Jeff Wu on Manufacturing, Compliance, and Culture

[image: Jeff Wu]
Cover Story
JEFF WU ON COMPLIANCE, CULTURE, AND CANNABIS MANUFACTURING’S FUTURE The
Xylem Robotics founder explains why GMP and ISO standards are no longer
optional for operators who want to survive — and thrive.
By TAYLOR ENGLE
Photos by Andrew Strother
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The cannabis industry is no stranger to turbulence. Operators across the
country face complex challenges: record consumer demand, heightened
regulatory uncertainty, and a marketplace that rewards speed as vigorously
as it punishes mistakes.

In this environment, decisions made today can have unforeseen long-term
consequences. Operators who underestimate the operational complexity of
manufacturing risk setbacks that can ripple across their entire business.
Each choice, from equipment selection to employee training, carries weight
far beyond the immediate outcome.

Across the spectrum, from cultivation to manufacturing and retail, the
stakes are higher than ever. Each harvest and every batch of extract
carries the potential to bring a company closer to trust or disaster.
Trust, in this context, is multi-layered, encompassing regulators,
investors, retail partners, and consumers. One lapse in quality or
consistency can erode all these relationships, making the journey back to
credibility both costly and time-consuming.

The difference often comes down to standards compliance.

“My previous experiences in lab equipment and appliances allowed me to
understand cannabis manufacturing is a cross between consumer packaged
goods (CPG) and pharmaceuticals,” said Xylem Robotics founder Jeff Wu. “And
central to the success of CPG and pharmaceuticals is a well-run supply
chain with product consistency and quality. We actually screen our
potential clients to see if they understand basic supply chain principles,
because we want the people who purchase Xylem products to be successful in
this market.”

The screening process is about more than technical knowledge. The Xylem
team also attempts to ensure operators understand how product flow,
traceability, and documentation affect the bottom line. Wu emphasized
foundational operational understanding is a prerequisite to responsible
scaling.

For decades, cannabis operated outside traditional regulatory frameworks
that come naturally to the much more mature CPG and pharmaceutical
industries. But as legalization expands, regulators and consumers alike
expect the industry to play by the same rules as other industries. That
means documenting everything, ensuring traceability, managing risk and,
above all, maintaining a culture that mandates quality.

Building this culture is not a matter of simply posting rules on a wall; it
requires hands-on leadership, consistent training, and clear communication
so every employee understands their role in maintaining compliance and
product safety.
Preparing for Increased Federal Oversight

Few people understand both the urgency and the opportunity better than Wu.
After years of building systems that helped companies in highly regulated
markets avoid recalls and survive audits, he entered cannabis with a
pragmatic message: Good Manufacturing Practices (GMP) aren’t optional.
They’re inevitable. Those who prepare now will not only survive federal
scrutiny but also thrive in a more mature, trusted marketplace.

Preparation involves assessing existing workflows, identifying gaps in
training or documentation, and making capital investments strategically,
rather than reactively, to support long-term growth. That’s easier said
than done. Many operators are trying to scale production in a patchwork of
state-by-state regulations while managing thin margins, talent shortages,
and constant competitive pressure.

The combination of rapid growth expectations and limited operational
experience creates stress points that often manifest in inconsistent
product quality, delayed shipments, or compliance oversights, all of which
can jeopardize contracts and investor confidence.

Operators who embrace standardized practices put forth by GMP and the
International Organization for Standardization (ISO) now will be ready for
a federally regulated market in the future. Those who don’t will be exposed
to operational, legal, and financial risk that scales with their production
volume.

Wu broke down the current state of cannabis manufacturing, the
inevitability of federal regulation, and why building a strong culture of
standards compliance today will determine who leads tomorrow. His insights
emphasize operational excellence is both a defensive and offensive strategy
that prevents failures while positioning companies to win in a competitive,
evolving market.
[image: Jeff Wu pullquote graphic]
The State of Manufacturing Compliance

At first glance, cannabis manufacturing resembles any other CPG operation:
Inputs enter the system, and products come out. But under the surface, a
fundamental question defines the success of the entire process: batch or
flow?

“Think of home brewers versus a beer factory,” Wu said. “Batch
manufacturing [as in home brewing] groups products into lots, with the
entire batch moving through each production stage sequentially. This offers
flexibility but ultimately can lead to downtime and higher total
manufacturing time and cost.” One potential issue with batch manufacturing,
he pointed out, may occur when a manufacturing defect is discovered during
the production cycle. In that case, the entire batch must be disposed of or
processed again.

In contrast, flow manufacturing pushes products through the system one at a
time, from start to finish without interruption. This creates a steady
stream of output, reducing lead times and increasing consistency while
lowering per-unit costs. However, flow systems generally require a larger
investment up front.

“Regulations drive up the cost of compliance or product standards,” Wu
said. “Flow manufacturing solves these issues head-on with consistency and
quality, which are key drivers of success for consumer products.

“Early on, when I was an investor-operator in a California cannabis
manufacturing facility, the first proto-Xylem cartridge-filling system we
built was a flow manufacturing system to compete with much larger
competitors like Select. It was our secret weapon, so to speak.”

For context, most cannabis companies operate with a batch system. Flower is
harvested, processed, and packaged in lots. It’s then measured by the
pound, the run, or the day. This approach fits the plant’s agricultural
roots but leaves gaps in traceability and risk management. In contrast,
flow systems, which are common in food and pharmaceuticals, continuously
track inputs and outputs. This creates a tighter, more transparent chain of
custody.

Wu explained why flow systems are essential for scaling. “If you batch 200
units, you’ll be profitable,” he said. “Batch 400, still okay. But at
1,000, cracks start to form. By 10,000, you’re losing money and exposing
your company to operational risk. One misstep at a million [production]
units can be catastrophic. Even paint specks or minor contamination can
trigger multimillion-dollar legal exposure.”

He added labor costs in the United States make batch systems fundamentally
unscalable at high volumes.

“Comparing batch and flow, one is efficient and one is not,” he said. “One
is scalable; one is not. All large-scale manufacturing requires flow-based
systems. Even pharmaceuticals are flow-based. If people think they can
scale a batch approach, they’re in for a big shock.”
Lessons from Other Industries

Wu encourages operators across the spectrum to take lessons from other
tightly regulated sectors that are well-established.

“If you’re working in meat packaging or foods, there is zero possibility
you’re not going to hurt someone if you don’t adhere to GMP and ISO
standards,” he said. “In cannabis, things like gummies are at least a
little safer. Once you get water out, sugar is a natural preservative. But,
I’d still be worried about mold, especially in flower. And when it comes to
drinks, I’m worried about potential bacterial issues.”

He emphasized cannabis is not a hype-driven product like energy drinks.
Products require disciplined manufacturing practices and reliable supply
chains. Compliance is more than merely a legal checkbox. It’s a financial
safeguard, Wu said. Recalls, fines, and lawsuits are not theoretical risks;
they can be operational landmines.

“GMP and ISO standards ensure products are produced safely, consistently,
and with quality,” he explained. “When federal legalization occurs, these
standards will most likely be mandated and compulsory, but this is not what
most operators want to hear due to the equipment and capital investments
needed to comply. However, if operators take a pragmatic approach, GMP and
ISO standards mean product consistency and quality. These lead to customer
satisfaction and, more importantly, customer retention. GMP and ISO
standards control for equipment and processes hygiene, which builds in risk
management, and that minimizes costly recalls and legal exposure.”

The potential for federal regulation already is causing shifts in the
market. Investors are starting to ask tougher questions about compliance
readiness, Wu said. Retail buyers want assurances products are manufactured
to the same standards used in traditional consumables sectors. In addition,
employees are more willing to work for companies that value safety and
consistency.

For operators wondering how to prepare for GMP and ISO standards, Wu
offered a simple recommendation: Begin with documentation. Creating
standard operating procedures (SOPs) and logging processes can pay
immediate dividends even for businesses that are not ready for full GMP
certification. Establishing written SOPs trains teams to think
systematically and creates a paper trail that regulators and investors can
trust.

“I came into the cannabis market during the 2018 California legalization
frenzy with investments into Eaze and a processing facility,” he revealed.
“The people who brought me into this market were the ‘tech bro’ crowd who
were interested in fast money and fast exits. Most had little interest in
understanding supply chains or manufacturing and even less interest in
running such a company.

“But at the end of the day, hundreds of millions of dollars of investment
capital cannot change the fact that cannabis is a perishable product that
needs to be physically manufactured and requires strict supply chain
management to generate profits,” he continued. “Success means simple,
fundamentally sound business models with durable competitive advantages
centered around product consistency and quality versus complex, flashy
trends.”

The industry may still be years away from federal legalization, but for
manufacturers, the clock is ticking. Standards compliance is not a one-time
project; it’s an ongoing discipline. The companies that take it seriously
today will be the ones that remain standing tomorrow.

“What’s fun about watching people with [Xylem’s] systems is, a lot of
operators are running the model we wanted to run back when we were
operators,” Wu said, chuckling. “Now you see operators actually using these
systems the way they’re designed to be used.”

Many new operators enter the industry with a fundamental misunderstanding
about the nature of the business, underestimating the harsh realities of
manufacturing in a highly regulated space, he said. Today’s industry may
not be subject to FDA oversight, but that day is coming. Developing the
discipline required to consistently produce a product at scale is crucial,
he said—and the sooner operators embrace that truth, the better for their
bottom lines.

“Cannabis is a manufacturing business with hard costs of goods, and you
will never get around that fact,” Wu said. “If you think this will be two
to three years and then you can go sit on a beach, that’s not going to
happen. Be ready to run a proper company that does true manufacturing work.
Success comes from doing it well and producing products people want to buy.”

For operators, adopting GMP and ISO standards now will deliver more than a
competitive advantage. Upgrading operations will prepare businesses for an
industry that most likely will be increasingly regulated, scrutinized, and
operationally demanding.