Updated: Mar 20, 2019
Of all the cannabis operations, Product Manufacturing Facilities (PMFs) may be the single most demanding and expensive cannabis outfit yet. They require significantly more startup costs—some of the highest in the industry, as well as more local permits, and in turn, more city and county inspections. However, without these facilities, retail stores could not feed the demand for cannabis products nor would we have the young, thriving cannabis industry we see today.
As a licensed cannabis manufacturer, part of your task is to maintain daily compliance with multiple regulations across all facets of your business that include:
Cleaning of equipment
Chain of custody requirements
Facility construction and design
Weights and measures
Cannabis manufacturing facilities are not only subject to state licensing and regulation requirements, but must also abide by city, county, and federal regulations as well.
With new cannabis reform and regulations constantly evolving, federal and state legislation can become complex and stringent. A single company in Colorado reported over 330 regulatory compliance requirements; some examples of these requirements include certifications, health and safety requirements, and Good Manufacturing Practices. (GMPs)
Good Manufacturing Practices are regulations set by the Food and Drug Administration (FDA) under the authority of the Federal Food, Drug, and Cosmetics Act. These guidelines set quality standards for safe, pure, and effective products as well as reduce risks that can’t be spotted in a lab test.
GMP is a blanket term for adequately maintaining the various facets of your production facility including:
Sanitation & cleanliness
Personal hygiene & training of staff
Federal agencies would generally develop these Good Manufacturing Practice guidelines—however, because cannabis is still illegal on the federal level, it is left up to state authorities to develop these regulations. In the constant flurry of legislation and regulations, establishing and maintaining compliance in your canna-business may be tedious, time-consuming, and at times, exasperating.
This can create quite the pandemonium for you and your executives. Consequences for noncompliance include stiff fines, depending on the type and number of violations, hearings, or worse—suspension or loss of operational license.
Therefore it’s vital that all stakeholders oversee compliance procedures in every facet of the manufacturing operation to avoid disruptions and remain reputable. Compliance is not a “set it and forget it” trade; constant updates and improvements are always required.
The list below consists of the top five compliance violations for cannabis manufacturing facilities. However, these are considered “across the board” infractions and it should be duly noted that infractions and penalties will vary according to the individual state’s legislation.
Top 5 Compliance Infractions for Manufacturing Facilities:
Failure to input all cannabis and cannabis product(s) into the state-mandated inventory tracking system and account for all variances (Inventory Management)
The facility does not ship compliant products, ready for final sale, that is properly labeled for all required statements and warnings (Packaging, Labeling, and Product Safety Laws)
The facility does not document material changes to the standard operating procedures as directed (Standard Operating Procedures)
The facility is missing manufacture and/or safety procedure documentation for extraction equipment (Equipment Documentation)
Failure to have a complete inventory of material safety data sheets (MSDS) where products are used and/or stored. (Material Safety Data Sheets)
HOW TO FIX IT
Inventory is the single most important element of your operation- yet about 80% of businesses struggle in this department. Simple, daily inconsistencies such as oversupply, miscounting, and employee theft can cause major discrepancies in the future.
What’s worse, industry leaders predict inventory management will only become more challenging in the coming years as legislation and regulations evolve. States such as Colorado are currently eliminating as well as adding regulations such as vertical integration and recycling unused plant mater.
Your state’s designated Marijuana Enforcement Agency will require you to provide mandated inventory tracking, documenting of products from seed-to-sale (chain of custody) and many other figures. Fines, penalties, suspension, or loss of operational license can be the result of improper inventory management. However, there are a few preventative methods that can eliminate inventory mishaps significantly.
Utilizing technology to track inventory discrepancies and reduce human error is a major must-have for any successful production facility. Software programs such as BioTrackTHC and Trellis are great tools to provide accurate production data of your operation including conversion tracking, transactional reports, transport manifests, and product details.
Another effective but simple method: observing demand. Monitoring week-to-week sales for tourism and holiday spikes can help prevent overstock. Also, investing in a good inventory supervisor who can provide current, pristine inventory records will save you time, money, and a serious headache.
Packaging, Labeling and Product Safety Laws
This is one of the more complex and consequential issues encountered in production facilities due to the ever-changing legislation surrounding the marijuana industry. Although the National Environmental Health Association has provided food guidelines for Cannabis Infused Products, packaging, labeling, and product safety laws are still determined by state legislators. Therefore, every state has its own set of laws and regulations.
Many promotional and marketing teams tend to improve on the logos but reduce the warning labels or omit them altogether. Ensure that your sales and production teams are on the same page—knowledge and adherence of these regulations are essential for any manufacturing facility that intends to remain open and fully functioning.
Thorough and frequent training of your employees is another great preventative measure to take. Employees that are aware of current regulations and can spot non-compliant matters and products will instantly improve upon your business and it’s compliance.
Standard Operational Procedures
Keeping your company’s compliance in good condition includes maintaining standard operating procedures. It's vital to monitor, track, and record the evolution of your SOPs so that the most current versions are accurate, adhere to state regulations, follow protocol, and are readily available for enforcement authorities.
Practicing good protocols and procedures will make your operation reputable and in turn, retail stores will grow more dependent on your cannabis products.
Equipment documentation and records are vital to your operation; they provide data on maintenance, cleaning, sanitizing, and inspection schedules of on-site equipment. Inspection agents will want these notations as well as a detailed description of operating procedures, equipment, and materials used in cleaning and maintenance operations, and methods of disassembling and reassembling equipment to ensure proper cleaning and maintenance.
Incomplete or inaccurate records are an open invitation for further investigation by agents and possible penalties and fines. Of course, you should document every detail but this doesn't always happen.
Material Safety and Data sheets
Every facility must have an accurate and up-to-date listing of all Material Safety Data Sheets. Under the Occupational Safety and Health Administration, employers are responsible and obligated to provide a safe work environment. Operators must maintain safety data sheets and lists of any hazardous chemicals used within the facility, compliant labeling of all chemicals, and proper instruction of chemical use by employees.
Facilities that include more than ten employees in chemical applications must have handwritten accounts from each employee. The chemicals and pesticides used must also meet the Department of Agriculture and OSHA standards. State regulators may involve the Department of Agriculture and/or OSHA if issues with chemicals or pesticides exist.
An Ally to Help You Comply:
It’s important to remember that a license to grow, manufacture, and sell cannabis is a privilege. Business owners tend to focus more on the push of the industry, promoting marketing sales, and neglect their pull, compliance. A manufacturing facility that adheres to regulations and promotes good standards will have much more pull in the cannabis industry than their risky, semi-compliant competitors.
Also, many of the elements that are neglected in your cannabis business, are most likely neglected by your competition as well. When companies comply, they are helping to fabricate quality standards in the cannabis industry as a whole. Becoming allies with regulators and thinking of them as an asset will put you many steps ahead of your competitors.
Developing a Compliance Safety Program by studying rules and regulations for your enterprise and constructing plans for possible outcomes will also put you ahead. Quality reference materials to develop these plans include OSHA and the Colorado Department of Public Health and Environment.
Another prevention method: designate a Safety Committee or Safety Technician on your staff to ensure up-to-date and current records. By delegating a position to the task of updating and maintaining daily compliance, you are consciously providing current details of your operation. This makes the inspection process much easier and demonstrates you are acting in good faith and responsibly with your license.
Most importantly: be proactive. Consider consultation services provided by independent companies such as Adherence Compliance or The J. Whitney Group. These are separate entities from enforcement agencies who reduce the risk of violations significantly and fortify your company for a better future.