Workflow Considerations for Cannabis Operations Facility Design
Some of the largest expenses an operations-based cannabis company will make are related to the buildout of their facility(s). As such, it’s quite prudent for operations management to carefully plan the facility design, so that money and time are not wasted on inefficient build outs that have to be changed at a later date. As someone who has one foot in cannabis and the other in real estate development, I can tell you a well-known concept in the development world: the further into a project you are, the more expensive it is to make changes — sometimes exponentially so.
Given the frenetic pace of the industry and the relative lack of experience in many leadership teams, it’s understandable that companies often find themselves operating primarily through impulsive decisions rather than careful, procedural consideration. However, from a project management perspective in particular, this is a poor way to run the business and will result in loss of income, sunk costs and lots of frustration.
Having been involved in several cannabis facility build outs myself, some of which went well and others that didn’t, I have identified three primary differences between successful efforts and the failures:
- Having a tangible vs. theoretical grasp of the operations
- Planning for future vs. immediate needs
- Keeping realistic vs. fantastical expectations of the required budget
In the spirit of keeping this article as succinct as possible, I am only going to focus on the first bullet point for today and will expand on the other two in a future article.
Know Your Operations
It is crucial that the person ultimately in charge of making final design decisions understands the impact of those decisions as they pertain to the operations of the business. After all, the facility’s purpose is to serve the operations team as efficiently and cost-effectively as possible, so if it’s not designed with that primary goal, then things are going to fall apart.
It’s also assumed that if a company is investing in a new facility, it’s being done to resolve issues with existing facilities — whether in the form of flaws that cannot be addressed effectively within the confines of the existing building, or simply to increase capacity for scaling purposes. When management doesn’t walk the floor of their existing facilities and develop an intimate understanding of the existing workflow (and its flaws), they miss the opportunity to eliminate the potential for these flaws to occur in the new facility, or to ensure maximum throughput.
Companies developing their very first operations facilities will encounter the exact same issues unless they’ve spent significant time in the facilities of other, similar companies with successful operations. Keep in mind, quick facility tours don’t cut it — those are great for drumming up investor cash by showing the shiny surface of the operations, but they’re useless for helping someone fully grasp the complexities of the processes — only witnessing them in their totality, over time, will accomplish this.
Assuming the decision maker has this knowledge, then the following questions are great jumping off points for making good decisions about a facility’s design.
Will the Facility be for a Single Function or Multiple Functions?
The good news is that due to the licensing requirements, state licensing authorities force companies to already have an answer to this question. If you want to open a manufacturing facility for example, you’ll need to apply for that specific license type and design the facility accordingly. If you design a distribution warehouse and then apply for a manufacturing license, the licensing authority is going to point out that the plans don’t match the purpose.
There will likely be substantial function-specific requirements at both the state and local levels, such as explosion-proofing and solvent storage for volatile manufacturers, quarantine barriers for distributors, and water preservation systems for cultivators. Planning for these elements during the design phase (rather than reacting to failed inspections during the build phase) will save time and money.
If you plan to have multiple licenses in a single building, you’ll still need to think about how to position each of those licenses. For example, take a facility that has cultivation, manufacturing and distribution all under one roof. With poor planning, the company could find itself needing to transport trim for extraction through the distribution portion of the facility to the manufacturing side. Not only would this convoluted workflow waste time due to the physical distance between the start and end point, but it would also probably be quite disruptive to distribution operations.
Again, this is why understanding operations in full is so important. For example, while trim would likely go directly to manufacturing, the flower would likely go directly to distribution for quarantine and testing. Thus, ensuring there is efficient access to both areas from cultivation will help reduce time wasting and disruptions.
Another consideration requiring tangible operational experience is what the projected shift headcount will be for a given process. Due to compliance restrictions in many states, personnel are limited in the areas they can access, making it potentially hard to have a lot of commonly-accessible areas like lunch rooms and bathrooms if the facility contains several license types. Knowing how many people will need to use a given set of facilities will help ensure that you don’t accidentally build 2 bathrooms for a workforce of 100 people, or a 20’x10’ break room that can only seat 10 people at a time.
A similar question to ask yourself is whether this facility will work in isolation or operate as part of a network of facilities in conjunction with each other. For example, you might have two manufacturing facilities, one of which is dedicated to extraction only, and the other which handles the post processing and packaging. The needs of each would be different, and this would affect how to best partition off each building.
What Will the Inventory Handling Look Like?
The question of how to handle, move and physically control inventory comes after the first question, as the type of inventory that needs to be accounted for and what types of movements it will make completely depends on the function of the facility. If the facility is for manufacturing, then there will be a need for the movement and storage of raw and work-in-process goods. You’ll need a method of getting the materials in and out of the building — if you plan to operate at scale, having easily-accessible loading docks for forklifts and pallets is critical.
The key with inventory-related layout planning is to make sure that there is as little unnecessary movement as possible. Materials should be stored as close as possible to the area where they will be used. Otherwise, there will be time wasted and constant disruptions to the employees as materials are moved from one side of the facility to the other, through unrelated workspaces. A good example of this is the quarantine, as it relates to both the processing area and the bulk flower storage area proximity-wise. A large distribution operation will be moving a ton of flower product between the quarantine area and storage, as well as to the packaging floor.
You also want to make it easy to keep track of inventory and minimize loss. Spending some time thinking through how you plan to organize materials on your racks — and making sure you have enough rack space to store all of your materials as your scale — is an important part of lean operations planning. This will keep the facility from getting cluttered, where time is wasted trying to find things because there’s no system in place defining exactly where it should be.
Typically, you will want to implement a first-in, first-out (FIFO) method of inventory control. In order to do this effectively you need to be able to have your back stock separated from your working stock in a logical way that prevents the employees from unwittingly pulling product from the incorrect stock location, but at the same time is close enough that refilling the working stock takes minimal time and energy.
One of the most important things for an effective construction project manager to learn is the concept that when you fail to plan, you plan to fail. Barring extraneous, “Act of God”-type circumstances, there is a direct correlation between how well a project is executed and how much time and effort was put into the planning stage. This is because the further into a project one is, the more expensive and painful it is to make changes. It’s very simple to adjust a set of architectural plans, even more so if they’re preliminary plans. It’s much harder to make significant changes to the physical buildout once construction has started. It’s harder still to make changes once the company is actively operating in the facility.
Operations leaders have the fiscal responsibility to keep costs as low as possible, and capital expenditures play a big part in this. Additionally, minimizing disruptions to production (such as needing to vacate the work floor for several weeks to move walls around in an active facility) will help keep potential revenues maximized and avoid preventable inventory shortages. Leaders who focus on fully understanding operations first, and then on planning projects appropriately and avoiding impulsive decisions, will find that their experience rolling out new facilities is drastically better than leaders who fail to perform these preliminary steps.