False Economy - Alan Beattie [106]
Prices as well as times converged. The same commodities increasingly cost the same in cities on either side of America, as they were later to do in cities on either side of the Atlantic. And commodity prices not only fell but became more predictable for both buyer and seller. Formal commodity exchanges arose in Chicago that allowed forward sales—enabling farmers to know ahead of time what they would get for their grain, and consumers to know what they would pay for it.
The railroads changed not just the volume but the orientation of U.S. trade. Until then, it had generally gone north to south, being floated down the Mississippi. Goods bound for the East Coast were often taken first to New Orleans—a diversion almost as dramatic as the pre-steam East India Company's sailing ships bound for India sailing most of the way west across the Atlantic first. But livestock was rarely transported by ship. Hogs were too difficult to manage and cattle too large and unwieldy. Cows bound for the East Coast were driven a thousand miles on foot, a journey that started between late February and June in the Midwest and ended up with the cattle, often in considerably worse shape and fewer in number than at the beginning, arriving in East Coast stockyards between April and August.
With the railroad, live cattle could be carried direct to markets in a few days. But they still arrived, in the words of the Massachusetts Railroad Commissioners in 1870, at best "panting, fevered and unfit to kill." At worst, they said, "a per centage of dead animals is hauled out of the car." Transporting live cattle also meant carrying around worthless weight and space: 55 percent of the animal was inedible. It also involved considerable inefficiencies of scale. Every town of any size, more or less, had to have its own slaughterhouse, from which the meat would be distributed to local butchers. The supply chain was long and disjointed, and, just as for the pre—mobile phone Keralan fishermen, it was hard to match supply and demand.
In 1875, Gustavus F. Swift came to Chicago to set up a cattle-buying office for his Boston-based meat wholesaler. As he later wrote: "I was determined to eradicate the waste of buying cattle which had passed through the hands of too many middle-men and against which too many charges had accumulated."
Previous attempts to ship meat in refrigerated railcars had proven unprofitable. This was not because the technology was inadequate but because they used the existing branch network of distributors, who were quite happy churning out profit from the system as it was and saw no particular need for speed. Swift set up his own branch distribution network, partly because he needed refrigerated warehouses, and he starting off by shipping to two businesses in Massachusetts.
His system had two features in common with Dell: one, a high volume of goods going through the system based on rapid transport and communications; two, a demand-pull rather than a supply-push system. Using the telegraph, orders placed by retail butchers were relayed to headquarters and to buyers at the stockyards, specifying the breeds, grades, and quantities required each day. Cattle arrived at the stockyards by night, were bought in the early morning, and were on the slaughterhouse floors no later than eleven a.m. The telegraph balanced supply and demand in something quite close to what we now call "real time." In 1882, the magazine Harper's Weekly published an account describing,