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Mexican Drug Lord’s Supply Chain Leadership

Supply chain leaders come in all forms.

Josh Meyer, writing in Quartz, pulls some supply chain-building insights from Joaquin “El Chapo” Guzman Loera, the head of Mexico's notorious Sinaloa Federation. Meyer introduces us (or at least me) to a new phrase, “deviant globalization,” coined by historian Nils Gilman and the co-editors of a 2011 book on the topic, Jesse Goldhammer and Steven Weber. From the article:

They describe a hidden and powerful underground economy that is growing globally at twice the rate of the legal economy. This vast commercial underworld rewards those who combine traditional business skills with the ability to operate in the spaces between the laws and enforcement agencies of various countries.

Supply Chain Visionary &…

Meyer leans on a fascinating report from West Point's Combating Terrorism Center. It offers, among other things, insights on pricing dynamics in that particular supply chain:

The nature of cocaine as a product adds a significant amount of risk during transport, and the price of this risk is then passed along to the final consumer. For example, a route from Colombia to France increases the price for a pure kilo of cocaine significantly. There is a risk to move the cocaine out of Colombia and into Central America, likely Honduras, where it is stored until Guzman's men are ready to move it to Mexico.

Once the cocaine enters Mexico, it takes another jump in value due to the 'market pressures' of government and rival action. The kilo then makes a significant jump in price when it moves from Mexico into the European Union through West Africa, or perhaps Spain, and finally again when the sales price is placed in euros, not dollars. In some cases, the exchange rate increases the value; in others, such as in Australia, the street price of a kilo of pure cocaine is so high that exchange rates have little impact on the business decision to transport cocaine across the Pacific.

Wow. And you thought pricing components was tough!

The difference between El Chapo's supply chain leadership and leadership in the commercial world is pretty clear: In our world, we give out industry awards; in El Chapo's you become Public Enemy No. 1 and often end up riddled with bullets.

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3 comments on “Mexican Drug Lord’s Supply Chain Leadership

  1. _hm
    May 2, 2013

    There is similarity in moving military and space electronics and other parts to countries like Iran, North Korea.

    There you can command better profit margin. Many supply chain may be part of it, knowingly or otherwise. How one can prevent this?

     

  2. Ariella
    May 3, 2013

    @_hm that's a good question. I recently heard that the illegal economies amount to billions in the US alone, so people seem to have an idea of its scale, though they still have not seen how to keep it from flourishing. 

  3. mr_bandit
    May 7, 2013

    A black market exists because something is illegal. The Drug War (well, in the USA, it's really a police action) has enough money because of the demand to pull in brutal players. This is nothing more than a Darwinian process.

    What will get rid of it? Stop the Drug war. However, the police derive too much cash (forfeiture and grants) and power to want it to end. Plus, the private prison industry has “beds” that must be full to make money. (One has to ask that if a country has to resort to private prisons, shouldn't the country look at the laws that are putting non-violent people, some with medical conditions like addiction?)

    We should also be asking if it is too late to stop these gangs. Once they are formed for drug smuggling, they get into real crime – murder, kidnapping, extortion, corrupting police and government. But – a large chunk of their income can be cut off by getting rid of the root cause – drug prohibition. See the folks at LEAP.cc – drug cops who recognize the current methods are not working.

    Oh, yeah – we are missing out on the taxes a legal recreational drug, like alcohol, will bring in. And pot (one of the illegal drugs) is much *less* harmless than the legal ones. Not *one* death is from pot (cancer, overdose), other than gangs and cops shooting people; all due to the prohibition.

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