Innovation in Shipping Enabled Global Growth

Some big ideas are so ubiquitous that they are taken for granted and blend into the background. Containerized shipping – the brainchild of trucker-turned-shipping mogul Malcom McLean, which started in Newark 50 years ago today – is one such idea. But the modern world could hardly exist without it.On April 26, 1956, McLean’s Pan-American Steamship company sent a ship called SS Ideal X to Houston from Port Newark, N.J. Instead of having longshoremen load and unload, the cargo was packed in 58 35-foot containers that could be loaded directly onto trucks or trains.While containerization took a decade or more to take hold, today nearly all modern shipping is done by container. The innovation, which was celebrated yesterday by the Port Authority at a ceremony at the port in Newark, made possible a quantity and quality of commerce that would simply be impossible without it.McLean, who died in 2001 at age 87, had sold his trucking business so he could buy Mobile, Ala.-based Pan American – renamed Sea-Land in 1960 – for $25 million. While some form of containerization had been used in the past, cargo was then loaded and unloaded by hand by longshoremen, a time-consuming and expensive process. Sea-Land is now a unit of Denmark-based Maersk Line.McLean’s new technique cut costs to a fraction – some say by 99%. Since then, the volume of global shipping has increased dramatically and has been a key driver in economic growth overall.Despite the obvious benefits of container shipping, it took about 20 years to take hold, the co-author (with Arthur Donovan) of “The Box That Changed the World,” Joseph Bonney, said. The reason is that shipping is an industry with a lot of tradition, and shippers had made investments in ships, equipment, and facilities, investments that containerization would render worthless, Mr. Bonney said.Longshoremen unions also resisted the idea. Asked what he thought of a container ship leaving Newark, a top official of the International Longshoremen’s Association, Freddy Fields, famously said, “I’d like to sink that sonofab-.”Indeed, the effect on the employment of longshoremen was predictably calamitous. In the 1950s, 30,000 men were employed in the port of New York. Today, that number has dwindled to 4,000, Mr. Bonney said. This is despite the fact that the volume of shipping, in America overall, more than quadrupled in that time, according to the U.S. Department of Transportation Marine Administration.But at the ceremony in Newark yesterday, everyone from the Port Authority to the current union president, John Bowers, had kind words for the cooperative nature of the International Longshoremen’s Association in the modern era. The ILA’s cooperation was eventually secured, in part, by a system of guaranteed payments in which workers displaced by containerization could simply show up for work and leave, but would still be paid, the treasurer of the ILA, Robert Gleason, said. This system was largely phased out by the late 1970s, he said.The triumph of containerization was speeded in 1961 when the International Standards Committee established standard container sizes, allowing for boxes that could be fitted on any truck or train.It was given another boost by the Vietnam War as the Defense Department contracted with Sea-Land to carry cargo to the Far East, including Vietnam. The Vietnam contract also provided for Sea-Land to move goods past the docks and on the land, demonstrating the ease that containerization allowed, a former president of Sea-Land, Ken Johns, who worked with McLean starting in the late 1950s, said. The Vietnam contract allowed McLean to prove the merits of his system and also allowed Sea-Land to improve methods for handling and tracking freight.By the late 1970s, containerization had become dominant. Since that time, much of the innovation has been in the size of ships traveling the world’s ports. In the Vietnam-era, the biggest ships carried about 1,200 TEUs (a TEU is a 20-foot equivalent unit, a measure of containerized cargo capacity equal to one standard 20 foot by 8 foot by 6 foot container). Today the largest ships might carry 7,000 TEUs.The size of markets grew with the size of the vessels.Rapid growth in international trade and economic growth followed. Between 1982 and 2003, container shipping has grown by 9.9% annually, and international trade has grown by 6% annually. Both have well outpaced world GDP growth, which has been 2.2% per annum, Mr. Bonney said. Shipping in America roughly doubled between 1983 and 2003, according to the Department of Transportation.But perhaps the starkest benefit of containerization is in the quality of goods that faster shipping allows. Today, one can eat grapes grown in Chile in the middle of winter. Bananas, which used to be unloaded stem by stem in Lower Manhattan, are now shipped to Delaware and moved immediately to trucks for transport to supermarkets.But before containers started with grapes from Chile or mangoes from Guatemala, one of the first products to be containerized was Scotch whisky. “Before that you’d be surprised how much theft and breakage occurred on the docks,” Mr. Bonney said.

Innovation in Shipping Enabled Global Growth

Innovation in Shipping Enabled Global Growth

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