How Will Cannabis and CBD Manufacturers Drive Sector Growth in 2022?

CBD sales are on an upward trajectory, and this has caught the attention of the manufacturing industry. 91% of manufacturers are interested in moving into the production of legal cannabis goods, with sector growth forecast to continue at a rate of 21% year-on year until 2028.

For current CBD manufacturers, increased market competition is raising the bar on operational standards. New research commissioned by Aptean has revealed that 48% plan to increase automation across their business in the next three years, to tackle critical challenges, improve customer satisfaction and capture market share as legal cannabis product sales continue to grow.

What’s Standing in the Way of CBD Manufacturing Growth?

While consumer appetite for CBD products has increased significantly over the past 12-18 months, not every manufacturer has been able to fully capitalize on this opportunity.

As we outlined in our new whitepaper—How Will Cannabis and CBD Manufacturers Drive Sector Growth in 2022—two thirds of manufacturing organizations have been forced to delay or cancel customer orders as a result of not being able to meet increased demand.

CBD manufacturers’ failure to meet rising customer expectations has been driven by three major operational issues:

1. Supply Chain Instability

89% of CBD manufacturers are still experiencing longer than usual lead times, although the consensus is that the situation is gradually improving.

This is welcoming news, as the sensitivity of marijuana plants mean that any delay or disruption in the supply chain can be devastating to the quality and useability of raw ingredients. 67% of CBD manufacturers want to improve their supply chain visibility over the next 12 months to accelerate their lead time recovery and prevent future problems.

2. Inventory Management Issues

Material unreliability has fueled issues in other business areas too, with 4 in 10 cannabis manufacturers struggling to align their production schedules with ingredient availability. But while market conditions have made the problem more prominent, the root cause of inventory management issues isn’t the supply chain; it’s lack of data integration.

85% of CBD manufacturing companies admit their data is currently too fragmented or siloed to make comprehensive decisions, as legacy systems struggle to cope with the volume of information and operational demands being placed on them while sales of legal cannabis products increase.

This is reflected in manufacturers’ technology investment priorities: 86% are already replacing unintegrated legacy technologies or plan to do so within the next 12 months, while 78% are investing in process manufacturing ERP software or other, similar solutions to help them maintain inventory levels more effectively.

3. Shortage of Skilled Workers

Manufacturing as a whole is struggling to recruit a new generation of workers required to build a smart production facility, and CBD manufacturers marked skills shortages as their number one problem heading into 2022.

However, cannabis manufacturing organizations also believe that technology can bridge the gap between current and future skillsets and create a more productive, value-driven workforce.

56% of the CBD companies we surveyed expressed an interest in replacing some job roles with robots to automate dangerous or repetitive tasks, while 100% of cannabis manufacturers said investing in a digitally-driven employee experience would help them to improve staff retention rates.

How Can Cannabis Manufacturers Use Technology to Solve Critical Industry Challenges?

As we’ve touched on already, CBD manufacturers are rapidly realizing that technology investment is pivotal to navigating major industry challenges, and market leaders are already investing in a cohesive strategy for driving change and expansion. 88% of CBD manufacturers believe technology will improve their overall operational efficiency, while 81% want to use it to manage their profit margin better.

Our research found that 97% of cannabis manufacturers already have a roadmap in place for digital transformation—and this reflects the critical growth point that many CBD companies have reached.

The majority of manufacturers that responded to our study have been in business for 6-20 years and are generating $100-500m annual revenue, showing the legal cannabis manufacturing market is being spearheaded by scale-ups rather than start-ups.

Many of these CBD manufacturing companies have reached a point where the legacy processes and systems they rely on aren’t able to manage the speed, complexity and accuracy of their current production requirements. As such, digital transformation has become fundamental to increasing market share while maintaining product quality and meeting customer expectations.

What will separate future industry leaders from their competition is how they approach technology investment—with those who choose a holistic, industry-specific solution like cannabis ERP software poised to reap the greatest rewards.

Investing in seed-to-sale software for cannabis manufacturing will unite their business operations to solve a diverse range of challenges through real-time data insights driving cohesive actions. And by putting a digital infrastructure in place to enable a more efficient performance, CBD manufacturers will also liberate more resources for process innovation and product development.

For a deeper dive into challenges and opportunities in legal cannabis manufacturing, download our whitepaper: How Will Cannabis and CBD Manufacturers Drive Sector Growth in 2022.