Let’s talk about the elephant in the room. Outsourcing. It’s the latest buzzword these days, as more and more cost and quality conscious businesses all over the world are turning to specialized companies for outsourcing their non-core business processes. So, what exactly are the benefits of having a partner do your work for you? Specifically, in the cannabis industry. Canada is preparing for a slew of new cannabis delivery methods to hit the shelves and for those Licensed Producers who have already partnered up with processing companies, well, lets just say, shareholders will be ecstatic in the next few quarters. Having the ability to transition into new products and services quickly and efficiently will have a small number of LPs first off the starting line. I mean, don’t get me wrong, for those Licensed Producers that have processing abilities in-house are sure to get a significant share of the market. However, that comes at a significant infrastructure and technology cost, efficiency issues, and loss of focus in key competency areas.
For those looking to expand their product lines, working with a dedicated production facility that has the infrastructure and technology to help facilitate product expansion projects for their customers should be a no brainer. Licensed Producers save in many areas. First, expansion costs. The cost associated with expanding or even building a new facility to house the processing branch are astronomical. Then add in the cost of the equipment, finding and training personnel, and let’s be honest here, the countless months spent dealing with consultants and waiting for Health Canada to approve your Standard Processing Application. It’s much more lucrative to invest in core competencies, develop products to continuously bring to market and outsource the rest to a processing partner.
Outsourcing the processing needs to a partner brings years of experience in research and development, manufacturing, packaging, business practices and expertise in delivering complex outsourcing solutions to Licensed Producers. Thus, they can do the job better with their knowledge and understanding of the domain. This leads to an increase in productivity and efficiency in the process thereby contributing to the bottom-line of their clients. Working in conjunction with lab staff these outsourcing partners can help their clients benefit from ongoing research that is being conducted to enhance the product development and flow structure that is in place. They also have the ability to work on proprietary investigation and methods to reduce time to market. Strides in the area of innovation and improved production capacity are additional advantages to working with an outsource partner.
Lastly, outsourcing to a processing partner provides Licensed Producers with much more energy to enable them to focus on building their brand, invest in research and development and focus on providing higher value-added options to their customers. With any competitive market, the ability to focus on product developments, sales and marketing and customer experience is a fundamental business advantage that companies strive to achieve. Furthermore, a lack of resources available to devote to production could affect an organization’s ability to meet fulfillment obligations. An outsourcing partner can supplement existing in-house manufacturing efforts and make it easier to meet those new demands.
It’s generally true that it’s cheaper to rent a processing plant and its employees than to maintain them yourself. With labour often being among a company’s largest costs, outsourcing processing work to a third party leads to a significant decrease in production expenses. One of the greatest advantages of outsourcing is to utilize assets already in place without having to make an investment in fixed costs and maintaining them. Whatever the case may be for Licensed Producers trying to launch new Cannabis 2.0 products, for those who stay lean, focus on their core business and outsource processing needs to a third party will likely be a lucrative decision for their shareholders.