Why Item Level IDs are Critical for the Cannabis Supply Chain

By Dana Spiegel, CTO, Lucid Green

Have you ever wondered why a dispensary can’t use the same UPC (universal product code) code that’s used at the supermarket checkout line? If you look closely at a cannabis product box, you’ll probably find another, smaller barcode or QR code sticker (maybe more than one). It's these “other codes” that are scanned by the Point-of-Sale system to facilitate checkout. Alternatively, you might see the budtender type in an alphanumeric code that’s almost microscopically printed on yet another sticker on the box.

What gives? Why can’t a dispensary just scan the UPC that’s already there? UPCs have long been standard codes that enable automation and information tracking of physical products throughout the global retail supply chain.

This simple question hides the incredible complexity of the highly regulated supply chain that exists within the legal cannabis world today. Every bit of controlled substance and its derivatives must be tracked as they change form, volume, or ownership.

Lucid Green is solving this problem in a way that benefits all the stakeholders in the cannabis supply chain by allowing for a single on-pack code to be modified at any step instead of adding sticker after sticker. After years of working with partners in the supply chain, we've found that it is absolutely crucial that unique IDs are applied to each individual unit, allowing for unit-level tracking. Let's explore why:

When a retailer receives cases of products, they need to track items received using a tracking number known as the package UID. For a number of reasons (keep reading) brands don’t know and can’t include the package UID on the labeling of a product when it is packaged. As a result, retailers are forced to add Point-of-Sale generated stickers containing this information to every item they receive to allow their POS systems to collect this information at checkout. This is a huge effort for even smaller retailers, but is dramatically inefficient for large retail chains, where we’ve observed multiple people employed full time just to receive and sticker products. In fact, some retailer time and motion studies have found eliminating just the stickering step will save upwards of $20k per store per month.

Clearly, it would be much more efficient to receive products that already have a scannable code that would differentiate the same SKU received through different shipments and therefore different package UIDs. UPCs won't work since they only identify SKUs, not received shipments. While many retailers have started to require such “pre-ticketing” on incoming shipments, they have often done so in a way that simply pushes the burden back on brands and distributors: another touch, another sticker, more operational complexity, and more lost margin. You can see that while this solves part of the problem for the retailer, it creates even bigger problems for everyone else.

Lucid Green’s solution is the LucidID, which is a unique ID applied to each item in a case. Why do LucidIDs identify individual items and not shipments? The answer has everything to do with balancing the needs of retailers and the cost and efficiency of other supply-chain participants to accommodate those needs. Due to the way cannabis supply-chain traceability requirements work, package UIDs for retailer shipments aren’t known until the final step in the chain: when retailer-destined orders are fulfilled.

NOTE:

“Package UIDs” are regulatory UIDs that are applied to the line items on a shipping manifest. A single package UID can apply to one or more cases of the same SKU and batch. It is up to the creator of the manifest if each case is assigned its own package UID, or if all like cases are bundled together under a single package UID. Different batches of the same SKU in a shipment require different package UIDs.

Lucid Green is committed to helping the cannabis industry adopt a more efficient and automated supply chain that works for all brands, manufacturers, distributors, and retailers. We have spent a lot of time trying to solve this challenge.

The Solution to the Pre-ticketing Problem are Item IDs

LucidIDs allow brands to add unique scannable codes to product regulatory labels at packaging time (regulatory labels are already required by law). With zero added operational overhead, brands and distributors now have the ability to digitally add information to each item after the regulatory label has been applied and after the items have been sealed in cases, including changes in package UID assignment.

Since LucidIDs are unique per item, casing, repacking, and handling, fulfillment exceptions are dramatically simpler for the supply chain to handle. There are no “serialization problems” to solve, yet all of the benefits of having a brand-applied ID that can be scanned at retail checkout remain in place.

For brands: LucidIDs are integrated into regulatory labels using Lucid Green’s automated label creation, “touchless COA management” and printing solutions. This allows each item (or cases of items) to digitally gather additional information as it travels through the cannabis supply chain.

For distributors: Package UIDs can be digitally added to LucidIDs already on items in a case during retailer order fulfillment, either via our APIs or our web console. This functionality is currently implemented by a number of key distributors and self-distributed brands. One scan of a CaseID can confirm it is the right product for the order and automatically add the package UID information. (Note: A CaseID is a Lucid Green ID at the case-level and dynamically contains all the information of the individual LucidIDs within the case.)

For retailers: CaseIDs can be scanned at intake which pulls in every SKU, batch, and order detail, which means a case of product can be ready for the shelf in seconds. At checkout, the POS system can scan a LucidID and automatically retrieve the Package UID for compliance reporting. There’s no need for secondary stickering (or pre-ticketing) with no massive increase in operational cost or complexity for the retailer or their partners in the supply chain. Retailers can also benefit from more efficient cycle-counting and hands-free product catalog management as part of the overall solution.

It's almost like having your cake and eating it too: low cost “apply-once” labels with end-to-end supply chain support. Every cannabis retailer, brand, and distributor can enjoy higher margins while delivering the best products to every consumer, as quickly and efficiently as possible, while staying in compliance with state regulations.

What's out there now?

All of the approaches below place the cost to support pre-ticketing on either a retailer’s or brand’s books, and significantly increase the operational complexity and exception management requirements for both distributors and brands.

Here’s the range of solutions out there and their respective limitations:

Approach	Associated Problem(s)
Use UPCs	Point-of-Sale systems currently support scanning UPCs, but regulatory UIDs are more granular, making UPCs unable to support regulatory reporting requirements. Many POS systems have developed support for generating secondary stickers to track package regulatory UIDs making UPCs irrelevant for most retailers. This secondary stickering solution is what the retailers are trying to avoid due to the costs associated with applying them.
Include Scannable “Batch UID” on Items	Brands and manufacturers know the batch UIDs, and many states require them to be printed on regulatory stickers. Similar to UPCs however, this solution doesn’t provide enough granularity to allow regulatory reporting compliance for POS use because the units sold at retail need to be reconciled back to the package UID, which associates it with the order it was received under by the retailer.
Include scannable Package UIDs on Cases and Items	The package UID must either be applied as a secondary sticker during distribution (requiring opening sealed cases) or a brand must manufacture, label, and pack cases for each retailer order on demand. This solution would require operational changes to how most brands and distributors currently operate: It would force the entire supply chain to move to a just-in-time labeling solution. This would require much more coordination between distributors and brands, or significant cost increases for handling products at distribution, which are almost certainly passed back on to the brand. There would be an increase in the backlog of order shipments to retail, resulting in a significant slowdown of product being delivered to retailers who are already struggling to manage stock-out issues. Additionally, if any changes must be made to shipments (such as unopened returns or case repacking), items and cases must be re-opened and re-labelled, leading to increased complexity in inventory management.
Include a unique ID on a case and all of the items within it (unique ID can be a “Package UID” generated by a brand or another type of unique ID)	This solution addresses a retailer’s needs, but it is incredibly complex for each constituent to manage. Brands must not only manage many more regulatory UIDs during the packaging and casing process (and through traceability systems and ERPs) but must also manage the “serialization problem”: keeping item labels aligned with case labels to ensure that each item’s label matches the case in which it is packed. Additional exception management solutions for many kinds of errors (off-by-one, for example) would need to be developed for each packaging facility, and additional labor cost would be required across the industry in the form of training and exceptions management. Any automated labeling solution is very complex to implement. In the case where a brand uses a non-package UID, this solution would require the retailers’ Point-of-Sale systems to support scanning a case ID at inventory intake and checkout and storing a mapping from case ID to package UID. Distributors would be required to associate the package UID with each unique case ID using an API. Additionally, certain practices that support regulatory requirements, like testing of received products by distributors, would need to be not only reworked, but would require additional operational processes to be put in place, which would cause the same undesirable supply chain bottlenecks as the previous solution.

Lucid Green has researched and worked with cannabis brands, distributors, and retailers since our inception in 2018. Our focus is the relentless pursuit of cannabis supply chain efficiency to help each entity in the industry meet regulations and drive greater profits. We have developed a platform to reduce costs, increase transparency, and drive revenue while meeting regulatory requirements and driving operational efficiencies across the entire cannabis industry. 

If you want to learn more and have all your questions and concerns answered, please reach out and schedule a consultation or demo: at https://www.lucidgreen.io/contact or https://www.lucidgreen.io/demo.