The of Bud: Putting Some SaaS into the Marijuana Supply Chain

pot wollertz/Adobe Stock

Technology is no stranger to the marijuana consumer.

From bongs crafted of gorgeous blown glass, assembled to resemble a train, or jerry-rigged by a friend of mine out of a couple of industrial-sized Absopure water bottles back in college (it really happened), all the way down to a cored apple (also happened), technology — no matter how crude or sophisticated — has been at the center of consuming the smoke of the flower for centuries.

Of course, technology also factors into non-smokable marijuana products, such as producing edibles that have been infused with THC — brownies, cookies and the ever-more-popular gummies — on a scale for mass consumption.

But when it comes to the B2B market in both medicinal and recreational segments of the young legal marijuana industry, technology used to enable that particular supply chain is a relative newcomer on the scene.

As we introduced in the first part of this series, marijuana purchasing managers have long been putting up with managing orders, inventory and supplier relationships the old way. Faxes, texts, emails, Excel spreadsheets and even corkboards littered with Post-It notes were all fair game. But it wasn’t helping the buyers at the dispensaries or retail shops advance strategically.

Enter SaaS platforms to save the day.

The of Bud

That’s what Forbes coined LeafLink, the SaaS platform founded by Ryan Smith and Zach Silverman, connecting marijuana buyers and suppliers. The publication named Smith one of its 30 Under 30 that year, the first from a cannabis-facing company.

“Cannabis-facing company.” My, how the business has cleaned up.

But to folks like Smith and Josh Best, the inventory control manager and head buyer for Medicine Man in Denver, that’s just the point — the stereotype of grungy stoners as the main consumer base is the first thing that should go up in smoke.

The image of the lazy stoner may need to be set aside, too. In 2016, there were 698 storefronts in in Colorado where you could buy medical or recreational-use marijuana. That’s more than triple the number of Starbucks in the state, which speaks how the business culture around marijuana has grown to the point that SaaS platforms for its supply chain became a no-brainer business idea.

The ‘Aha!’ Moment

The founders’ focus on the greenfield nature of marijuana supply chain management turned out to be a boon.

“In the cannabis industry, there is less to disrupt because you can define from the very beginning, ‘This is how it’s done,’” said Smith. In that way, it’s a “tech-first” industry in that there are no preconceived notions of doing business.

Both Smith and Silverman came into the business with a SaaS background. As LeafLink’s quirky NYC-based CEO, whose bio betrays his tendencies to build structural models as a party trick and eat more sugar than Will Ferrell’s character in “Elf,” Smith has had an obsession with selling things on eBay since sixth grade. That translated into starting an investor relationship management platform for real estate companies his senior year of college, which he then sold. Silverman had worked at eBay on its B2B enterprise platform before meeting Smith and deciding to start LeafLink.

They began 18 months ago by asking questions of dozens of supply chain players throughout the industry — anyone who would meet with them — with the goal of teasing out their business and organizational pain points. The resulting conversations unearthed the need for better order management.

“We visualized what the order management process is and should be” in the pot supply chain and how it should work, Smith said. “What we created has what the other [non-marijuana-industry-specific] B2B commerce platforms don’t have.”

The LeafLink Differentiator

If pressed for one word to describe what makes LeafLink unique, it would be “community” — and not necessarily anything related to the simple yet core Amazon Business-like functionalities, which have seemingly become a must-have for the next-gen e-commerce companies starting out).

“We didn’t want to go as wide as TradeGecko,” Smith said, referring to the inventory management platform solution, and adding that “the community effect is tied into the actual tools.”

For dispensaries, these include the ability to discover new products and request samples from certain suppliers. (Platform access is free for dispensaries and retail stores.) On the vendor side, having a CRM with integrated order history helps streamline process flow and places the focus on relationships.

The tight-knit community feel of the legalized marijuana business made a platform like LeafLink a natural partner fit for practitioners in the pot supply chain. “Unfortunately, modern B2B platforms haven't always been available to our industry,” said Kim Gibson, sales representative for Wana Brands. “Wana was very excited to be one of the first edible companies in Colorado to use this new technology.”

“As a sales rep, it has helped me forge better relationships with my customers since all the of the actual order taking has been automated,” Gibson continued. “It allows for companies like Wana and Medicine Man to focus more on building our brands rather than just selling products.”

Remember how I mentioned the greenfield nature of marijuana supply chain management being a boon? According to Smith, they launched their platform in March 2016, with the first full month being live that April.

“4/20 is the Christmas of retail life for cannabis, and in April 2016 we did $12,000 [in] orders” on the platform, he said. “We just broke $6 million in orders in May 2017, a little more than a year after launch.”

LeafLink now hosts more than 970 dispensaries across five states on its platform, buying from 150 brands, according to Smith.

“It’s definitely interesting and it never gets old.”

The Road Ahead

According to Forbes, Smith and Silverman believe the weed supply chain will ultimately look like the alcohol business, with regional distributors and “nonsensical” supply chain participants.

Of course, we haven’t yet addressed the biggest elephant in the room: regulatory risk and compliance. That central issue looms larger in this industry and its supply chain than perhaps any other in the United States. After all, there are reams for precedent for alcohol production, distribution and consumption, which had been made federally legal in 1933 — for the second time.

But not quite yet for pot.

“The one lesson that every cannabis business must understand is the same lesson that every business in every regulated industry already understands — compliance is a part of how you run your business, day in and day out,” said Rick Matsumoto, COO of Simplifya, a compliance platform designed specifically for this industry. 

Much more on the legal marijuana industry’s regulatory compliance and risk challenges coming up in Part 3, including viewpoints from Gregg Brandyberry, former vice president of procurement, global systems and operations at pharmaceutical giant GlaxoSmithKline, who knows a thing or two about a heavily regulated business environment.

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First Voice

  1. Andrew Karpie:

    Sounds like a block chain fix waiting to happen.

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