There is an on-going debate as to whether we, as the United States, are responsible for the growing instability in Northern Mexico resulting from various competing drug cartels having set up their distribution centers in the area. The only debate worth having is whether we are totally responsible for the problem or only mostly responsible. Our laws and our enforcement policies (or lack of enforcement of our policies) are the sole reason the drug cartels have located as close to the border in the United States as possible.
The decision for the drug cartels to locate their distribution centers in Northern Mexico is nothing more than a lesson in supply chain management. All of the business factors included in that supply chain management decision relate to successfully serving the American drug market. None of the decision making has anything to do with serving the Mexican drug market.
Every business organizes itself to achieve maximum profits. In the analysis to maximize profits, businesses attempt to avoid catastrophic risk. A classic example of this decision process would be not locating an inventory of books in a place where the books might get wet and therefore become worthless. The people who run the drug cartels face the same issues and similar assessment of risk. And if you were the chief executive officer of Illegal Drugs R Us, where would you store your inventory?
Why are we responsible for problems in Mexico? We are responsible because we have created a business and legal environment where the best possible location for a drug distribution hub is uniquely Northern Mexico.
The following are the ‘business’ facts that the drug cartels deal with every day:
- The United States does virtually nothing to discourage illegal drug use by the user. During the last few years, the common vernacular for illegal drug use has actually changed from illegal drug use to the ‘use of recreational drugs’. Generally for the user, the only meaningful law enforcement risk is to be arrested for another crime while under the influence. The result of lax enforcement and meaningless penalties (think Paris Hilton) is that there is a very significant demand for illegal drugs within the United States. In fulfilling this demand, the cartels, like any other business, attempt to limit their risk.
- The United States allocates a significant portion of its drug enforcement funds towards thwarting growing and the manufacturing or processing of drugs within the United States. These activities are pursued by law enforcement with unbridled enthusiasm. The result is that the business risk associated with growing and the manufacturing or processing large quantities of drugs within the United States is a business risk the drug cartels choose not to take. These activities are outsourced to other nations. In a business sense, this is no different than deciding to outsource a call center to India. It is all about increasing profits and decreasing risk.
- The United States allocates a significant portion of its drug enforcement funds towards attempting to confiscate large quantities of illegal drugs at a single location in a single enforcement action. They are aided in this activity by decisions to try to control our airports and ports for homeland security reasons. This has resulted in a business imperative for the drug cartels to locate their significant inventories where the risk of seizure by U.S. authorities is very low to non-existent. It is all about increasing profits and decreasing risk. This is step one to the decision to locate illegal drug inventories in Northern Mexico.
- The United States allocates an insufficient amount of funds from any and all agencies, including Homeland Security, towards securing the United States border with Mexico. (It is without merit to argue that we are spending more than previously spent if the borders are not secure. The issue is not what happened previously, but what is happening today. The cartels can easily bring inventories across the border in incredibly small increments and then consolidate these shipments into manageable, but not huge, quantities in small vans on the U.S. side of the border. It is all about increasing profits and decreasing risk. This is step two to the decision to locate illegal drug inventories in Northern Mexico.
Given the high demand for their product and the reality on the ground in the United States, the following is the supply chain management program of the drug cartels:
- The growing, manufacturing and processing of illegal drugs is outsourced to locations around the world.
- Distribution centers have been located in Northern Mexico. The seizure of the inventories of illegal drugs in Northern Mexico is more difficult for the Mexican government as the drug cartels are better armed than the Mexican police and virtually as well armed as the Mexican army. (One must wonder as the drugs are not being used by Mexicans why any Mexican police officer or member of the army would risk their life or the lives of their families trying to control the drug traffic.)
- The distribution of the illegal drugs is done in a two part process. First the drugs are carried across the border in fairly tiny quantities by individuals entering the United States illegally and then the tiny quantities are consolidated in small vehicles. The small vehicles then are sent on their way throughout the United States to fill the demand of their customers.
The drug cartels have developed their business around a supply chain management decision process that reduces economic risk while insuring on time deliveries.
What would happen if the President of the United States allocated sufficient resources to effectively close our borders? Right away, we cannot be sure, but the reason that the drug cartels have decided to make Northern Mexico their location for drug distribution would be gone. At that point, if the Mexican military intervened aggressively, the distribution would probably move somewhere else fairly quickly.
If the United States decided to either make the drug trade legal or make the risks of using illegal drugs significant for the user along with closing the borders, the most significant part of the problem in Mexico would probably disappear overnight.
Are we the problem? You’re darn right we are the problem. If we are in the blame business, it starts with a presidential decision that enforcing the borders is not too important.