Value Stream Analysis – Cannabis Products Company

Results Case Studies

Case Study Snapshot

Results At A Glance

Raw Material Cost

$4,000–$5,000/Kg (Untracked Yield Losses)

Packaging Excess

3–50 Years of Supply On Hand

Products Analyzed

5 Key SKUs

Key Takeaways

  • VSM and time studies quantified labor, packaging, raw material, and yield costs per product.
  • Identified high-cost cannabinoid material losses as the top margin improvement lever.
  • Exposed massive packaging over-purchasing across the product line.
  • Data-driven prioritization framework enabled focused improvement sequencing.

Where This Approach Fits

Best for growing manufacturers lacking cost visibility across vertically integrated operations.

Value Stream Mapping Lean Assessment

Download Case Study: Value Stream Analysis Cannabis Products Company

Problem / Challenge:

The client is a vertically integrated Cannabis products company, operating manufacturing facilities, a supply chain including co-packers, a distribution center and retail stores.

After 10 years of entrepreneurial growth, the company’s leadership faced various challenges including:

  1. Lack of understanding of true manufacturing and supply chain costs
  2. Retail channel stock-outs, at the same time the company was expanding to the wholesale and e-commerce channels
  3. Quality complaints from consumers

Value Stream Analysis

We assessed manufacturing and supply chain operations and prioritized lean supply chain improvement projects, starting with performance scorecards and value stream mapping.

To understand manufacturing and supply chain costs, we chose to do a value stream analysis, to determine total end-to-end costs from receipt of raw materials and packaging through shipping to retail stores and other channels.

The value stream analysis also identified and quantified waste streams in the process.

Implementation Details

  • Prioritized key focus areas based on a manufacturing and supply chain assessment
    • Prioritized the development of costing data (labor, packaging and raw materials) to enable data-driven decisions
    • Recommended increasing visibility across raw materials, packaging, in-transit stock, and work-in-process to deal with the double-problem of excess inventory and store/warehouse stock-outs
  • Mapped the Value Stream and created detailed list of sub-processes in in each major function
    • See top of page 2 for Value Stream Flow
  • Worked with the R&D, manufacturing and supply chain team to conduct time studies, quantify all costs and identify improvement opportunities for key product families
    • Raw Materials, Packaging, Labor, Changeover, 1st Pass Yield, and Inventory
    • Identify processes contributing to waste in the end-to-end process
  • Normalized all costs at the SKU level for 5 selected key products to a “cost per unit”
    • The company makes products in many formats (liquid, gels, joints, gummies, etc.)

Production Value Stream For In-house And Co-man Processes

TEAM PURPOSE: The goal of the project was to create an optimized supply chain process for store / wholesale / ecommerce fulfillment that reduces waste, improves delivery accuracy, and minimizes all costs.

Time Studies

Identified Quick-fix Improvements

Quantified Finished Goods Costs

Time Study And Value Stream Analysis

  • 5 key products selected for production time study and select cost data analysis: (a) Drink infuser, (b) Pain Cream, (c) Cannabinoid Candy (d) Cannabinoid Tincture (e) Cannabinoid beverage
  • Labor Time and Cost Analysis
    • Material Prep Labor
    • Mixing Labor
    • Changeover-Filling Setup
    • Filling Labor
    • Packaging and Master Casing Labor
  • Packaging Analysis
    • Packaging Material Costs Including excess packaging > 2 years of usage
    • Master Case cost (Master case was thrown away at retail when received)
  • High-Cost Raw Material Analysis – Yield
    • Actual Cannabinoid costs per unit of product
    • Sensitivity analysis based on Cannabinoid mixing and filling yield

Results

  • Data-Driven Approach to Improvements
    • The most important result is a data-driven analysis of what and where the company should focus improvements to create a Lean Supply Chain
  • The Value Stream Analysis Identified Three Key Areas of Margin Improvement
    1. High cost ($4000 – $5000 per Kg) Cannabinoid material/inventory is not accurately tracked through the process, with likely high yield losses
    2. Excess packaging – some products have 3 to 50 years of packaging on hand
    3. Manufacturing processes are not Lean (non-value-added work), causing significant labor inefficiency
  • Recommended Projects to Streamline Operations – e.g., ERP implementation for data accuracy, forecasting and inventory optimization, quality management system development

Learn more about our Value Stream Mapping service

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