From Order to Delivery
Around 1902 Giuseppe Morello, whom you’ve already met as a counterfeiter, ran into a problem any manufacturer would recognise. Printing fake dollars in New York had become dangerous: the Secret Service had a new bureau chief, William Flynn, and he was paying close attention. Morello sent his printing plates to Italy. Printing was safer there. That left the question that decides the fate of every business: how to get the goods to the buyer.
The answer turned up in the business next door. His relative Ignazio Lupo, known as the Wolf, imported wine, olive oil and other foodstuffs from Italy by the thousands of dollars’ worth, and customs on the Manhattan piers gave his cargoes only a cursory look. So the fake dollars were soldered into gallon tins meant for olive oil. That way more than ten thousand dollars came in under the customs men’s noses and spread through New York, Pittsburgh, Yonkers and perhaps half a dozen other cities.
When I told Don Vincenzo this story, he laughed for a long time. He said he finally understood why Lupo’s oil was so expensive: the tin was worth more than what was in it.
There’s one more detail in this story that I love. Flynn, as the historian writes, knew from the first days of 1903 that Morello’s fakes were circulating in Manhattan: the Italian work could be spotted a mile off, and there were at least ten spelling mistakes on the notes. In other words, Morello had set up the delivery flawlessly, and it was the product itself that let him down. Remember that. It will come in handy before we’re done.
The Journey of a Thing
From the moment the client says yes to the moment he gets what he paid for, the thing travels a road. That road is the part of your Business people talk about least. Everyone sees the advertising. The deal gets celebrated. And the road from order to delivery is dismissed as a dull bit of housekeeping, until it breaks.
Take a sheet of paper and draw that road for your own business. Every step, whose hands the thing passes through, where it lies, where it waits. First you’ll be surprised how many steps there are. Then you’ll be surprised how many of them add nothing but time. Then you’ll find the step where something is always breaking, and you’ll recognise your eternal headache.
Don Vincenzo did this once for the oil, not on paper but on foot. He travelled the whole road of a tin himself: the olive mill, the lorry to Palermo, the warehouse at the port, the steamer, our port, customs, the warehouse, our lorry, the restaurant kitchen. It took three weeks, and he came back with three discoveries. At the port in Palermo the tins stood in the sun for two days at a time, and the oil had time to heat up. At our port nobody accepted cargo on Fridays. And in the kitchens the cooks kept the tin next to the stove, so the oil went rancid within a week, though it had arrived in perfect shape. Three places where quality was lost, and not one of them was our “work” in the narrow sense. But the client tastes what’s in his frying pan, not what was at the mill.
Every Step Adds Value and Can Kill It
The value stream, as clever people call this road, is a treacherous thing. Every step can add value to the thing. And every step can destroy everything that was added before it.
Roberto Saviano has described how the stream works in a trade I don’t advise you to go into. A kilo of pure cocaine, by his figures, costs the producer a thousand euros, and the wholesaler already thirty thousand. Then the goods are cut, thirty kilos become a hundred and fifty, and on the street that’s about fifteen million. The figures are wild, and the clan stands on them. But Saviano has a sentence I’d hang over the desk of every production engineer. Badly done cutting leads to buyers dying, to the police, to arrests and, as he writes, to a clogging of the business’s arteries. One mistake at one step, and the whole stream stops, with all its millions.
In a legitimate business nobody shoots, but it all works the same way. The flour can be the best in town, but if the baker burns the bread, the customer will remember the bakery, not the mill. Your stream is exactly as strong as its weakest step. So watch all the steps, not just the ones you take yourself.
The Channel
Now for the second half of the road: how the thing reaches the client. This is called the distribution channel. You can sell yourself, through middlemen, through shops, through agents, by post. Every channel costs its own money and gives its own reach.
The power of the channel can be greater than the power of the product. Gambetta found a curious case in the reports of the Anti-Mafia Commission. The Sicilian fruit market is almost impossible to monopolise: there are too many suppliers, and too many roads. The only example of collusion the commission found had to do with a bottleneck. Boats ran between the small island of Pantelleria and Sicily, and a group known simply as “the Association” took control of those boats. After that the local cooperative sold its zibibbo grapes to nobody else. The grapes grew on the farmers’ vines, but they belonged to whoever had the boat.
And here’s another example, from Naples. The Nuvoletta clan from the Marano district stopped going round the shops for tribute and came up with a subtler mechanism: a tax on supplies. Their man, Giuseppe Gala, known as the Showman, became the sales agent for several well-known brands of sweets and milk. The firms he represented were guaranteed a place on the shelf of every shop in his territory, and the shopkeepers got good discounts from him, because he knew how to lean on the suppliers. According to the trade confederation, the sales of firms that went to Gala between 1998 and 2003 rose by forty to eighty per cent. At Christmas he raised the price of panettone to pay a “thirteenth month’s salary” to the families of the clan’s jailed members. The buyers paid it without knowing. The Showman came to a bad end: he wanted an exclusive in the drug market too, and one day he was found burned to death in his own car. A channel, as you can see, can be worth more than the product, and sometimes more than a life.
What to Learn from It
For an honest business the lessons are these. A channel is an asset, sometimes the main one. Whoever has access to the shelf, to the buyer, to the boat is stronger than someone who only has the goods. So look after your channels, invest in them, and don’t stake everything on one: whoever holds your only boat will one day name your price.
And don’t forget Morello. He built an excellent channel, ran the money through customs in olive-oil tins and spread it across half a dozen cities. And the notes themselves had ten spelling mistakes. The best delivery won’t save a bad product. It will only carry it round the country faster, along with your name. Delivery and product are two halves of one promise. The client doesn’t know which half you let him down on. He only knows you let him down.