buy-in from the C-suite is a crucial step in the right direction.
Without a champion at the top, you end up with fragmented initiatives and a whole lot of resentment — both of which will tank any ERP project before implementation even begins.
Investing in a new cannabis ERP impacts everyone in the organization — meaning it would be a fatal mistake to leave employees — whether they’re middle managers, front line workers, or directors and VPs leading entire departments.
People are often resistant to change, especially when they have been doing things the same way for years. As such, it’s important to have people from every department engaged in the implementation process, if not the initial selection.
Cannabis businesses may have an advantage here. Most aren’t that old, so it’s unlikely people have even had enough time to let habits or routines calcify. Still, implementing a new ERP might be a shift away from ad-hoc record-keeping or informal processes that could put your business at risk or limit your growth potential.
Your goal is helping the team understand that to grow the business and unlock new opportunities for everyone to be successful, you need an ERP that serves as the digital foundation for your entire business.
Come Up With a Game Plan
Don’t take the planning process for granted.
Cannabis companies must ensure their system is designed and built for where they are right now — but also, that it’s flexible enough to adapt as the market, their customers, and their overall strategy evolve.
You’ll need to understand how your current business processes are functioning (or not) and how they might be improved before you can move forward with implementation.
You might ask yourself:
- Are you able to get the reports you need to demonstrate compliance? Make purchasing decisions? Understand how products are performing? Etc.
- Are you able to demonstrate compliance with federal, state, and local laws?
- Are you planning to expand into new segments or markets?
- Are you trying to raise investor capital to fund expansion efforts?
Establish an Internal Team
Building an internal team of project champions helps result in a smooth transition with broad user adoption. Post-implementation, the team becomes the internal resource for continued success.
Every organization is different, but your ERP team might include the following roles:
- Project lead. Typically a senior manager who can provide high-level guidance during the implementation and offers or filters support needs once the company is live with the new system. This person may end up as an overall project manager who sets meetings, tracks progress toward milestones, monitors system controls, and ensures all issues are identified and addressed.
- IT manager. Internal IT support is critical for the success of any implementation. Merging information and ensuring initial system needs are being met will keep the project running smoothly from an operations standpoint. This may include ensuring proper hardware and software connections, as well as monitoring internal activity to provide guidance on company needs.
- Team leads & team players. Team users will need information and training, and leads can be trained to be trainers. That said, you don’t necessarily need to stick to the hierarchy of the org chart. Individual “team players” are often in a better position to get buy-in from the team and train colleagues in context. Look for power users and enlist them to support the mission.
Don’t Do it Without a Partner
Finally, it’s important to note that getting the most from your ERP investment depends starts with the right partner.
Doing your due diligence is a great starting point, but in most cases, you’ll be better off navigating the selection process — and later, planning and implementation — with a seasoned expert leading the way.
This is true for any business staring down a major ERP transformation. However, the cannabis industry and the many complexities it brings to the table make partner support an even more urgent priority.
For example, ERP solutions like Dynamics Business Central aren’t necessarily designed for the cannabis space out of the box, but can be adapted to fit your unique requirements with customizations, ISV solutions, and the right integrations.
The bottom line is, cannabis ERPs are a prerequisite for competing in this complex business environment. The right solution enables businesses to eliminate bottlenecks and manual processes, tackle issues like unreliable data, lack of operational capabilities, functionality gaps, or inability to scale, and remain compliant with ever-changing laws and regulations.
That said, investing in an ERP is a serious decision – and a significant commitment. The application you choose should facilitate overall efficiency gains, provide access to the data you need to make intelligent decisions, and protect your business from the myriad risks that come with operating in this space.
Velosio is a certified Microsoft partner with more than 30 years in the game. We help our clients address their biggest challenges, achieve strategic objectives, and power business growth for years to come.
Get in touch with an expert today. We’ll walk you through our process, services, and the specific ways we can help cannabis companies win big in a confusing, complex business environment.