Potted Products Often Out Of Stock In Ontario Due To Bad Forecasts: Auditor’s Report
TORONTO – The Auditor General of Ontario says some cannabis products are often out of stock because the province’s jar retailer inaccurately forecasts inventory levels.
In a report released Wednesday, Bonnie Lysyk explained how the problems plaguing the crown corporation that runs the Ontario Cannabis Store, the province’s cannabis distributor, leave customers empty-handed and licensed producers frustrated.
Lysyk came to this conclusion by comparing the company’s inventory forecast made between January and June 2021 with actual demand. She found that the company’s predictions were often wrong.
In some cases where the OCS forecast was lower than customer orders, there were 145 percent more orders than product available.
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In cases where forecasts were greater than orders, the excess supply was approximately 40% greater than actual orders.
The company blamed the inaccurate forecast on the province’s restrictions on in-store shopping during the COVID-19 pandemic, but Lysyk found that the company had never performed a formal analysis to confirm this claim or quantify the difference between forecasts and orders.
Inaccurate forecasts mean that there is a mismatch between what customers want to buy and what products to sell, which often results in unhappy customers. Worse than that, Lysyk said, it could fuel the illicit market that the province is desperately trying to downplay.
The illicit market accounts for most cannabis purchases in Ontario, more than three years after its legalization. The OCS estimates that the illicit market was responsible for at least 52.9% of the province’s pot purchases made between April 1 and June 30.
SCO spokesman Daffyd Roderick said many of Lysyk’s findings correspond to areas he is already prioritizing.
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For example, he said work is underway to use point-of-sale technology to further automate sales reporting, which would improve inventory management and forecasting.
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In addition to the flawed forecast, Lysyk also took issue with the lack of clarity the company has given to licensed pot producers on how it selects products for sale and sets prices.
The company launched a call in February for new products and received 966 submissions from 100 producers, but only listed 209 products from 59 producers for sale, according to the auditor’s report.
Lysyk’s office reviewed the submissions and found that the company’s category managers only documented their final decisions and not how they came to their conclusions.
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No scorecard was used for assessments until April, when one was implemented, but Lysyk said “it’s not clear if the scorecard is actually being used.”
She also found that there is no appeal process for rejected products and that only two of the six category managers making decisions on what is listed have any experience with cannabis. The rest have training in beverages, interior design and clothing.
Once the products were selected for the list, Lysyk discovered that licensed producers often did not have enough time to prepare.
Production of new products can take up to 16 weeks, but eight percent of purchase orders placed in February for new products were issued less than three weeks before the required delivery date.
Just under 90 percent of purchase orders were placed between three and four weeks before delivery, and only four percent were placed with more than four weeks notice.
“Many licensed producers we interviewed expressed concerns about the difficulty of responding to OCRC purchase requests on short notice,” the Lysyk report states.
Licensed producers have said they need to prioritize the Ontario market over other provinces in order to meet OCRC timelines and quantities.
Roderick says the OCS launched a new product listing process in October and internal process and transparency improvements to help licensed producers are “already well underway.”
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