Hiccups with traceability system rollout costing Washington state cannabis producers thousands

Problems with the rollout of Washington state’s new marijuana traceability system have cost producers tens of thousands of dollars in lost sales and contributed to dwindling cannabis inventories among retailers.

At issue is problems with Denver-based MJ Freeway’s Leaf Data Systems, the state’s new vendor for seed-to-sale tracking.

Producer/processors are experiencing several problems, including inability to transfer their wholesale cannabis to retailers.

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According to grower Steve Fuhr, who owns Toucan Farms in Shelton, the problems with the traceability system cost him at least $10,000 in lost sales.

“It killed us,” he said. “It’s castrating us.”

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MJ Freeway, for its part, conceded there have been bumps along the road but that the problems are being resolved.

“We don’t have one widespread problem currently,” said Jeannette Horton, vice president of global marketing and communications for MJ Freeway.

The troubles began Feb. 1, when the Washington State Liquor and Cannabis Board (LCB) finally rolled out its new state vendor tracking system.

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The days immediately following the rollout weren’t smooth for many license holders, particularly businesses with producer/processor licenses.

Growers struggled to provide inventory manifests to retailers. And without proper manifests, retailers couldn’t accept product.

Logan Bowers, co-owner of Seattle retail shop Hashtag Cannabis, estimated he could accept only one in 10 shipments from producers.

Horton of MJ Freeway maintained that the system is processing millions of dollars in orders.

She did acknowledge that various businesses have encountered different glitches.

For example, over the weekend, Leaf Data users encountered an email field where licensees’ identification numbers would show up, then disappear, which prevented completion of transactions.

“That has been resolved,” Horton said.

She also pointed out that from Feb. 1 to Feb. 5, a total of $3.3 million in sales had been processed through Leaf Data.

“So there are a good number of people using the system,” Horton said. “But there are also people running into issues.”

Horton said ongoing the problems are:

  • People not being able to log in.
  • Licensees’ accounts not showing up in the system.
  • Third-party integrators struggling to function fully.

Producer/processor pain

The Leaf Data problems have contributed to other difficulties facing Washington state’s growers.

According to Fuhr of Touchan Farms, wholesale outdoor-grown flower is selling for as low as $100-$300 a pound in Washington state.

Indoor cannabis, meanwhile, is in the $1,000-$1,500 a pound range, down from $3,500 a pound a few years ago.

“Here we are, suffering all these price issues, and this happens,” he added.

“It’s like we’re being kicked when we’re down.”

Fuhr knows of multiple licensees who will struggle to make payroll or pay the electricity bill this week because they can’t make sales.

Fuhr didn’t have to send any employees home. He’s keeping them busy tasking them with changing identification tags on Toucan Farms’ plants.

However, Fuhr said manpower and time to retag 1,000-plus plants will cost him $3,000-$5,000.

The Liquor and Cannabis Board announced Monday that some of Leaf Data’s major errors had been fixed, but Fuhr said Toucan Farms still doesn’t have a functioning system.

“The gross negligence here is that they’re launching a system that hasn’t been tested,” he said.

“They need to go back to a system that functions and transfer to a system that’s demonstrated through testing that it’s going to function.”

Brian Smith, communications director for the Liquor and Cannabis Board, played down the Leaf Data problems, saying only a few licensees had issues.

“Any time you have a rollout of a new IT system, there’s going to be some issues that happen up front,” he said.

Smith reiterated that the major glitch with the system where licensees’ ID numbers weren’t showing up had been resolved.

He added that the LCB had a team working round the clock since Feb. 1 to address and prioritize issues as they arose.

That team and MJ Freeway have been responsive, Smith said.

Producer/processor Jeremy Moberg disagreed with Smith’s assessment.

“I don’t believe it’s fixed,” said Moberg, CEO of Cannasol Farms. “Not until I hear of retailers bringing in product.”

Moberg, also president of the Washington Sungrowers Industry Association, said he temporarily laid off six of his employees this week and left $18,000 worth of cannabis sitting in a van because his company couldn’t get integrated with Leaf Data.

The only employees he’s paying are those who are trying to figure out how Leaf Data works, Moberg said.

“If you think about five days in this industry, it’s millions of dollars worth of transactions that are not happening,” he added.

Retail jitters

Bowers of Hashtag Cannabis said he’s experiencing some problems with Leaf Data but not to the extent of the producer/processors.

“The issues we’re seeing are failed deliveries,” he said. “Producer/processors can’t get us deliveries reliably.”

Bowers is hopeful everything will be repaired before his cannabis supply gets too low.

“Our inventories are dwindling,” he added. “I would say that we’ll be fine for a week or two, and then we’re going to start to see shelves empty.”

Bob Ramstad, owner of OZ retail store in Seattle, said Wednesday he had gone seven days without receiving an order from a producer.

Two orders were pending approval in the afternoon, he said. His normal weekly volume would be about 15 orders.

Aside from the direct impact on his business, Ramstad worries how the Leaf Data issues could affect the industry considering inventory isn’t being properly tracked.

For example, he said, Leaf Data isn’t allowing for products to be categorized with product type or weight.

“I don’t want to be too mean,” he said, “but this implementation looks like the kind of thing three guys with a couple of cases of beer could whip up over a weekend.”

Potential solutions

Some license holders would prefer to return to the state’s previous system.

Before Leaf Data’s implementation, licensees were operating with a “contingency system” provided by the state’s previously contracted vendor, BioTrackTHC, as a stop-gap solution.

BioTrackTHC’s contract with the state ended Oct. 31, but Leaf Data wasn’t ready to go then.

So BioTrackTHC offered a privatized solution.

“I think that (the workaround) system worked at least as good if not better than the original BioTrack system, and I would love it,” Fuhr said.

Moberg’s pushing for the state to cancel the Leaf Data contract and go back to the Unified Contingency Plan provided by BioTrackTHC.

He wrote a letter representing the growers association asking for the state to revert to the BioTrackTHC system.

He wrote, in part:

“There are 1800 licensees without functional traceability and unable to conduct business and maintain compliance.

“Many licensees will begin layoffs this week as they will be unable fulfill orders. There are tens of thousands of jobs at stake, as well as millions of dollars in tax revenue.”

It’s likely too late to make a switch, Ramstad said.

Businesses using Leaf Data, he said, no longer are compatible with those on BioTrackTHC’s contingency system, and vice versa.

“Most of us have fallen through a one-way door,” he added.

Ramstad believes MJ Freeway could have made the transition smoother by mimicking BioTrackTHC’s previous structure.

“They very clearly have not done that at all,” he said. “It seems as though they’re square-peg, round-holing us.”

Ramstad suspects it will be nine months to a year before “we get back to something that’s as functional as what we had, and there will be pain along the way.”

Bart Schaneman can be reached at [email protected]

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