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Top 5 Compliance Infractions To Guard Against

Ah, compliance. The cannabis industry’s favorite word. Remaining compliant is a headache, no doubt about it. The industry is unlike any other, and our processes are far from typical. Compliance, while frustrating at times, keeps products safe for consumers. Products intended for human consumption must be produced with certain standards in place.

Certain parts of the supply chain are more susceptible to lapses. We’re going to highlight the top five areas that see the most infractions.

Dealing with Expired Product

Expiring product costs brands unnecessary money and the cannabis industry is no exception. Cannabinoids themselves won’t really expire, though they do degrade over time. Cannabinoids aren’t the only ingredients in many cannabis products. Edibles, for example, often have dairy in them – which will absolutely expire. Spoiled dairy is nobody’s friend.

Private globally established university, INSEAD, released a report in 2019 exploring expired products in the consumer-packaged goods space. The report outlined that expired goods cost U.S. manufacturers approximately 1-2% of global retail sales. Spoiled soft drinks, health and beauty products, and shelf stable dry food cost the CPG industry $15 billion in 2008! This report makes it clear: expired goods waste a lot of money.

Here are some ways to minimize loss:

  • Examine all steps in the supply chain, especially packaging and distribution. Poor handling, insufficient product packaging and an inadequate shelf-life are all common reasons for expired products.
  • Use an inventory management system and create a weekly report to stay ahead of expiring products.
  • Track and trace system data can help plan production and measure individual product success.
  • Explore promotions to move inventory nearing its shelf life. Reporting and observation are key to staying on top of this.

Documenting SOPs

Standard operating procedures (SOPs) are the backbone of all companies. They are clear, unchanging and written procedures to follow for repeatable tasks critical to key operations for employees to reference.  SOPs eliminate company confusion and lessen mistakes while employees work independently. Implementing a formal document control policy keeps SOPs properly versioned and up to date. This allows employees to work independently and focus on the tasks at hand.

When solid standard operating procedures are implemented expect:

  • More effective employees and management;
  • Easily spot and troubleshoot problems as they arise;
  • Bolster new-hire and ongoing employee training;
  • Increase company safety; and
  • Streamline customer service processes and resolutions.

Remember, SOPs evolve over time and tweaking them along the way to better service current needs is encouraged.

Security and Surveillance

Security is a primary concern within the cannabis industry.

Security is required by state and local law when operating a cannabis business. Cameras are one of the most important safety measures required. A common compliance infraction is not retaining the proper history of video. Various governments require different time periods. It’s important to ensure there are no obstructions in the footage, like ceiling fans, air ducts or other pieces of equipment. Obstructions = fines. Take the extra steps to make sure there is a clear shot of the room and install overlapping fields of view to guarantee the best angles.

Every employee needs to have clear, easy to reference instructions for security and safety procedures, another win for SOPs. What happens if someone attempts to rob the building? What plan (other than alerting the police) do you expect your team to follow in case of an emergency like this?

Another thing to consider is cybersecurity. Cannabis businesses aren’t necessarily targeted more online than other industries, but nonetheless, a cyber breach can be devastating. Partnering with a software provider ensures documentation of every step of the process in real time and can identify when there is a problem. When selecting a company to help maintain compliance, be sure to identify if they are SOC compliant and read their data privacy policy in full.

Purchase Limits

Each state regulation outlines that consumers are allowed a certain amount of cannabis per month, with the specific quantity varying by area. Some people have been skirting past these rules and looping, which is when customers will visit the same dispensary multiple times over a certain period of time and go over their monthly allotment, and some customers will do this multiple times in one day.

In 2016 in Colorado, local law enforcement launched an investigation into Sweet Leaf, a Denver-based dispensary. Ultimately, the dispensary was found guilty of looping at multiple Colorado locations. “Sweet Leaf trainers instructed new employees to allow looping for retail customers making multiple purchases of one ounce of marijuana if the customer left the premises after each purchase,” reads official documents detailing the investigation.

In this particular instance, employees were aware (and apparently encouraging) this practice. However, honest businesses might be targets of looping too if they’re not careful.

Fortunately, there are ways to safeguard against this tactic. The most important one is a POS system that intricately tracks customer services purchases. Companies should also learn from the Sweet Leaf saga, and ensure all employees are complying with state guidelines – especially when training new employees.

Technology or not, employees should pay close attention to the customers they serve. Have a written plan in place for employees to follow when they are suspicious of looping, and ensure the business owner is the one ultimately turning the customer away to protect the employees. This can avoid looping consumers, keep team members up to speed and safeguard against legal turmoil. Those complicit in the Sweet Leaf case are barred from owning dispensaries for 15 years, so looping is not a risk worth taking.

Consumer Delivery Documentation

Cannabis delivery is one of the coolest things about the budding legal market, and with COVID-19 delivery is an important part of the supply chain. There are plenty of opportunities for compliance infractions when delivering cannabis. A track and trace system should have delivery documentation that syncs the required forms to compliance system tracking in place. Software should integrate with METRC or each state’s compliance system so that home deliveries remain compliant.

One of the biggest opportunities for trouble comes with transportation. Since cannabis is still considered a controlled substance in the eyes of the federal government, all delivery drivers must maintain sobriety while working and be free of any drugs or alcohol. Should a driver gest in an accident and found to be under the influence, they could be slammed with a federal crime. Make sure the people delivering product is trustworthy and most importantly: a safe driver. It’s worth it to install a dash cam, too. That protects both the company and the employee, who might be on the receiving-end of an accident.

 

Colton Griffin

Colton Griffin

Colton Griffin is CEO of Flourish Software, a technology provider of enterprise supply chain and inventory management software built for cannabis, CBD and hemp operations. He may be reached at [email protected].

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