Both cannabis activists and business owners have been wondering aloud if the industry will ever be able to pull off home delivery to the same extent as other industries. It is possible, but there are plenty of hurdles that would need to be overcome. One such hurdle is the dreaded last mile problem that every supply chain has the deal with.
The last mile problem is essentially the challenges faced by retailers and distributors in getting products from the final distribution point to the customer’s home. For a company as big as Amazon, last mile would involve transporting packages from a local distribution point to their final destinations. Amazon has mastered last mile delivery through the economics of scale. Marijuana businesses, not so much.
Keeping the Last Mile Short
The phrase ‘last mile delivery’ in no way implies that the final trip a package makes only covers a mile. But it does imply that the last trip is the shortest of the entire journey. Making last mile delivery as efficient and cost effective as possible requires keeping that distance as short as possible.
Maintaining the shortest possible last mile allows for a single truck to deliver more packages. It allows for hiring local drivers and keeping them local. Most importantly, it allows for maximum delivery speed. In this day and age, speed is everything.
Amazon has mastered the challenges by mimicking companies like UPS and FedEx. They have the financial resources to do so. They have set up regional distribution centers through which they feed smaller, local distribution centers. Retailers ship goods to the regional locations and Amazon takes it from there.
The Problem for Cannabis
Amazon has figured out how to mimic package delivery companies to accomplish its own last mile goals. Couldn’t the cannabis industry do the same thing? In theory, yes. But practically speaking, no. Cannabis businesses are subject to regulations that do not apply to Amazon or package delivery companies. Those regulations make last mile delivery exceedingly difficult.
Utah regulations are a fitting example. For starters, there are only fifteen dispensaries in Utah. That is fifteen dispensaries to serve some 65,000 patients scattered throughout the state. Guess where most of them are located? All but one is located in busy urban centers.
Home delivery is legal in Utah. The problem is that all deliveries must originate from a dispensary. So imagine you are a medical cannabis patient living in St. George. The closest medical cannabis dispensary to you is Pure Utah, located up in Payson. You don’t want to make 245-mile trip to get your medicine. You would rather have home delivery.
Pure Utah would rather deliver to your home as well. But it is not practical for them to send a delivery vehicle that far. So unless there is a third-party provider willing to make the trip, you’re out of luck.
Distribution Centers Are the Key
What Utah’s cannabis industry needs is the ability to set up local distribution centers. The same is true in every state that allows cannabis home delivery. To achieve the same level of service that a company like Amazon offers, cannabis businesses need to reduce last mile delivery distance as much as possible. And the best way to do that is through a network of distribution points.
Without a distribution network, the last mile delivery problem makes home delivery prohibitive in largely rural states like Utah. But it is even prohibitive in more densely populated states, at least outside of the major cities. Cannabis home delivery will never be as fast or reliable as package delivery until the last mile issue is addressed.