Hidden Costs of Incorrect Casing that you should be aware of
In the fast-paced world of cannabis production, the accurate casing of products plays a crucial role in maintaining efficiency and avoiding potential pitfalls. Incorrect casing refers to the mishandling of products during packaging, labeling, and SKU placement into cases. Such errors may seem minor at first glance, but they can have far-reaching consequences throughout the supply chain. In this blog, we will explore the costs of case errors and highlight the importance of proper casing at the retail level.
Over/Under Products in Case:
One of the most common mistakes in cannabis production is the incorrect counting of products placed within a case. Overpacking or underpacking cases can lead to several complications. If overpacked, it leads to a product loss due to excess inventory and it can significantly impact the company's bottom line. Conversely, underpacking can result in out-of-stock situations, leading to missed sales opportunities and potential damage to brand reputation.
Incorrect Labeling at Unit or Case Level:
Accurate labeling is essential for compliance and consumer trust. Mistakes in labeling, whether at the individual unit or case level, can lead to regulatory issues, increased labor costs to rectify the errors, and the risk of products being rejected by distributors or retailers. Incorrectly labeled products might not meet the standards set by regulators or mislead consumers, leading to adverse effects on the brand's image.
Incorrect SKU Packed into Case:
Assigning the wrong Stock Keeping Unit (SKU) to a case can lead to further complications in the supply chain. It may trigger METRC corrections at the retail level, causing delays and additional administrative burdens for both producers and retailers (and in some cases distributors). Moreover, retailers might be hesitant to accept wrongly packed cases, leading to potential rejections and further supply chain disruptions.
Consequences of Case Errors
The consequences of incorrect casing in cannabis production are not limited to financial losses and regulatory issues. These errors have hidden costs that can accumulate over time and have a significant impact on the overall business:
Labor Cost to Remedy:
Rectifying case errors demands additional labor hours, both in the production facility and at the retail level. Employees must spend time inspecting, relabeling, and re-casing products, diverting valuable resources from other essential tasks. This increase in labor costs can affect overall operational efficiency and profitability.
Out of Stock Risk and Opportunity Cost:
Underpacking cases can lead to product shortages on the retail shelves. Customers might turn to competitors when their preferred products are not available, resulting in lost sales and a diminished market presence. The opportunity cost of missed sales due to stockouts can be substantial, impacting revenue and future growth prospects.
100% Product Loss if Overpacked:
Overpacking cases means that excess inventory might not be saleable within a reasonable timeframe, leading to product obsolescence and 100% product loss. This loss represents a waste of valuable resources and reduces the potential for maximizing revenue.
The proper casing is a critical aspect of cannabis production that should not be underestimated. The consequences of incorrect casing go beyond immediate financial losses and can have far-reaching impacts on the entire supply chain. By ensuring accurate product counting, labeling, and SKU placement, cannabis producers can avoid hidden costs, maintain compliance, and enhance their brand reputation in the competitive market. It is essential for producers to implement robust quality control measures to mitigate case errors and foster long-term success in the ever-evolving cannabis industry.
At Lucid Green, we are acutely aware of this issue. We've conducted empirical analysis and interviews with retailers to gather valuable insights. Here are the key takeaways:
30-50% of Inventory Deliveries Contain Incorrect Quantities:
1-2 Days Delay in Product Placement on Sales Floor Due to Mispackaging Errors:
Mispackaging errors result in a delay of 1-2 days before products are ready for display on the sales floor.60% of Retailers Report Negative Impact on Brand-Retailer Relationships2
A majority of retailers (60%) have expressed that mispackaging errors have a detrimental effect on their relationships with brands. This leads to additional costs and delays, straining the brand-retailer partnership.