There are many unique aspects to cannabis regulation, none more fraught with risk than inventory management. We’re not aware of any industry that is required to track its inventory on a government mandated database through every single phase of the supply chain. Imagine a hops farmer, brewer, and liquor store all being required to report daily changes to their inventory to a government controlled system down to the individual plant or .01 of a gram.
The largest, most successful, and well-capitalized businesses in the world have gaps between their digital and physical inventory, commonly referred to as shrinkage. Unlike those businesses, cannabis licensees have regulators monitoring their inventory on a daily basis and meting out punishment for mistakes commonly made in many industries. This means cannabis businesses must invest a tremendous amount of operational and technology resources into managing their inventory perfectly.
Using Metrc to manage inventory
Franwell’s Metrc may seem simple at first glance, but do not let this fool you. It is a recording platform, meaning there is now a record of every action taken within the operation. All actions record the employee, date, timestamp, how the information was submitted to Metrc, and the adjustment (or action) that occurred. What makes it even more complex is that the licensed operator cannot delete any data or mistakes.
We always advise people that working in Metrc is just like getting pulled over by the cops. You need to tread very carefully and remember everything you do may be used against you in a court of law.
It’s critical to understand that Metrc is a tool that was created to provide regulators with a clear, round-the-clock view of cannabis licensees’ inventory. It is not a tool designed to benefit businesses. It is not responsible for keeping licensed operations in compliance. In fact, it does not even notify operators if they are out of compliance until it is too late. Metrc will allow businesses to violate the law and record the violations as evidence.
Therefore, the responsibility to keep the operation in compliance lies solely with the businesses and whatever technology solutions they use to manage inventory, reconciles, customer type data, purchase limits, and more.
The risk of non-compliance
We are frequently asked, “What happens if I do not comply with Metrc?” The answer is pretty simple. Your operation will be shut down and investigated. A team of investigators, probably armed, will show up at the facility unannounced. They will slap a summary suspension sign on the door and tell all the employees to leave, except for management and leadership. The business’s Metrc account will be placed “on hold,” meaning they can’t transfer any cannabis to anyone. Other licensees in possession of cannabis involved in the investigation could be frozen in place as well. Then the investigation begins.
All of the business’s inventory will be weighed or counted to verify 100% accuracy with Metrc. Any physical inventory that doesn’t match up will need to be explained. Typically, an investigation can last three months and the business can be shut down the entire time. Any cannabis that doesn’t have a Metrc tag, a clear digital chain of custody, or a discrepancy that can’t be resolved will likely be seized and destroyed. Then, the state will likely issue a large fine, and it could even suspend or revoke the license.
At best, this will cost a tremendous amount of money even before the state issues a fine. Operations will be halted and inventory is likely to be lost. The investigation will soak up a ton of staff and executive time. There will be attorney’s fees, and a Metrc consultant will be needed to work through the inventory forensics.
Be proactive
Metrc isn’t just a technology platform; it’s a risk that must be mitigated. Businesses must be proactive and take steps to integrate compliant inventory management procedures into their operations. There are plenty of resources out there, including some great services by Simplifya and Rocky Mountain Cannabis Consulting, which can prepare your operation to tackle Metrc head on. We’re here to help, so contact us today!
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Special thanks to BriAnne Ramsey of Rocky Mountain Cannabis Consulting for co-authoring this post. She is offering two free online training courses to our readers. To take advantage of this generous offer, just mention this post in an email to info@rockymtncannabisconsulting.com or call 720-996-0625.