This is Sunday Supply Chain Stories, where we revisit the foundations that continue to shape how inventory moves, returns and recovers value.
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You have not heard from me for two weeks. A few of you noticed and wrote to ask, which I appreciated more than I expected to.
I was in Italy, on summer break, in the town where I was born. Livorno sits on the west coast of Tuscany, and if the only Tuscany you know is the one on the postcards you would not recognise it. There are cranes on the waterfront and container traffic moving through a basin that has handled cargo for four hundred years. It is a working city, blue collar, unbothered about charming anybody. People forget how much of Tuscany faces the sea, and how much the sea decides here, in the economy, in the food, and in the soil a few kilometres south.
Livorno is young by Italian standards, and the reason is worth knowing. In 1591 it was a fortified settlement of roughly five hundred people that the Medici had been building out since the 1570s, because the harbour at Pisa was silting up and Tuscany needed a port that worked. The walls went up, the basin went in, and then Ferdinando I de' Medici had to find people to fill it.
What he did about it still shapes the city. On 10 June 1593, expanding a decree issued two years earlier, he published what became known as the Leggi Livornine (the Livornine Laws), addressed to "merchants of whatsoever nation, Levantine and Ponentine, Spanish, Portuguese, Greek, German and Italian, Jews, Turks and Moors, Armenians, Persians, and others." Goods moved through the port free of duty, foreigners were promised the freedom to practise their religion, barring any religious inquisition.
Ferdinando needed volume through his port, and the merchants who could deliver it were the ones nobody else in Europe would house. The tolerance was real in its effects and commercial in its motive.
People from all over came. Five hundred residents in 1591 became more than twenty-one thousand by 1689: Sephardic Jews expelled from Spain and Portugal, Greeks out of the Ottoman territories, Armenians, English, Dutch and North Africans, most of them arriving with trading networks instead of capital. Livorno never built a ghetto.
A city assembled out of poor people from everywhere does not learn to throw things out. They had to be inventive with what they could get, and nowhere more than in the kitchen.
Which brings me to the bowl in front of me on the second night I was home.
Cacciucco arrives dark, almost brick red, fish still on the bone, a slab of garlic-rubbed bread underneath soaking up everything that comes off it. It is heavy, messy food, and it is the thing Livorno is known for.
The dish is roughly five hundred years old and its logic is entirely commercial. In a fishing town, the boats came in at dawn, every day, and the catch was graded on the quay, informally and without mercy. The prized fish, the sea bass, the red mullet, the big clean-filleting species, went to buyers at a premium. Everything else stayed behind. Scorpionfish covered in spines, gurnard, cuttlefish, small bony things nobody would pay for, and whatever had been broken by the end of the day.
That leftover had almost no market value and a shelf life measured in hours, and without leaving the port, the fish was thrown into a large pot with oil, garlic, chilli, tomato and wine. The name most likely comes from a Turkish root meaning small pieces, which arrived in Livorno the way everything else did, on somebody's boat. You cooked what the day handed you.
What I had never paid attention to until this trip is the sequencing. Octopus and cuttlefish go in first because they need the longest cooking. The firmer fish follow. The delicate flesh, the mussels and the prawns go in last, minutes before it reaches the table. Every input is routed by what it can withstand, and the tomato base carries the ones that would be thin on their own.
That is a grading and disposition system run with a wooden spoon. The units nobody would buy at full price were sorted by tolerance, routed to the treatment each one could take, and recombined into something that now sells in Livorno restaurants for considerably more than the fish inside it would have fetched on the quay in 1600.
One more thing about cacciucco took me out of the kitchen and down the coast. It is served with red wine, which breaks the rule that fish takes white, because the tomato and the chilli and the long-cooked cephalopods build a weight white cannot hold up under. For most of the dish's life that meant Chianti carried in from the hills. Nobody expected anything drinkable to come off the coast.
The coast, after all, was the part of Tuscany nobody wanted. The strip running south from the city was low, wet and malarial, land you crossed rather than land you farmed, and reclamation only dried it into vegetables, legumes and winter grazing. As late as the 1940s you could stand at Bolgheri and see nothing worth planting.
Like the fish nobody would buy that became the dish the town is known for, this is the story of Bolgheri and the ground nobody would plant that became the most expensive wine in Italy, right on the outskirts of Livorno. Both were written off by a market that had already decided what good looked like, and in both cases someone recovered the value by testing that judgement instead of accepting it.
In a land that had been a swamp, Mario Incisa della Rocchetta planted Cabernet Sauvignon at Tenuta San Guido in 1944 and called the vineyard Sassicaia, the place of many stones, which is the same observation about the ground that gave Graves its name. Incisa had spent years drinking Bordeaux, and on this stretch of coast he saw gravel running through the soil, a maritime climate and a closeness to water that lined up with the Graves district on the left bank.
The wine used varieties no Tuscan appellation recognised, so for decades it was sold as ordinary table wine regardless of what was in the bottle. The rules caught up in 1994.
I was lucky enough to visit the Ornellaia winery during my trip, right in the heart of the Bolgheri region.
Lodovico Antinori founded the estate in 1981 at Castagneto Carducci, after André Tchelistcheff talked him out of California and told him what he already had at home was better. First vintage in 1985, and the Frescobaldi have been sole owners since 2005.
During the visit to the cantina, I learned that the grapes follow a very strict grading system.
The grapes come in by hand in fifteen kilogram baskets, small enough that the weight at the top does not crush what is underneath. They are then reviewed manually, by hand, and segregated into A, B and C grades. Since 2016 there is optical selection as well, reading each berry as it passes and catching what the hand and the eye let through.
A vintage is one year's harvest, nothing more, and no two are alike because no two growing seasons are. The estate is divided into parcels, small blocks with their own soil, exposure, drainage and vine age, and each one is picked, fermented and aged as its own lot, press wine included. A block near the sea and a block two hundred metres inland go into the cellar as two different wines and stay that way, which leaves dozens of distinct components, none of them yet committed to anything.
The blend is assembled around twelve months later, once the components have been in barrique long enough to show what they actually are. The proportions come from the year. Nobody writes them down in advance.
Standing in there, the question I could not let go of was the obvious one. If only the best components go into the grand vin, where does everything else go?
Ornellaia bottles seven labels in all, and each one has its own channel, its own specification and its own market. Le Serre Nuove takes the second selection. Le Volte sits below it. Poggio alle Gazze and Ornellaia Bianco cover the whites, and Ornus, a late harvest Petit Manseng, only exists in the years when one small vineyard delivers the conditions for it.
The one that stayed with me is Variazioni in Rosso dell'Ornellaia, which is never sold and is poured only for guests who come to the estate in person. Every year the team selects the varieties that reached their peak in that particular season, and the blend is rebuilt from scratch around whatever the year delivered. The 2021 came out at 40% Cabernet Franc, 30% Cabernet Sauvignon and 30% Merlot. A different season produces different proportions and a different wine under the same name.
That variability is the entire design. A house chasing consistency would spend the cellar work sanding a difficult year down until it tasted like all the others. Ornellaia pushes the character forward instead, and its own description talks about each harvest as an orchestra playing a different symphony. The wine is a byproduct of what the terroir handed over that year, accentuated rather than corrected, and it exists so that character does not have to be blended away into something larger and safer.
I have spent my career in reverse logistics, and I came home thinking that a sixteenth century fisherman and a sorting team in Bolgheri are both more disciplined about grading than most of the networks I have worked with. In a world where waste is the norm, the cacciucco and the selection process at Ornellaia speak loudly about the need to reduce waste and find better ways to match supply and demand.
Then there is the matter of channels. Most operations run one or two and treat everything outside the primary route as a cost to be minimised. Ornellaia has seven labelled outlets before anything gets written off, each with a specification, a price point and a buyer. The fisherman had a second channel too, and it happened to be dinner. The problem in most networks is rarely the existence of grade B and grade C units. It is that nobody has designed a channel that maximises their value while acquiring new clients and establishing an emotional relationship with them, making them experience the brand in its essence.
Spending time in the cellar, living that luxury experience even as it was built on scarcity, made me think about cannibalisation and how luxury brands are thinking about it when it comes to branded resale.
Look at what those labels cost. Le Volte sits around $30 a bottle. Le Serre Nuove is closer to $65. Ornellaia itself runs near $280. Nobody in that cellar spends a minute worrying that Le Volte is stealing customers from Ornellaia, because they are not the same customer. The person picking up Le Volte on a Thursday evening and the person opening Ornellaia for an anniversary are at different points in a life, with different money and different reasons for being at that table.
What the entry label really does is let somebody stand inside the estate's world at a price they can actually pay. They learn the house style. They remember the name. And some of them, ten or fifteen years on, walk into a shop and buy the bottle they could not afford in their twenties, and it means something to them precisely because they waited for it. The cheaper wine protects the expensive one by giving people a reason to aspire to it.
We hear the opposite fear constantly. Cannibalisation is the first objection raised in almost every conversation about opening a resale or refurbished channel, and it comes from the same instinct that would tell a winemaker to stop making the second label. The evidence does not support the fear, though it does not entirely dismiss it. Boston Consulting Group and Vestiaire Collective found that 66% of consumers had discovered or bought a brand for the first time through resale, platform operators report between 45 and 80% of resale buyers arriving new to the brand, and Trove puts the share converting to full price within six months at around half. Set against that, ThredUp's 2026 report argues secondhand is now taking measurable share from new retail, and an honest reading holds both.
The usual answer to all this is that brands already run entry-level lines for exactly that purpose. Fashion tried that for two decades and then dismantled it. D&G closed in 2011, Marc by Marc Jacobs was reabsorbed in 2015, Burberry shut Prorsum, Brit and London the same year, and Versus folded into Versace Jeans in 2018. The reason given each time was dilution.
What Ornellaia does is a different thing entirely, and the distinction is the one I would put in front of anybody raising the cannibalisation objection.
There is no second winery. No cheaper team, no lesser vineyard bought in to hit a price point, no relaxed sorting for the entry bottle. One estate, one harvest, one grading standard, one set of tanks.
Le Volte and Le Serre Nuove come off the same line as the grand vin. What separates them is which components the winemakers selected for which bottle.
A diffusion line is a decision taken before the cost is incurred. It commits you to separate design, sourcing, factories, inventory and markdown risk, all of it new spend to reach a customer you do not have yet.
Declassification is a decision taken after the cost is incurred. The grapes were picked, the sorting was done, the tanks were filled. Choosing which label a component goes into costs almost nothing on top.
The second label is evidence of the standard rather than evidence of its absence. Le Serre Nuove exists because somebody was willing to turn grapes away from Ornellaia. A house with no standard would have one wine.
Every one of those lines describes a returned unit. The item exists, the manufacturing cost is sunk, and grading it and routing it into refurbished or open box is a disposition decision on inventory you already own. Treating that as though it were a new product launch is how the cannibalisation fear gets priced wrong before anybody has run the numbers.
It also turns the erosion argument around. A certified refurbished unit came out of the same factory to the same specification and has simply been used, and publishing a grading standard and holding to it demonstrates rigour to somebody who has never bought from you. What actually erodes a brand is uncontrolled liquidation, which is the diffusion line of reverse logistics: your name on a unit whose condition nobody guaranteed, sold by somebody with no relationship to your standard, to a customer you will never meet.
What I think we get wrong is the level the argument is fought at. The useful question is not whether a refurbished unit costs you a new sale this quarter. It is whether you would rather have that customer inside your brand at a price they can afford, buying through a channel you control, with your name on the box and their details in your system, or buying your product secondhand from somebody who tells you nothing, returns you nothing, and controls the entire experience of owning it.
Luxury worked this out before we did. Wine is sold on how it makes a person feel about themselves, and so is a handbag, and so, quietly, is a refurbished phone. Do not build a second system to serve a second price point. Build one system with a high standard and several honest outlets from it, keep the standard visible, and let the ladder do the work.
I came back from two weeks off with a better appreciation of a fish soup and a sharper view of my own grading process. Both came off the same fifteen kilometres of coast, built by people who could not afford to throw anything away, and who worked out somewhere along the way that the second-best bottle is what teaches a person to want the first.
For practitioners: When your team argues that a resale or refurbished channel will cannibalise new sales, what evidence are they arguing from, and have you ever measured how many of those buyers were already yours? At what point in your reverse flow does unit-level information stop being visible, and how much recovery value disappears the moment a unit loses its identity inside a pallet? And what would it be worth to know the name of every customer buying your product secondhand today from somebody who is not you?
Sources
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Thank you for reading Sunday Supply Chain Stories!