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Building An Integrated Pest Management Plan – Part 5

By Phil Gibson
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This is the fifth in a series of articles designed to introduce an integrated pest management framework for cannabis cultivation facilities. To see Part One, an overview of the plan and pest identification, click here. For Part Two, on pest monitoring and record keeping, click here. For Part Three, on preventative measures, click here. For Part Four, control methods, click here. Our final chapter, Part Six, discussing emergency response, comes out next week to wrap it all up.

This is Part 5: Pest Control – Taking Action

Previous chapters have covered the many preparations you can take to protect your facilities from pest attacks and outbreaks before they get started. This chapter will summarize the concepts of pest control thresholds and the actions you can take for the painful event when you surpass those limits (and various examples). The Integrated Pest Management (IPM) recommendations provide you with a framework for these plans.

Figure 1: Cleaning regimen, the heart of successful operations – no biofilm buildups

Preventative actions are part of your regular site operations; in other words, they are how you avoid problems before they happen. Just to hit this action one more time: cleaning must be fundamental to your facility. Water sanitation and changing filters must be done on schedule and frequently to avoid biofilm build up and nasty self-multiplying eco-systems.

For each of the rooms in your facility, identify the acceptable tolerance level for each type of pest that you may encounter. Define the intervention levels per room: preventative, direct action and escalated direct action. Follow your predefined procedures and defend your facility. Let’s cover high, medium and low tolerance example responses.

High Threshold for Tolerance

For example, the impact on your plants, your profits and your yields from the discovery of a white fly fluttering inside of one of your flower rooms may be very small. If this presence is late in your harvest cycle, your tolerance of this discovery may be very high. Your team could take preventative actions to clean the room more aggressively or to check your traps more frequently, but you are probably not going to want to invest in aggressive actions at that time in the harvest cycle.

Move from passive observation to the shake test. With sticky traps in place, shake or brush your plants. Do you see the bug counts increase on your test sheets?

Figure 2: Thrip Evidence c/o UC ANR Publication 7429

As that infestation grows, you may set a threshold for direct action (i.e. 5-10 flies per trap per week). If you reach that level, implement a treatment action with a non-chemical microbial biofungicide to stop growth in the roots or neem oil as a direct chemical action.

When you reach your escalated threshold of 10-20 flies per trap or direct plant damage is apparent, an infestation is more serious. In that event, you may choose to take steps to directly reduce the pest population with knock down sprays of approved direct chemical pesticides like citric acid or insecticidal soaps. Be sure to use your Personal Protective Equipment (PPE) for breathing and contact safety if you get into this situation.

Medium Threshold for Tolerance

Depending on the timing in your harvest cycle, the discovery of fungus gnats in your grow room may trigger a medium level alarm for you. Is the location, a small example with a minimal frequency? Is this addressable with additional attention to cleaning the area and longer dry periods in the irrigation or is this the beginnings of an infestation? Fungus gnats feed off of fungus or organic matter in soil triggered from an overly moist root environment. You may choose to react with immediate cleaning at the first existence in a room. Or you could set your “Medium” level alert status to be additional sticky trap distribution at the first visible gnat. If those counts reach 10-20 gnats per sticky trap per week, begin your foliar spray regimen with Zerotol or the equivalent.

Figure 3: Fungus Gnats

If these counts do not respond to your treatment, meaning that the next sticky trap count reaches beyond 20+ gnats per trap or visible direct plant damage, then institute your root drench protocol with a solution of BActive 1-2 times per week until the problem is under control and the counts are reduced. If the growth continues, look to approved pesticides in your area (as an example, AzaGuard Asadirectin).

Low Threshold for Tolerance

Alternatively, you may have a unified air circulation system due to facility limitations. Your air circulation may be shared across all of your mother plants, clones, veg and flowering plant areas. In that case, any presence of an airborne fungal infection like powdery mildew would have a very low tolerance of acceptance. Selective de-leafing of the infection and increased airflow are your first defense. Any visible presence beyond that would trigger a low threshold alert and immediately start a preventative action, such as carefully removing the infected plant material much wider than a few leaves and treating the area with foliar sprays like Zerotol (hydrogen peroxide plus).

If the penetration continues or expands, treatment would escalate to minimal risk pesticide follow up and observation. Chemical oils or citric acid might be in your mix in this case.

Figure 4: Powdery mildew in cannabis – Ryan Douglas Cultivation LLC

Finally, if repetitive treatments once a week are not turning the tide, increasing to once per day or even once per ON/OFF lighting cycle until the infection is controlled. At this point, you may decide to strip the room down and start over. Clearly the choice to “throw in the towel” is a total loss of the crop, but it may be the best option relative to minimal yields and failed flowers that will not sell.

Pest Control Actions

Our Integrated Pest Management recommendations paper gives you examples of what to consider for plans with white flies, fungus gnats, root aphids, powdery mildew and biofilm on plumbing or surfaces. These follow the preventative action, direct action, escalated direct action and pesticide approaches for each example. These are options to plan for water sources, root treatment, tunneling, crawling and flying phases.

In summary this week

As covered, preventative measures are your best defense. Hire expert consultants and plan these well. Escalate your response based on your scouting activity and your plan. Add your sticky traps, de-leafing, root drench, foliar sprays or knock down sprays as defined by your pest population control actions document.

For more detail on each of these treatments, you can see examples for your integrated pest management procedures in our complete white paper for Integrated Pest Management Recommendations, download the document here.

In our final chapter, Emergency Response, we will review control thresholds and example plans for a range of problems from biofilm build up to white flies and more.

Our final chapter after will describe emergency response framework and reviewing your complete plans. See you next week.

Building An Integrated Pest Management Plan – Part 4

By Phil Gibson
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This is the fourth in a series of articles designed to introduce an integrated pest management framework for cannabis cultivation facilities. To see Part One, an overview of the plan and pest identification, click here. For Part Two, on pest monitoring and record keeping, click here. For Part Three, on preventative measures, click here. Part Five comes out next week on how to build a framework for control actions and how to monitor them. More to come!

This is Part 4: Direct Control Options

Even when the best methods are implemented and precautions are taken to protect your infrastructure, determined pests can penetrate your perimeter. Before you see crawling, hopping or flying insects, or sickly-looking plants, be sure to implement your physical protection (positive pressure airflow sealed facilities) and personal hygiene methods (shoe baths, sticky mats, & air shower entrances) to protect your crops. Equip your employees with personal protection equipment (PPE) proper gloves, masks and clothing as discussed in our last chapter, preventative measures.

Figure 1: Fungus Gnats Unleashed In A Grow Room

When things do break-out beyond your acceptable thresholds, Direct Control Options include non-chemical microbial biofungicides, microbial bioinsecticides and direct chemical control options. Lots of big scary words there, all of which are toxic even under safe application methods and when used at recommended concentrations levels. This means training in their use and protective clothing is required. Careful application of these control options is necessary so you exterminate your pests and not your people! This seems obvious, but do not just “wing it.”

These chemical elements can be applied in diluted concentration levels, manual wipe-down application, concentrated flush frequencies, or root drench applications, foliar spray mist applications, HVAC aerial diffusions and aerial knock-down sprays. You may even choose to remove badly infected plants and destroy them completely.

Use experts when you are planning for these tools. All of these methods require handling and safety precautions. Proper breathing filters, eye & skin protection, as well as disposable gowns/hazmat suits should be used when applications are performed and until the applications have dissipated to safe levels. Be careful not to co-mingle removed plant materials. Gloves become transport and infection spreaders after use.

Please also be sure to review your harvest testing requirements and what treatments are safe for your consumers and within legal limits. No one wants to have their harvest rejected due to pesticide contamination.

Figure 2: Municipal Water Treatment, RAIR Cannabis, Michigan

Clean-up after application may be required depending on the bioinsecticide or chemical that is used. Again, always ensure the safety of your employees and take precautions.

Start the application of your control options with your site map, room assignments and scout monitoring teams. Where does air flow into and within the facility? When your scouting team count logs go beyond your acceptable thresholds, here are some options for you.

Let’s begin with cleaning your irrigation and nutrient water sources. For a walk-through tutorial for incoming water treatment, humidity recovery and nutrient water recycling, please review the video tour of Water Treatment at RAIR Cannabis to see how an expert has done it.

From the IPM Planning Guide standpoint, peroxide and acid sterilizers can be used to clear irrigation water, for surface wipe-downs or as direct plant applications. We will cover those first. Caustic sterilizers require PPE for cleaning. Forgive my image here, we were just using water.

Concentrated Cleaners for Surfaces & Irrigation Sources (Hydrogen Peroxide & Sanitizers)

Plant interacting interfaces, i.e. surfaces, benches, walls, floors, trays, utensils, clippers, etc. should be sterilized with every use. Methods can include direct wipe-down or scrub, concentrated or diluted sprays or room vaporizers. A good example of hydrogen peroxide (H2O2) liquid would be a food grade sanitizer with 3-35% H2O2 content. Use acceptable diluted versions of these cleaners as appropriate.

Figure 3: Cleaning & Scrubbing, Where’s the PPE?

A commercial example would be Zerotol 2.0 with 27% H2O2 & their proprietary acid mix. Alternatively, you can use direct hydrogen peroxide generators from commercial sources to generate your H2O2 at various concentrations. More detailed examples are included in the complete Integrated Pest Management Guide (link at the end of this article). Establish your procedures for sterilizing your rooms and tools before you introduce plants, and describe what is to be done after every harvest and room turn. Track the cleaning materials used for your operational records. You will find this useful to track operational cost over time.

Sanitizing Acids for Surfaces & Irrigation Sources

Similar to hydrogen peroxide, hypochlorous acid (HOCl) comes in many commercial forms and can also be generated onsite using purchased generators. Commercial mix examples are UC Roots, Watermax and Athena Cleanse. They come in 0.028% to 15% concentrations. Self-generators range in output from highly precise 0.01% to 1% concentrations with more examples in the guide.

Treatment Tools

OK, so enough on cleaning preparation. Here are some tools that can be used to fight back against a pest intrusion:

Non-Chemical Microbial Biofungicide for Pathogens in Soil or Fertigation Water

Microbial fungicides are available to clear nutrient irrigation systems by minimizing pathogens and improving plant resistance to infections. Some fungicide versions target root pathogens by attacking the diseases directly. Others control or suppress common water carried challenges like pythium, rhizoctonia, phytophthora, fusarium and others. Brand names include Botanicare, Bonide, BioWorks, Actinovate, Mycostop and many more. Details covered in the guide.

Non-Chemical Microbial Bioinsecticides for Larval Stages

These biological tools attack the organisms or insects at a physical or mechanical way by breaking down the pest’s nervous system, biochemistry, or structural integrity (exoskeletons, etc.). These are engineered or living organisms (bugs to attack bugs) that are developed as targeted attacks for specific pests. Brand names are BioCeres, Botanigard, Venerate, Bio Solutions and others.

Minimal Risk Chemical Pesticides for Airborne Critters

Figure 3: Example Fungus Gnat Infestation – Royal Queen Seeds blog

Regularly approved for used in most locales, essential oils, natural acids (like citric acid) and insecticidal soap are commonly available in every hydroponic store. These work very well as safe spray “knock-down” insecticides for crawling or flying pests. Commercial examples use a proprietary mix of various oils, citric acids or isopropyl alcohol to do their task (examples in guide). Insecticidal soaps and fungicides for surface cleaning perform a similar purpose and typically use potassium salts or fatty acid mixtures.

Biochemical Pesticides

These tools are used to inhibit insect or fungal growth to acceptable levels. The multifaceted and commonly used neem oil comes in many commercial versions and is a naturally occurring pesticide extracted from the leaves and seeds of the neem tree. Example brand names are Bonide, Monterey, Triact and others. They range in concentrations from 0.9% to 70% concentrations. These oils suffocate living organisms or eliminate moisture to kill insects, spores or fungus at their initiation and throughout their lifespan.

Another option here are Azadirachtins. These act as insect growth regulators and disrupt the bugs natural evolution. Brand names are AzaGuard, AzaMax and others in the guide.

In summary, this week

We summarized some of the many pest control options available for water treatment, soil borne, intermediate or flying pests. We also covered various concentrations for these pesticide and sterilizer options. If you are not familiar with dilution ratios, %, PPM terms and how to apply the correct level of pesticide, you may find our plant science test kitchen blog on this topic of use here.

Chemical access and use should be restricted to employees familiar with their authorized application. PPE is very important to protect any employee that will come in contact with materials, liquids or vapors for chemical resources (gloves, boots, respirators, Tyvek (or equivalent protective wear) suits and eye protection or goggles.

For more detail on each of these treatments, you can see examples for your integrated pest management procedures in our complete white paper for Integrated Pest Management Recommendations, download the document here.

In our next chapter, Pest Population Control Actions, we will review control thresholds and example plans for a range of problems from biofilm build up to white flies and more. Our final chapter after that will suggest an emergency response framework and how to address pest outbreaks. See you next week.

Building An Integrated Pest Management Plan – Part 3

By Phil Gibson
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This is the third in a series of articles designed to introduce an integrated pest management framework for cannabis cultivation facilities. To see Part One, click here. For Part Two, click here. Part Four comes out next week and covers direct control options for pest reduction. More to come!

This is Part 3: Preventive Measures

Preventive measures are a great investment in the profitability of your operations. Our objective is to ensure successful repeat harvests forever. Build your procedures with this in mind. This means maintenance and regular review. We all realize that this work can be monotonous drudgery (we know!), but these procedures will ensure your success.

Figure 1: New Air Shower Access Installation

As a summary to begin, pest access must be limited wherever possible. Employees are the first place to start, but we must also return to our site map and review our facility design and workflows. Every operation has to move plants from nursery through harvest and post-harvest. Where should cleaning happen? Of course, you have to clean up post-harvest but when should this occur during the grow cycle? What is the best way to monitor and clean environmental management systems (i.e. air, water) and what are the weaknesses in the physical barriers between operations? Let’s walk through these issues one-by-one.

Employee Access and Sterile Equipment

Follow procedures to screen and protect your employees both to eliminate pests and to avoid exposing your employees to harmful chemicals or storage areas. Look for ways to isolate your workflow from pest access. Be certain that your facility is airtight and sealed with filtration of molds, spores and live organisms in your air intake areas. Air showers at your access points are important to screen your employees on their way into your gowning areas and grow facility. Clothing should be standardized and shoe coverings or crocs should be provided for all employees that access your interior. Look for ways to stop all pests (embedded, crawling, hopping or flying) in all of your room assignments (mothers, clone, veg, flower, trim and drying). This can be improved with shoe baths, sticky mats, frequent hygiene (hand washing and cleaning stations) and procedures for entry.

Always consider requiring hair & beard nets, shoe covers and disposable gloves in plant sensitive areas.

Chemical Access & Protective Equipment

Figure 2: Example Facility Map – Understand Workflow & Barriers to Pest Access

Personal protection equipment (PPE) is very important to protect any employee that will come in contact with materials, liquids or vapors for chemical resources. Establish procedures for chemical use and train employees in the safe handling of these materials. Typical equipment includes high density chemical protective gloves, boots, respirators, Tyvek (or equivalent protective wear) suits and eye protection or goggles.

Chemical access areas and their use should be restricted to employees familiar with their authorized application. Always remember that cannabis is an accumulator plant, and it will absorb and hold onto chemical treatments. Appropriate isolation and safety procedures must be followed for chemical use. Not following these restrictions can expose your employees to dangerous chemicals or get your entire harvests rejected at testing.

Facility Map & Workflow

Because insects would like to be everywhere and they come in many types (root zone, crawling, flying, microscopic, bacterial or biofilm), the facility workflow must understand where they are and how they might migrate if they penetrate your defenses. Note airflows in your rooms and fan locations so migrations can be predicted once an infestation is located. Where are your opportunities for full clean-up and disaster recovery in your building? Where should you stage maintenance filters, test kits, water and cleaning materials. How best to clean up and dispose of sealed garbage containers or cleaning materials?

Operational Cleaning & Post-Harvest Reset

When compiling your preventative measure documents, it is critical to create a repeatable operating procedure for cleaning and sanitizing your rooms, systems, and growing spaces after each harvest. Plant material handling, cleaning surfaces and wipe methods should all be documented in your Standard Operating Procedures (SOPs). Define what “clean” is. Removing plants and plant debris is pretty clear but define how to drain reservoirs, clean pipes, change filters and clean and sterilize your rooms. Operators must be trained in these SOPs and reminded of their content on a regular schedule. This is how you avoid outbreaks that can crush your profits.

Physical Barriers & Maintenance

Figure 3: HVAC Air Filtration, Dehumidification, & Air Movement, Onyx Agronomics

Document your sealed spaces and define your normal room and access door barrier interfaces. Review the status of any known cracks or gaps in your perimeter. Are there any known leaks or piping that has been seen as a risk or a problem in the past? Are there any discoloring or resident mold locations (Never happens, right?). Baseline how much time and people resource a harvest operation and cleaning effort should take. Will you do this after every harvest or compromise your risk by delaying to every third or fourth harvest? Create your barrier SOP.

Environmental Control & HVAC

Managing the air quality provided to your plants is critical to your yields. Controlling CO2, air movement rates (the leaf happy dance), humidity, air filtration and sterilization methods must be maintained and cleaned on a regular basis. Do you need to change the HEPA or other particulate filters? Is there any UV light sterilization maintenance? We have all seen the home HVAC air conduit cleaning commercials. Your commercial facility is no different. How will you clean your air and water plumbing systems? How often will you perform this full reset? When will you calibrate and data log your sensors for temperature, humidity, CO2 and water resources? Put everything about your environmental set points into your maintenance document and decide when to validate these. Molds, mildews and biofilm hazards are all waiting for unmonitored systems to open the door for access.

In Conclusion, This Week

If you’re an IPM nerd and this dynamic topic did not put you to sleep, you can read more detail and examples for your integrated pest management procedures in ourcomplete white paper for Integrated Pest Management Recommendations, download the document here.

In our next chapter, Direct Control Options, we will review what you can use to protect or recover control of your facility including both chemical and non-chemical tools and methods. In our final two chapters, we will discuss extermination of the determined pests that breach your defenses. And with great expectations, our final chapter will discuss emergency response and time to go to war!

Part Four comes out next week. See you again soon!

The 3-Legged Stool of Successful Grow Operations: Climate, Cultivation & Genetics – Part 4

By Phil Gibson
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This is Part 4 in The 3-Legged Stool of Successful Grow Operations series. Click here to see Part 1, here to see Part 2, and here to see Part 3. Stay tuned for Part 5, coming next week.

Integrated Pest Management (IPM)

Aeroponic & hydroponic systems can operate with little to no soil or media. This eliminates the pest vectors that coco-coir, peat moss/perlite and organic media can harbor as part of their healthy biome approach. Liquid nutrient systems come at the nutrient approach from a different direction. Pure nutrient salts (nitrogen, potassium, magnesium and trace metals) are provided to the plant roots in a liquid carrier form. This sounds ideal for integrated pest management programs, but cultivators have to be aware of water and airborne pathogens that can disrupt operations. I will summarize some aspects to consider in today’s summary.

The elimination of soil media intrinsically helps a pest management program as it reduces the labor required to maintain a grow and the number of times the grow room doors are opened. Join that with effective automation with sensors and software, and you have immediate improvements in pest access. Sounds perfect, but we still have staff to maintain a facility and people become the number one source of contamination in a grow operation.

Figure 1: Example of Pythium Infected & Healthy Roots

Insects do damage directly to plants as they grow and procreate in a grow room. They also carry other pathogens that infect your plants. For example, root aphids, a very common problem, are a known carrier of the root pathogen, Pythium.

Procedures

One of the most common ways for pests to access your sealed, sterile, perfectly managed facilities are in the root stock of outsourced clones. If you must start your grow cycles with externally sourced clones, it is strongly recommended that you quarantine those clones to make sure that they do not import pest production facilities into your operation. Your operation management procedures must be complete. If you take cuttings from an internal nursery of mother plants, any pathogens present in your mother room will migrate through cuttings into your clones, supply lines, and subsequently, flower rooms.

Figure 2: Healthy Mothers & Clones, Onyx Agronomics

Start your gating process with questioning your employees and visitors. Do they grow at home or have they been to another grow operation in the last week? In the last day? You may be surprised by how many people that gain access to your grow will answer these questions in the affirmative.

Developing standard operating procedures (SOPs) that are followed by every employee and every visitor will significantly reduce your pest access and infection rates, and hence, increase your healthy harvests and increase your profitability. Procedures should include clothing, quarantining new genetics and cleaning procedures, such as baking or irradiating rooms to guarantee you begin with a sterile facility. This is covered more in the complete white paper.

Engineering Controls

Figure 3: Access Control: Air Shower, FarmaGrowers

Technology is a wonderful thing but no replacement for regimented procedures. Considered a best practice, professional air showers, that bar access to internal facilities, provide an aggressive barrier for physical pests. These high velocity fan systems and exhaust methods blow off insects, pollen and debris before they proceed into your facility. From that access port into your grow space, positive air flow pressure should increase from the grow rooms, to the hallways, to the outside of your grow spaces. This positive airflow will always be pushing insects and airborne material out of your grow space and away from your plants.

Maintaining Oxidation Reduction Potential (ORP)

ORP is a relative measurement of water health. Perfect water is clear of all material, both inert and with life. Reverse osmosis (RO) is a standard way to clear water but it is not sufficient in removing microscopic biological organisms. UV and chemical methods are needed in addition to RO to clear water completely.

ORP is an electronic measurement in millivolts (mV) that represents the ability of a chemical substance to oxidize another substance. ORP meters are a developing area and when using a meter, it is important to track the change in ORP values rather than the absolute number. This is due to various methods that the different meters use to calculate the ORP values. More on this in the white paper.

Oxidizers

Figure 4: AEssenseGrows Aeroponic Nozzles

There are two significant ways to adjust the ORP of a fertilizer/irrigation (fertigation) solution. The first is by adding oxidizers. Examples are chemical oxidizers like hydrogen peroxide (H2O2), hypochlorous acid (HOCl), ozone (O3) and chlorine dioxide (ClO2). Adding these to a fertigation solution increases the ORP of the fertigation solution by oxidizing materials and organic matter. The key is to kill off the bad things and not affect the growth of plants. Again here, the absolute ORP metric is not the deciding factor in the health of a solution and the methods by which each chemical reaction occurs for each of these chemicals are different. This is compounded by the fact that different ORP meters will show different readings for the same solution.

Another wonderful thing about automation and aeroponic and hydroponic dosing systems is that they can automatically maintain oxidizing rates and our white papers explain the methods executed by today’s automation systems.

Water Chilling

Another way to adjust ORP is to reduce the water temperature of the reservoirs. Maintaining water temperature below the overall temperature of your grow rooms is imperative for minimal biological deposition and nutrient system health. Water chillers use a heat exchanger process to export heat from liquid nutrient dosing reservoirs and maintain desired temperatures.

The benefit of managing ORP in aeroponic and hydroponic grow systems is highly accelerated growth. This is enhanced in aeroponics due to the effectively infinite oxygen exchanging gases at the surface of the plant roots. Nutrient droplets are sprayed or vaporized in parallel and provided to these root surfaces. Maximizing the timing and the best mineral nutrients to the root combustion is the art of grow recipe development. Great recipes drive superior yields and when combined with superior genetics and solid environmental controls, these plants will deliver spectacular profits to a grow operation.

Another Hero Award

Before closing this chapter, we have many cultivators that are producing stellar results with their operational and IPM procedures, so it is hard to choose just one leader. That said, our hats are off to RAIR Systems again and their director of cultivation, Ashley Hubbard. She and her team are determined to be successful and drive pests out of their operations with positive “little critters” and the best water treatment and management that we have seen. You are welcome to view the 7-episode walkthrough of the RAIR facility and their procedures here.

To download the complete guide and get to the beef quickly, please request the complete white paper Top Quality Cultivation Facilities here.

Stay tuned for Part 5 coming next week where we’ll discuss Genetics.

An Interview with Würk CEO & Chairman, Scott Kenyon

By Aaron Green
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The cannabis industry operates in a legal gray area between federal restrictions and state legalization in a constantly changing regulatory environment. Maintaining payroll and HR compliance is a burden cannabis companies face that grows exponentially with geographic expansion of the workforce.

Würk allows cannabis companies to manage payroll, human resources, timekeeping, scheduling and tax compliance, minimizing compliance risks in the ever-changing cannabis regulatory environment. The company uses its expertise and trusted partnerships to provide guidance on 280E tax law, accounting and banking. Its platform is designed to scale nationally with the growth of the industry while incorporating the local laws and regulations unique to individual states. Their clients include Cresco Labs, Canndescent and NUG.

We caught up with Scott Kenyon to ask about Würk’s approach to human capital management, challenges facing cannabis businesses and industry trends. Scott sat on the Board of Würk before becoming its CEO and chairman. Prior to Würk, Scott held leadership roles at Dell and Phunware.

Aaron Green: How did you get involved in the cannabis industry?

Scott Kenyon, CEO and Chairman of Würk

Scott Kenyon: My wife and I were early investors in a few companies in Colorado and Nevada. From early on (this was back in 2015) we learned the hard way of cannabis and how difficult it is to run these businesses, especially in those early days. We’ve progressed a ton over the years, but it’s still very difficult to run cannabis businesses.

I joined Würk about five years ago as a board member. I came on as CEO at the beginning of 2021 after our founder and previous CEO Keegan Peterson, who was an early trailblazer in the industry, passed away. So, I’ve been CEO at Würk for about 18 months.

Green: Tell me about Würk and the main problems you’re trying to solve.

Kenyon: Early on we were focused on establishing getting out of the cash business for these cannabis companies. Allowing them to pay payroll, taxes and be tax compliant electronically was a huge early advantage for us as a company. Now, fast forward seven years later and a lot of different banks (credit unions) are in the industry and that is allowing people to move money. So, that’s not as big of an advantage for us anymore, but early on that was huge.

Our advantage now is the scars on our back, for lack of a better phrase, from what we’ve gone through over the last seven years. We anticipate. We prevent. And most importantly we’ve seen all those problems for our customers. Last year, a big thing of mine was being “Smokey the Bear.” We want everybody to be Smokey the Bear: prevent fires and prevent issues for our customers. When I came in, we were the world’s best firefighters. I didn’t want that title. I wanted to prevent issues for our customers. That takes you from being a vendor to a partner.

If you look at it, on our platform we have 80% of the enterprise cannabis market, about 60% of the mid-market and then low single digits in the small business space. We have that market share because we provide invaluable experience and guidance to our customers. The biggest MSOs have different challenges from a “Joseph and Scott” dispensary, or a “Mary and Jane” grow facility. We’re able to adapt to all those different segments.

At the core of our product, we offer payroll services and what we call HCM – human capital management. That’s everything from scheduling, applicant tracking systems processing and paying your payroll taxes. So, we have the full gamut of product offerings that any type of HCM or HRIS software system does, whether you’re outside of cannabis or inside of cannabis, we’re offering the same thing.

Green: How does Würk differ from say a Professional Employer Organization (PEO)?

Kenyon: We aren’t a PEO. We don’t manage employees. At a high-level, a PEO is basically managing HR for these companies. Our platform enables HR professionals to go out there and do that. PEOs are more popular down in the small business space, because people are not at the scale to hire an HR team. We’re similar in that we’re processing payroll and have all the software that these companies need, but we’re different in that we’re not running their HR for them.

Green: How do you work benefits into the mix?

Kenyon: We leave it to the client, and we integrate their benefits provider into our platform so it’s an easy one-stop shop. We have single sign-on for a lot of our integrations. For the HR organizations, we want them to log into our platform and everything they need will be there.

Green: How is SAFE banking going to affect the HR industry in cannabis?

Kenyon: It’s going to be great for the industry, obviously. For HR specifically, it’s going to bring in more providers of payroll and more competitors for us for sure. But also it’s going to bring in more providers of services that can come in and offer that right now because of the federal illegalization.

Green: How does 280E affect your business and your customers?

Kenyon: We don’t guide people around 280E because that’s a tax specific matter. We refer them to their tax experts. We process payroll tax, which is different than what 280E affects. I think 280E was a big challenge, it’s still a big challenge, but that’s mostly because people didn’t really understand it. I think 280E was a problem five to seven years ago. In the last two years most companies are very familiar with it. That doesn’t mean 280E is the right thing. I think 280E is an awful thing. And while I think I hope SAFE banking is the first thing to fall legislatively, I think 280E has a good chance of getting across first.

On any given day my opinion on which will go first changes. I just want something to get across the line.

Green: What are some unemployment and payroll challenges your customers face?

Kenyon: We really watch unemployment changes and changes in job descriptions or job codes. For example, if an unemployment rate changed, and that unemployed person moved to a different place, which happened a lot during COVID, that company needed to report that and they needed to collect the appropriate charges or taxes there.

Green: What geographies are you in right now?

Kenyon: As of January 1, we had people on our platform in 46 states and just under 600 different jurisdictions. So, even though cannabis isn’t legal in all those states, big companies have employees across the United States.

Green: How do you help your users manage compliance across multiple jurisdictions? That must be a complex undertaking.

Kenyon: Our platform automatically plugs into the states that have electronic notifications around laws, which most states do. In our tax department, we have certain group members that are experts, let’s say, in the west coast. So, we assign people to certain regions to ensure that they have the best knowledge.

From our support piece, where a lot of our customers come in, somebody might say, “Hey, I have a unique question for Utah” and we’ll say we have a person that is specialized in Utah, but we don’t force them there, we just give them the option. But in our tax queue, we actually direct the customer like, “Hey, here’s a Massachusetts Question, so that goes to a particular person because they are our Massachusetts expert.”

Green: How do you deal with timekeeping issues like overtime?

Kenyon: Well, our system does that automatically. Let’s say they’re working overtime in a state that’s difficult to keep time for like California. In the state of California, if they’re working overtime on a Saturday or Sunday or a holiday, that’s a whole different calculation than working longer on a Thursday night. So, our platform is made to automatically calculate that for our customers. There’s no manual adjustments or coaching happening there. We just follow the state law based on where the employees are.

Green: Are you seeing any unionization of employees within the cannabis industry?

Kenyon: There’s unionization in many of our states, I don’t know the exact number, but California being the biggest, there’s a lot of union representation. Illinois is probably the second biggest union state on our platform. I’m assuming New York will be once it becomes adult use.

Green: How does Würk approach cybersecurity?

“Cannabis customers don’t want to buy on the illicit market. They want to buy from a trusted source. It just takes time to make that happen.”Kenyon: Well, we approach it very seriously and I recommend everybody take cybersecurity seriously. We test our internal systems regularly. We test our employees through phishing scams. And we’re always just trying to educate our team on the risk that we have.

I can’t share specifically the prevention steps that we’re taking, but I can tell you we partner with some of the biggest experts and make sure that we’re following everything that they’re recommending. More importantly, we’re testing for human failures, because where most failures happen is with people.

Green: What trends are you following in the industry right now? 

Kenyon: Any type of activity in Congress is going to be huge for this industry. So that’s something I always keep abreast of. The next thing that comes down the line which is tied to that is interstate commerce: How is interstate commerce going to really come into play? And how does that change this industry?

Within the industry, the big question is how do we combat the illicit market? Over the last five years, I’ve heard all kinds of different ideas. But in the end, I think we have to out-innovate the illicit market, and that’s what I’m most excited about.

There are new product categories, beverage being one that is starting to gain traction. How are these new products and new variations of the cannabis plant able to treat and help people in ways that we’ve never thought of? That’s part of out-innovation. I was reading an article today about new terpenes that were discovered and how 100 products could come from each one of those new terpenes. I think we’re just still at the tip of the iceberg of product innovation.

How do we fight the illicit market? I think that is just through coming up with new products that treat different illnesses and ailments, that allow customers to get away from pharmaceuticals. Cannabis customers don’t want to buy on the illicit market. They want to buy from a trusted source. It just takes time to make that happen. They’re not going to do it when there’s a huge price difference, but they will do it when there’s a huge product difference. And right now, our products are very similar to what you can find on the illicit market. You can find vapes, you can find gummies, you can find all that in the illicit market. We’ve got to out-innovate the illicit market.

Green: What in your personal life are you most interested in learning about?

Kenyon: I am the father of two teenagers right now and I really like to learn how to be a better parent to them because it’s really frickin’ tough!

Green: Great, that concludes the interview!

Kenyon: Thanks, Aaron.

Risk Management Considerations for Cannabis Retailers in New Jersey

By Eric Schneider
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Despite the US making cannabis regulations challenging to navigate, the industry is snowballing toward profitability. New Jersey legalized adult use cannabis on April 21 this year. One month earlier, The Garden State began accepting applications for Class 5: Retailers, Dispensing and Delivery.

Although New Jersey isn’t shy about its licensing requirements and standards, many people want to know how retailers can stay in the game for the long run. So, let’s talk about risk management considerations New Jersey retailers need to know.

Top Risks Cannabis Retailers Face in New Jersey

Regardless of what kind of retailer you operate —medical or adult use — it’s critical to know what you’re up against. The following are the most common risks we’ve watched cannabis retailers face daily in New Jersey, making a customized risk management strategy necessary.

Theft

Like other retailers, New Jersey cannabis retailers are vulnerable to theft. Unfortunately, theft can come from various angles, such as in-store, in-transit and insider crime. Besides cannabis retailers typically having a well-stocked inventory, it’s not uncommon for them to have more cash on hand than most other businesses.

Although the SAFE Banking Act could positively impact the cannabis industry, it’s in a notorious stall yet again. Briefly, the SAFE Banking Act would no longer allow financial institutions, such as banks and credit card companies, to refuse to do business with cannabis companies. However, cannabis retailers must operate in a cash-only environment, for now, forcing them to make bank runs multiple times a day. We probably don’t have to explain how enticing a significant inventory and fat bank bags look to criminals.

Cybersecurity

Since the onset of the global health crisis, the cyber liability landscape has nearly spun into a death spiral. In other words, cybercriminals sat on the edge of their seats during the pandemic, waiting to pounce on anything that looked slightly vulnerable. Remote workers, small businesses, and emerging industries were hard-hit.

It’s no surprise that New Jersey cannabis retailers face many cybersecurity risks through their point of sale (POS) systems. Additionally, retailers often gather and store personal information, such as email addresses, credit card numbers, shipping addresses, etc. Hackers and cybercriminals gravitate to this vital data rapidly.

Property Damage

In addition to the risk of theft, as mentioned above, cannabis retailers must protect their property from losses. Without adequate protection, damage to equipment or buildings could add up to high out-of-pocket costs. Consider the damage a weekend office fire or late-night vandalism would cause. If property damage occurs, retailers must figure out how to sustain business operations while recovering from the loss simultaneously. As a result, New Jersey retailers must protect their property and maintain business continuity.

How to Customize a Risk Management Strategy

Watch or listen to any news reports and there’s a decent chance that you’ll feel some slight sense of doom and gloom. And sure, a lot is going wrong in our world; however, that doesn’t need to impact how you perceive your businesses. Instead of casting a massive net over every possible risk that you can imagine, we recommend trying the following 5-step approach. Here’s the gist:

  1. Identify: Pinpoint high-level risks that are specific to the cannabis industry. Then, let the process trickle down to focus on company-specific exposures.
  2. Analyze: Determine how badly a particular risk could harm your retail company. How much will this hurt should the “what-ifs” play out?
  3. Evaluate: Categorize risks according to how risk tolerant your company is. Will you avoid, transfer, mitigate or accept the risk?
  4. Track: Use your history or the stats from a similar retailer to map out how you’ve handled the risk over time. Older retailers have an advantage over younger retailers, of course, but you can still get a feel for your risk management style.
  5. Treat: Make good on your evaluation promises by avoiding, transferring, mitigating, or accepting the various risks you identified.

Recommended Insurance for New Jersey Retailers

Sales totals in the first month of New Jersey’s adult use market

The New Jersey Cannabis Regulatory Commission issued detailed requirements for new cannabis businesses. That said, part of the application requirements considered is the plan for companies to obtain liability insurance. Many new retailers opted for a “letter of commitment” as opposed to a certificate of insurance (COI), stating their plans for obtaining the following coverages:

  • Commercial general liability: Protects cannabis companies against basic business risks.
  • Product liability: Protects against claims alleging your product or service caused injury or damage.
  • Property: Reimburses cannabis companies for direct property losses.
  • Workers’ compensation: Covers employees if they are injured on the job and can no longer work.

In addition to the required insurance coverages, we recommend New Jersey retailers customize their risk management package with these policies:

  • Crime: Protects your cannabis company against specific money theft crimes.
  • Cyber: Protects your cannabis company against damages from specific electronic activities.
  • Directors & officers: Protects corporate directors’ and officers’ personal assets if they are sued.
  • Employment practices liability: Protects cannabis companies against employment-related lawsuits.
  • Professional liability: Protects cannabis companies against lawsuits of inferior work or service.

With more states in the US entering the marketplace soon, New Jersey is doing its fair share of the heavy lifting by spearheading the onboarding process. Remember, doing your due diligence at the start pays off in the long run — New Jersey retailers are proving that. Consider teaming with a commercial insurance broker calibrated to the cannabis industry, so you get the most out of your broker, marketplace and the cannabis industry as a whole.

New Insurance Risks as Cannabis Lounges Open Across the US

By Jason Scheurle
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In a growing number of communities around the U.S., new cannabis lounges are offering a social setting where guests can openly use cannabis products. Colorado and New Mexico both saw their first cannabis lounges open in April, Michigan’s first cannabis lounge is set to open this summer, and officials in Nevada are currently discussing how the recently approved class of businesses should be regulated. In West Hollywood, California, where the state’s first cannabis lounge opened in 2019, multiple new lounges are now in the works after two years of slowdown due to the pandemic.

The bar-like establishments add a new dimension of potential revenue — and risk — to an industry that is expected to add almost $100 billion to the U.S. economy this year. This new and emerging segment within cannabis isn’t happening in every legal state, but more are starting to enact regulations to provide for some type of on-site consumption.

These new ventures need insurance policies tailored to address the risks of serving cannabis products, which could be looked at similarly to liquor liability for bars and restaurants.

Whether it’s alcohol or cannabis, these products impair people’s judgment, meaning everyone reacts differently to them. But how do you know when to cut someone off?

Cannabis lounges could be held liable & run risk of being sued for overserving

If a cannabis lounge faced a lawsuit alleging that it overserved a patron, leading to a third-party bodily injury, the business’ Commercial General Liability (CGL) Insurance and Products Liability Insurance could potentially cover costs such as legal defense, medical expenses and settlement amounts. Until such a case occurs, it is not yet known how exactly these lawsuits would be covered by insurance.

Because of the short history of cannabis lounges in the U.S., something like this is largely untested, making it hard to speak to exactly how a scenario would play out. Many of the existing cannabis insurance policies are highly exclusionary, meaning it could exclude a loss that is deemed to have arisen out of the use of cannabis.

Recent liquor liability lawsuits have shown the potential for a significant loss is clear. In early April 2022, a $20 million lawsuit was filed against a nightclub in Houston, Texas, alleging it overserved customers and allowed underage drinking, contributing to a drunk driving crash that killed a teenager.

In December 2021, a jury in Texas awarded the family of two drunk driving victims over $301 billion after a lawsuit alleged the driver was overserved at a bar before the accident; though largely symbolic, the settlement marked the largest personal injury award in U.S. history.

The Barbary Coast lounge in San Francisco

With these cannabis lounge establishments more or less encouraging intoxication of patrons on their premises, it’s very similar to a liquor liability type situation. If someone overindulges at a lounge, leaves and causes a crash resulting in injury or death, that could come back to the establishment.

While it remains to be seen how cannabis overserving lawsuits could play out in American courts, it’s worth noting Canada forbids on-site consumption of cannabis products and any loss or damage will not be covered by their insurance policies – despite it being legal country-wide.

Lawsuits possible over product issues, budtender advice

Even cannabis operations that do not allow on-site consumption can face liability related to the products they sell, making Products Liability Insurance and Product Recall Insurance necessary for growers and retailers. They should also consider Employment Practices Liability (EPL) Insurance to cover staffing-related allegations such as discrimination and ask their insurance broker whether budtender liability is included in their CGL Insurance policy.

Budtenders must walk a fine line between giving advice versus general information on products.

Budtenders, or individuals who work at cannabis retailers, are not allowed to offer medical advice to consumers. They must walk a fine line between giving advice versus general information on products. Although we are not aware of lawsuits that have been filed over a budtender’s advice, it would ultimately be up to the courts and lawyers as to how those proceedings would play out.

Budtender liability is not very different from professional liability insurance, and it’s more like an incidental coverage based off the budtender’s informal advice. There are, indeed, insurance carrier partners today that offer that service.

CGL Insurance can also cover in-store slip-and-falls and other third-party injuries and property damage. Because most cannabis retail stores are fairly small, these incidents have been rare, but GCL cannot be overlooked. Businesses must be prepared for anything to happen – and need to know that no risk is too small.

Theft, vandalism among top threats to cannabis businesses

Whether or not a cannabis business includes a lounge for cannabis use, any business in this industry may be more vulnerable to certain risks, including theft and vandalism.

In the U.S., where many cannabis companies operate on a cash-only basis because of banking difficulties tied to recreational products being federally illegal, a recent surge in cannabis shop robberies has led to calls for a new banking bill. Some of these incidents have even turned deadly, including an April 30 dispensary robbery in Los Angeles, California, during which one man was reportedly shot and killed.

Many insurance carriers require retailers to install alarm systems, video monitoring equipment or safes

Large amounts of cash are on-hand daily at these premises, and workers might have to make multiple bank runs throughout the day, leaving a heightened exposure and risk for robberies.

From robberies and vandalism to fires and flooding, Commercial Property Insurance is a key protection for cannabis retailers. Equipment Breakdown Insurance may also be needed, particularly when the stores contain expensive refrigeration equipment. The potential loss is large in this industry, especially at growing facilities, and there’s a lot at stake with such high-value equipment.

Security systems, employee training can help reduce risks

Many insurance carriers require business owners to install alarm systems, video monitoring equipment or safes to help reduce potential property losses, and employees should be trained to use the alarm systems consistently. Policyholders and business owners should also know there is a lot they can do to curb some of the risks, such as businesses doing background checks on every hire and taking steps to ensure they are hiring individuals they can trust.

Installing bars on glass windows and doors is another loss prevention measure that is strongly encouraged because it adds an additional layer of security to get through – it won’t be an easy or quick process to break-in and will trigger the alarm system.

The importance of working with an insurance broker

Working with an insurance broker who is specialized in the cannabis industry can help business owners better explore available coverage options. With cannabis or any type of risk, you should always work with someone who has knowledge and expertise in that area. When you work with someone who knows the ins-and-outs of the regulations, you can have more peace of mind.

You might have a risk warranty that always requires two drivers in that vehicle, or GPS monitoring on the vehicle.

Understanding your policy in its entirety is also essential, as these policies have any number of different limitations and exclusionary forms that could preclude you from collecting if you had not understood and followed the language of the policy.

In a transportation situation, for example, you might have a risk warranty that always requires two drivers in that vehicle, or GPS monitoring on the vehicle. In the event of a claim, if the investigation determines the business did not have those items present at the time of loss, that claim will not be covered.

In a rapidly growing and changing industry, business owners should not underestimate the value of working with a team of insurance experts who keep a close pulse on the quickly evolving industry. Brokers are aware of the different legal environments in each state or even each city or county. Cities and counties can add different levels of compliance matters, so as a buyer, you can be confident that you have the most recent information and are in compliance with state law and any insurance requirements that may be present. Being able to explain the differences between the markets and the coverage options is beneficial to any business owner in this ever-changing industry.

Ask the Experts: The Business of Cannabis Meets the Law

By Cannabis Industry Journal Staff
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Practicing Law Institute Press’s Legal Guide to the Business of Marijuana: Cannabis, Hemp and CBD Regulation is a one-of-a-kind deep dive into the many regulations governing the industry. Aimed at attorneys representing clients in this space, the treatise offers guidance on a range of interrelated topics including state regulation of medical and non-medical cannabis; federal law, enforcement and preemption and their implications for employment, taxes and banking; and the various aspects of establishing and managing a cannabis enterprise, from growth to licensing, transport and distribution. We spoke with co-authors James T. O’Reilly, professor of Public Health Policy at the College of Medicine of the University of Cincinnati and author of leading references on food and drug law, and Edgar J. Asebey, a founding partner of Keller Asebey Life Science Law and a life sciences attorney with over twenty years of experience, about the intersection of the cannabis business and the law.

Q: From the legal industry’s perspective, how has this area of the law evolved over the past few years – and what would you advise clients in cannabis to look for when engaging legal assistance for their businesses?

James T. O’Reilly & Edgar J. Asebey: Over the past few years, we have seen a growing acceptance of the idea that lawfully serving the needs of cannabis consumers is a commendable business initiative. This evolution in thinking – tied to the myriad business opportunities cannabis presents – has given large, mainstream corporate law firms the incentive to grow practices and develop specialists in this area, which is a very positive development.

But it is not enough for lawyers to know their way around M&A and the capital markets; they must also have experience with federal regulatory bodies. As regulations continue to evolve, it is essential for practitioners to be familiar with the Food, Drug and Cosmetics Act as well as the Federal Trade Commission Act. The framework for regulating cannabis products already exists, as can be seen in the Warning Letters sent to hemp and CBD companies by both the Federal Trade Commission and Food and Drug Administration (as well as, most recently, the FDA and CDC’s warning about delta-8 THC). If a client places their hemp or CBD product into the stream of commerce, that product will be subject to FDA, FTC and relevant state laws. We strongly recommend seeking out advisors who truly understand these regulations and how they align with the regulatory agencies’ procedures and agendas.

Q: What are the most urgent legal and regulatory topics the industry is watching these days?

O’Reilly & Asebey: Our treatise follows and analyzes the most pressing legal issues facing those in the cannabis and hemp space. In our most recent edition, we add discussion of the Final Rule for the establishment of a domestic hemp production program. We think this is a significant development in that it attempted to address some of the industry’s criticism of some provisions found in the Interim Final Rule, par­ticularly around issues of sampling and testing for THC content. The Final Rule clarified issues around THC percentage testing methodologies, but disappointed many in the industry by leaving in place the low 0.3% dry weight threshold for an acceptable hemp THC level. On the other hand, The Final Rule raises the threshold for a negligent violation from 0.5% to 1.0% total THC and limits the number of violations a grower can receive in one year to one, easing potential penalties for violations.

Of course, the regulation of CBD products is on the minds of many in the industry. Key questions remain about whether cannabinoids such as delta-8 THC can be lawfully sold. Since the FDA has provided no clear guidance with regard to the sale and use of CBD and other hemp-derived cannabinoid-containing prod­ucts, well-meaning businesses find themselves operating in a regulatory gray area. While some states have raced to place delta-8 THC on their controlled substances lists or otherwise regulate it, at the federal level it remains unclear. Our book provides a legal argument showing that current regulations support the lawful production and sale of delta-8 THC. To date, this and other legal arguments have not been tested in the courts and, without FDA guidance, the delta-8 THC sector will remain gray.

Editor’s Note: The Legal Guide to the Business of Marijuana: Cannabis, Hemp and CBD Regulation is now available for purchase here.

About James T. O’Reilly

James T. O’Reilly of the University of Cincinnati College of Medicine is former chair of the 8,000-member Section of Administrative Law & Regulatory Practice of the American Bar Association and has been active in numerous ABA, Federal Bar Association, and state and local bar activities. He retired as Associate General Counsel of The Procter & Gamble Company to teach full-time, and served as a consultant to three federal agencies and to the Deputy Secretary General of the European Commission. He has authored fifty-six texts and more than 230 articles, and his work was cited numerous times in appellate opinions, including “The experts have written . . . ” in a March 2000 opinion of the U.S. Supreme Court (Food & Drug Administration v. Brown & Williamson Tobacco Corp., 120 S. Ct. 1291). He has received numerous honors and awards for his professional and electoral activities and has been listed in Who’s Who in American Law for twenty-five years. He is a graduate of Boston College and the University of Virginia School of Law.

About Edgar J. Asebey

Edgar J. Asebey, a partner at Asebey Life Sciences Law PLLC, is a regulatory and transactional attorney with over two decades of experience in federal regulation of pharmaceutical, biotechnology, medical device, food, dietary supplement and cosmetics companies. Since 2015, he has been working on cannabis-related matters and transactions, and since 2018, he has provided regulatory compliance, business transactional, venture finance and international trade services to hemp/CBD companies. Mr. Asebey practices before the FDA, the USDA, the CBP, the EPA, and the FTC, representing client companies on regulatory compliance, product approval/registration and FDA enforcement defense matters. He founded and served as president of Andes Pharmaceuticals, Inc., a natural products drug discovery company, from 1994 to 2000, and has served as in-house counsel to two life sciences companies. Mr. Asebey is a member of the American Bar Association (Section on Administrative Law & Regulatory Practice: Food and Drug Committee and International Committee), the Food & Drug Law Institute (FDLI), the Dade County Bar Association, and BioFlorida.

Content sponsored by Practicing Law Institute

Lean Management in a Cannabis Lab

By Rob Radke
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Lean management or Lean thinking is a process for continuous improvement that can be applied to any business. Most frequently Lean is attributed to the manufacturing sector due to its origins in Japan at the Toyota Motor Company. Lean originated in post-war Japan where resources were scarce as the country rebuilt itself after World War II. The scarcity of resources forced the Japanese to do more with less which manifested itself within the Toyota organization as the Toyota Production System from which Lean originated.

Today, Lean thinking is being applied to every industry and we believe that the cannabis industry, and in particular laboratories, can benefit tremendously from its principals.

What Is Lean and How Does it Apply to Cannabis?

Lean thinking is a set of powerful tools for any business or organization that wants to be the best in their industry and deliver superior value their customers. This is especially relevant to the fast-growing cannabis and hemp testing industry where customers demand fast turnaround times and error-free results.

The reason that Lean applies to all businesses and especially the cannabis industry is because of its focus is on eliminating waste. Waste comes in many forms including defects, waiting time, extra motion, excess inventory, transportation, over production, over processing and underutilized talent.

Companies that adopt Lean management eliminate waste using a wide variety of tools that help surface issues and eliminate the root causes. When companies eliminate waste, they simultaneously improve both their speed and quality, two attributes that customers really care about. Given the fast-changing nature of the cannabis industry and differences state by state, we believe that using Lean thinking to eliminate waste is critical to being a top performing business in the cannabis industry.

One important tool that many businesses begin with is known as 5S or 6S. At our laboratory we recently implemented 6S to organize both our office and laboratory spaces. 6S is a process improvement tool that stands for Sort, Set in Order, Shine, Standardize, Sustain and Safety. The process involves each technician or analyst assessing their areas and asking critical questions such as: Can I easily reach everything I need for this test or process? Is there wasted motion due to the placement of items within the lab? Can I easily tell how much consumable inventory I have on hand at a glance?

This process also helps improve safety because the workspace is better organized, easier to navigate and designed with safety in mind. Each person is responsible for maintaining their workspace and regular audits by rotating teammates, helping drive continuous improvement to our 6S. It is a fundamental process for any business starting to adopt Lean thinking.

Another very helpful process that any cannabis business can implement is the Gemba walk. Gemba is the Japanese word for “actual place” and refers to the place in a business where value is created for the customer. Value in our cannabis business is created in our testing lab. By improving everything in our testing lab we improve our quality and speed for our customers. In our laboratory we begin the Gemba walk as a team reviewing our key performance indicators (KPIs). From there, the management team visits each station to review additional KPIs and discuss any issues that group may be having. We try to surface issues, however small they may be, so that they are solved and hopefully eliminated. This process is key to helping us keep a pulse on the lab, engaging employees and better understand the improvements that need to be made.

How to Implement Lean Processes

labsphoto
Without quality results, a testing laboratory does not really have a product or service to offer

Lean thinking is a very accessible set of tools. Unfortunately, it is quite difficult to implement because of the dedication that it requires. Implementing Lean and changing the culture requires a significant amount of time, investment in training and management commitment. Time and capital for training can be scarce at some businesses in the cannabis industry. For the businesses with capital, it is extremely important that management commit to implementing Lean and changing their culture. Without the support of the executive team most businesses stop implementing new procedures and revert to how they are used to operating. It is also common for changes in management to result in lean becoming deprioritized in place of a new initiative.

If the executive team is inexperienced in Lean management, it will be important to find a Lean consultant that can guide the training and events. A Lean consultant should be able to provide you with thorough training on each tool and help your business implement them in real time to improve the business. The training and knowledge gained during these events are extremely valuable and practical tools that every employee can use.

Results From Implementing a Lean Organization

If a business is able to successfully implement Lean management the results for their customers can be dramatic. In the laboratory setting, turnaround times will be reduced, and more importantly, will remain consistent despite fluctuations in sample volume. Faster turnaround times for cannabis companies means that they can bring inventory to market faster which can be critical for supply constrained businesses.

Additionally, implementing Lean helps reduce the number of errors, rework and retests so the quality of the results for the customer is dramatically improved. Root cause issues are solved, processes are updated and then shared with the entire team so that everyone can learn and benefit from the improvement. Without quality results, a testing laboratory does not really have a product or service to offer so it is critical to get it right every time.

All areas of the cannabis industry are becoming more competitive, and it is important for every business to make sure they can stay competitive considering changing market dynamics. Lean management has helped businesses in other industries stand apart from the rest and we believe that the cannabis industry will be no different. Academic literature has studied and documented the positive impact that Lean has on businesses globally. Lean management has repeatedly shown that businesses that can truly implement Lean thinking in everything that they do will have an inherent advantage because they’ll be faster, more agile, higher quality, more efficient and focused entirely on creating value for their customer.

Best Practices for Training New Hires and Documenting Operations

By Dede Perkins
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Let’s just say it. There is an undeniable chaos in the cannabis industry. It doesn’t matter if you’re a big or small operator, it’s likely that you don’t have a documented system for creating and managing ever-changing SOPs or for consistently training all employees on the most current versions of those SOPs. This chaos is often the result of rapid growth, mergers and acquisitions, and the ever-present turnover in our industry. When department leadership changes, and it often does, established policies and procedures are often left behind. In some cases, this is a positive sign of growth. As a company outgrows SOPs and as it develops more sophisticated ways to cultivate, extract, process, manufacture, package and sell cannabis and cannabis products, inevitably, the old ways of doing business need to be replaced. For those operators who have prioritized operational excellence, whether they want to position their company for new investment, merger or acquisition, or just want to create a consistent and standardized, branded product, it’s critical to get control of SOPs, training and documentation.

Food processing and sanitation
By standardizing and documenting safety procedures, manufacturers mitigate the risk of cannabis-specific concerns

As with most big goals, to obtain operational excellence, you need to break the goal into manageable steps. Assuming you have accessible quality policies and procedures in place, properly training employees when they first start work and on an ongoing basis as policies and procedures change is the number one key to successful operations. When employees know how to do their job and understand what is expected of them, they are positioned for success. When employees are successful, it follows that the company will also be successful. Documenting operations is a second important step in obtaining operational excellence. While training and documentation appear to be different, in best-practice organizations, they are inextricably linked.

One Set of SOPs

Those of us who have been in the cannabis industry for a while have experienced firsthand or heard stories of facility staff working off of two sets of SOPs. There’s the set of SOPs that are printed or digitally available for the regulators, let’s call them the “ideal” set, and then there are the SOPs that actually get implemented on a day-to-day basis. While this is common, it’s risky and undermines the foundation of operational excellence. Employees often know there are two sets of SOPs. Whether they express it or not, many are uncomfortable with the intentional or unintentional deception. When regulators arrive, will they have to bend the truth or even lie about daily operations? Taking the time to establish and implement one set of approved SOPs that is compliant with both external regulations and internal standards is good for employee morale, productivity and ultimately, profits.

What’s the best way to get control of a facility’s SOPs? Again, break it into manageable steps:

  • First, task someone with reviewing all SOPs that are floating around. Determine if any are non-compliant, which ones need to be tossed and which ones need to be revised so they work for the company as well as outside regulatory authorities.
  • At a minimum, establish a two-person team to draft, review, publish and distribute the final SOPs. Ensure that at least one member of the team has management level authority. Assign that employee the responsibility of reviewing the SOPs before “publication” and distribution.
  • Archive, delete, or actually throw away outdated or non-compliant SOPs
  • Revise or create new best-practice SOPs that are in compliance with external regulations and internal standards
  • Establish a system to update SOPs when external regulations and internal standards change
  • Use a naming convention that distinguishes draft SOPs from final SOPs, for example, “Post-Harvest Procedure, FINAL”
  • Inform employees that they will be retrained on the new SOPs and that approved SOPs will always have the word “Final” in the title
  • Store the final SOPs in an easily accessible location and give employees access, not only during training, but on an ongoing basis

Centralized Repository for Final SOPs

Storing final, approved SOPs in one easily accessible, centralized location and giving employees access sounds simple, but again, this is the cannabis industry, so this often doesn’t happen. Many of us have or are currently working for an organization that stores SOPs in multiple places. Each department may have its own way of updating, disseminating and storing SOPs. Some SOPs are stored in a printed binder stuffed in a drawer or left on a bottom shelf. Others are stored digitally. Some use both systems, which creates confusion. Who knows if the digital versions or the printed versions are the most current? Surely someone knows, but often the front-line staff do not.“Once you’ve established a single set of compliant SOPs and have stored them in one accessible location, it’s time to train your employees.”

Establishing a centralized repository for final, approved SOPs is the foundation of operational excellence. It lets employees know that operations are organized and controlled, and it reassures regulatory authorities and external stakeholders—think insurers, bankers, investors—that the company prioritizes compliance and organization. And external stakeholders who believe that an organization is proactive and well-run tend to be more forgiving when the inevitable missteps occur. Companies that are organized, have effective training systems, regularly conduct internal audits to identify potential issues and take identifiable action steps when necessary to remediate issues, receive fewer deficiency notices, violations and fines than their less organized competitors.

Train Employees

Many states require cannabis operators to provide a specific number of training hours prior to an employee beginning work, and a specific number of continuing and refresher training hours annually. Once you’ve established a single set of compliant SOPs and have stored them in one accessible location, it’s time to train your employees. To do so, set clear expectations and decide who is responsible for what. Is the HR manager responsible for initial onboarding and training? Are department managers responsible for ongoing and annual training? Create a training responsibility chart that works best for your company; write it down and share with all stakeholders.

Documenting all key areas of operation on a recurring basis will help you keep track of a large facility and workforce

The next step is to figure out how to train your employees. Individuals have different learning styles, so ideally, you’ll offer multiple ways for them to master the requirements of their position. Assign written materials and if possible, attach short videos showing the best way to complete a task. Follow up with a quiz to determine comprehension and a conversation with a department lead or manager to answer questions and review the key take-aways. Ideally, the department manager or lead employee will work with the employee until they are competent and comfortable taking on new assigned tasks and responsibilities.

Sum It Up 

Operational excellence begins with:

  • Knowledge of and access to current external rules and regulations and internal standards
  • One set of approved and easily accessible policies and SOPs that comply with both external and internal standards
  • An initial training system with clearly assigned roles, responsibilities, and goals
  • An ongoing training system with clearly assigned roles, responsibilities, and goals
  • Systems to:
    • Test knowledge before employees begin unsupervised work
    • Stay up-to-date with all changes to external rules and regulations and internal standards
    • Control policy and SOP revision process
    • Inform all stakeholders when policies and SOPs change
    • Test that employees understand new standards
    • Document all key areas of operation on a recurring basis
    • Address deficiencies and evaluate whether SOP revisions are warranted
    • Document and implement necessary remediation when necessary

For those of you rolling your eyes and thinking you don’t have time for this, ask yourself, “Can you afford not to?”

For those of you committed to operational excellence and doing what it takes to get there, congratulations on being a visionary leader. Your efforts will pay dividends for your own company and will help the cannabis industry grow into a well-respected, profitable industry that improves lives.