As a result of the COVID-19 breakout, production in China has slowed and the cannabis industry supply chain is taking a hit.
Cannabis industry analysts say that 90-95% of cannabis vape components are manufactured in Shenzen, China. The outbreak and subsequent cannabis industry supply chain disruption highlights the value of diversifying material suppliers.
The pandemic, which began in December 2019 in Wuhan, China, slowed down the production of vape components, as well as cannabis packing, extraction, and cultivation equipment. For a period of time production stalled completely in Shenzen, leaving the cannabis industry without an alternative.
Although cannabis product packaging and component production in Shenzen factories have recommenced, it’s not operating at full force. Reportedly, workers in Shenzen are weary to return to work for fear of contracting COVID-19.
Switching to a domestic manufacturer in lieu of supply delays isn’t an economically feasible action. Manufacturers in the United States aren’t able to meet the industry’s demand. American material suppliers aren’t able to compete with the automation and innovation of China’s production facilities.
Cannabis companies that are likely to experience the largest supply chain disruptions are those which either own a single Chinese production factory or source packaging, materials, or product components from a single manufacturer.
According to the Global Port Tracker report released on March 10th, 2020, supply chain shortages are “expected to have a longer and larger impact on imports at major U.S. retail container ports than previously believed as factory shutdowns and travel restrictions in China continue to affect production.”