'Inaccurate inventory forecasting by Ontario Cannabis Store has contributed to products being out of stock'
A blunt report by province’s auditor general assesses efforts to date.
The Ontario Cannabis Retail Corporation (OCRC) must strengthen its inventory forecasting chops if it expects to ensure that customers have full and timely access to recreational weed , suggests the 2021 Annual Report from the Office of the Auditor General of Ontario.
Operating as Ontario Cannabis Store , OCRC is the only legal online provider of recreational cannabis in Ontario and the sole wholesaler to authorized private retail stores.
Ontario Cannabis Store (OCS) spokesperson Daffyd Roderick reports the Crown corporation is already prioritizing some areas noted in Lysyk’s report, per CP. This includes getting started on point-of-sale technology to automate more sales reporting which should, in turn, improve inventory management and forecasting.
With inaccurate inventory forecasting contributing to products being out of stock, this has had an impact on “ potential sales for the first six months of 2021,” information from the auditor’s office states.
Citing information from the report, Marijuana Business Daily (MJBiz) reports that an OCRC audit of private cannabis retail stores this summer showed 47 per cent were “not satisfied” with wholesale product availability and another 19 per cent were “very dissatisfied.”
The lion’s share of comments cited consistency of product availability and high frequency of out-of-stock inventory.
The Auditor General’s recommendation was that OCS work out its forecasting issues by receiving weekly or biweekly retail store sales data and analyzing the differences between forecasts and actual demand, per MJBiz.
Since 2018-2019, its revenue has grown 10-fold and its expenses increased six-fold. And as of March, the corporation noted that Ontario’s legal market made up 44 per cent of weed purchases in the province.
The Auditor General’s report points out “weaknesses in some of OCRC’s operating processes include product listing and pricing, sales forecasting and response to customer inquiries and complaints.”
Some of these issues highlight the need for greater transparency. Until this past April, OCRC “did not use any formal criteria to evaluate product submissions, resulting in non-transparent decisions about products selected for sale.”
The report also shows no love for the Crown corporation’s decision to change from a fixed mark-up to a value-based pricing approach for listed cannabis products. The new approach, Lysyk writes, “is not based on sufficient analysis and is not transparent to licensed producers.”
The report furthermore identifies challenges around ensuring that customers are of legal age. Calling OCRC a young Crown agency that is taking steps to address operational gaps, the corporation, nonetheless, still has hurdles to clear to ensure minors cannot get their hands on recreational cannabis.
Selling cannabis comes with the need for extra effort to try to provide public education to assist people as they weigh the costs and benefits — both financial and personal — of consuming this newly legalized product and the risk of purchasing cannabis in the illegal market,” Lysyk says in a statement.
But inventory forecasting, transparency and age verification were not the only areas Lysyk cited as needing improvement. “OCRC’s recent transition from outsourced to in-house customer care staffing has resulted in longer wait times for inquiries, claims and complaints due to a 50 per cent reduction in dedicated customer care support as well as more retail stores,” the report notes.
The agency, however, still outsources most of its supply chain operations, including warehousing and product distribution operations. That said, the OCRC does not have “effective oversight of services provided by this major service provider.”
And then there are concerns related to customer information. “OCRC does not have effective mechanisms to oversee the use, retention and safeguarding of customer information retained by its service providers.”
Lysyk emphasizes that “better management processes,” including careful attention to its contract management, “will further improve OCRC’s business operations.”
In general, the Auditor General maintains that “more action is required on social responsibility, including educating the public on responsible consumption, health risks and the differences between regulated and unregulated cannabis products.”
Overall for the province, value-for-money audits “show that public organizations need to improve on both service delivery and providing more accessible information to help Ontarians make more informed decisions,” notes a press release from the Auditor General’s office.
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