As cannabis markets evolve, operators face two dominant distribution models:
- Direct-to-Dispensary (D2D): Licensed cultivators or manufacturers ship directly to retail outlets, using small fleets—sometimes unmarked vehicles—and often handling shelf-stocking, merchandising, and delivery.
- Centralized Warehouse Model: Products from multiple producers go to a secure, licensed hub. From there, consolidated shipments are sent out to retailers via larger logistics providers.
Here’s a structured comparison:
Speed & Efficiency
Direct-to-Dispensary offers faster delivery because it cuts out middle handling. This model resembles the grocery industry’s Direct Store Delivery (DSD) approach, which prioritizes rapid replenishment of high-turnover inventory. In cannabis, similar systems—like British Columbia’s direct-delivery initiative—were launched to address bottlenecks and vulnerabilities in central supply chains.
Centralized warehouse models, in contrast, involve double handling: inbound to the warehouse and outbound to dispensaries. This extra step introduces delays and increases risk for misplacement or damage.
Inventory Control & Scale
Central hubs afford better forecasting, inventory pooling, and compliance oversight. A case study in cannabis showed that centralized supply chains benefited from streamlined project management and inventory control across multiple facilities. Centralization allows for route optimization and economies of scale—core reasons major retailers lean on warehouse hubs.
Flexibility & Market Responsiveness
D2D shines in markets requiring dynamic, small-batch offerings and rapid product rotation. BC’s regulatory direct-delivery policy maintained flexibility for small producers. Small cultivators or craft brands benefit most, moving niche SKUs quickly to licensed retailers without the hub bottleneck.
Cost Considerations
- D2D: More logistics overhead—multiple vehicles, drivers, staff for merchandising and delivery tasks.
- Warehouse model: Central warehouses offer volume discounts and lower per-unit costs thanks to economies of scale, though they incur higher facility and labor costs.
In cannabis, operators must weigh direct delivery benefits for speed against higher overhead.
Compliance & Security
All models must meet rigorous tracking and chain-of-custody mandates. Centralized hubs allow for greater process standardization and visibility. However, D2D often uses smaller, discreet fleets which can reduce regulatory scrutiny and improve reliability on tight timelines.
Hybrid: The Best of Both Worlds?
Many industries adopt a hybrid approach: high-turnover items via D2D, bulk or slow-moving inventory through centralized channels. Cannabis mirrors this: craft or promotional lines shipped directly to dispensaries, while bulk flower and branded goods go through a warehouse model.
Final Thoughts
- D2D is faster and more responsive, making it well-suited for time-sensitive, niche, or promotional products.
- Centralized warehousing excels in cost efficiency, scale, and compliance control, though generally slower due to double handling.
- Hybrid models offer optimal flexibility, enabling operators to fine-tune distribution by SKU type and customer demand.
In short, neither model is inherently superior. Market context, product type, growth stage, and compliance needs should guide distribution strategy. Many successful cannabis distributors adopt a hybrid distribution model, leveraging Direct-to-Dispensary for speed and flexibility while maintaining centralized warehousing for efficiency and scale.