Editor’s note: This article is part of an ongoing series that examines key innovations in transportation and teases out lessons that can lead to better innovation in sea freight. The views expressed here are solely those of the author and do not necessarily represent those of FreightWaves or its affiliates.
“The Box – How the Shipping Container Made the World Smaller and the World Economy Bigger” by Marc Levinson makes the case that the shipping container and its global intermodal use was one of the most important innovations of the second half of the 20th century. Its widespread global use on sea and land led to dramatic reductions in shipping costs, door-to-door shipping time and theft losses compared to the breakbulk processes in use prior to 1956. This new reality enabled a rethinking of the global economy with increased global trade driving a revolution in economic geography.
From our current-day perspective, it is easy to forget how a transport system based entirely on breakbulk worked. Levinson explains in economic and physical terms how much labor (cost) and time it took to move pallets, crates and bags from a factory to one or more modes of transport (truck, rail, barge and/or ship) and to their eventual destination. This was the situation when Malcom McLean, the founder of McLean Trucking Company, was looking for a way to avoid highway traffic on the U.S. East Coast and had the idea of loading truck bodies onto aging tanker ships and sailing from Newark, New Jersey, to Houston. The first such voyage left port on April 26, 1956.
The next 11 years were a period of breakneck invention and innovation that led to regulatory obsolescence, labor unrest and ongoing corporate restructuring and destruction. During this time McLean used a number of corporate entities (which eventually became Sea-Land Services) to mature and develop his idea. Competitors appeared. Technical issues such as standards for container dimensions and corner interlocks had to be debated and approved. Physical issues such as crane designs and ship designs required numerous iterations with substantial amounts of capital required. The book describes all of this in fascinating detail.
The big proof point for global container shipping happened in 1967, when Sea-Land began regular container service to support U.S. military operations in Vietnam. Sea-Land provided the vessels, containers, chassis, trucks and terminals to the U.S. military on a fixed-price basis from the U.S. West Coast to Vietnam. The service completely revolutionized the wartime supply chain because one container ship could deliver as much cargo as 10 average breakbulk ships that were in prior use. Even better, the process delivered the goods directly to the consuming unit rather than to a port warehouse.
Once high-volume global container shipping proved its tremendous value, the entire world moved quickly to adopt and improve the new process. The last part of the book describes the technical and business developments that led to today’s current intermodal landscape dominated by relatively few non-U.S.-based carriers. It also explains how carriers, ports, terminal operators, longshoremen, railroads and truckers continually adapted to rapid and continual increases in container volumes over the decades after 1970.
Three lessons for sea freight
1. The benefit of outsiders. McLean was not from the ocean shipping industry. He was a trucking executive who wanted to use ocean shipping to help his business. His thinking was not limited by knowledge of what wouldn’t work. This allowed him to push forward on a completely new way to think of ocean shipping and introduce revolutionary processes to an ancient industry. He brought engineers and business thinkers into his projects who were also from outside the industry and together they invented a new industry.
The ocean container industry today is a little like the breakbulk industry was in the 1950s: insular and protective. It is possible that the only way to make rapid progress on some of the new topics of the 2020s is to aggressively look for outside perspectives that can help with big multicompany issues like decarbonization or digitalization.
2. Boldness drives change. McLean was willing to invest large sums to physically build his vision. He made big bets on his original ships and on cranes to work with them. With the Vietnam project, he “bet the company” that containerization would work for the U.S. military.
McLean was not the only leader to be like this. The book highlights the importance of nonconference carriers like Maersk and Evergreen having a major role in the industry’s rapid growth. Their willingness to price outside the conference structure attracted new volumes that accelerated industry progress.
A problem as big as decarbonization or digitalization will not be solved without engaging aggressive (and expensive?) bets. The history of the container industry suggests that the winners of the coming decades will be the companies that execute boldly in both technical and business innovations.
3. Standards are vital. As early as 1958, the U.S. government (U.S. Maritime Administration) and the U.S. military (National Defense Transportation Association) realized that standards for container size (length, width and height), lifting and stacking were necessary to allow interoperability and efficiency. Along with the American Standards Association (ASA) and the International Organization for Standardization (ISO), the global community finally agreed on a viable set of standards by 1970. The process was winding and political, but its ultimate success is the foundation on which all subsequent growth was possible.
The current pressure to digitize in container shipping is equivalent to the initial push to create physical standards for equipment and machinery. In both cases, a shipper wants to be able to work with any vendor without worry. In the beginning of container shipping, the worry was compatibility of the container itself with downstream processes. Now the worry is whether shipping data can be used by a shipper’s internal systems. The Digital Container Shipping Association and United Nations Centre for Trade Facilitation and Electronic Business are good efforts, but history suggests that involvement by a body with legal authority like the International Maritime Organization might help to move standard setting more quickly.