More on this book
Community
Kindle Notes & Highlights
McLean understood that transport companies’ true business was moving freight rather than operating ships or trains. That understanding helped his version of containerization succeed where so many others had failed.
the developments recounted in The Box turned out not at all as expected. Containerization, after all, began as a means of shaving a few dollars off the cost of sending Malcom McLean’s trucks between New York and North Carolina. At best, it was regarded as a minor innovation, “an expedient,
Absolutely no one anticipated that containerization would open the way to vast changes in where and how goods are manufactured, that it would provide a major impetus to transport deregulation, or that it would help integrate East Asia into a world economy that previously had centered on the North Atlantic.
U.S. railroads fought containerization tooth and nail in the 1960s and 1970s, convinced that it would destroy their traditional boxcar business, never imagining that early in the twenty-first century they would be carrying 12 million containers every year.
foresaw that this American-born industry would come to be dominated by European and Asian firms, as the U.S.-flag ship lines, burdened by a legacy of protected markets and heavy regulation, proved unable to compete in a fast-changing world. And, of
That simple metal box was what we today label a disruptive technology.
Before the container, transporting goods was expensive—so expensive that it did not pay to ship many things halfway across the country, much less halfway around the world.
The container is at the core of a highly automated system for moving goods from anywhere, to anywhere, with a minimum of cost and complication on the way.
Cities that had been centers of maritime commerce for centuries, such as New York and Liverpool, saw their waterfronts decline with startling
Merchant mariners, who had shipped out to see the world, had their traditional days-long shore leave in exotic harbors replaced by a few hours ashore at a remote parking lot for containers,
Even as it helped destroy the old economy, the container helped build a new one. Sleepy harbors such as Busan and Seattle moved into the front ranks of the world’s ports,
Sprawling industrial complexes where armies of thousands manufactured products from start to finish gave way to smaller, more specialized plants that shipped components and half-finished goods to one another in ever lengthening supply chains.
Huge industrial complexes mushroomed in places like Los Angeles and Hong Kong, only because the cost of bringing raw materials in and sending finished goods out had dropped like a stone.
This new economic geography allowed firms whose ambitions had been purely domestic to become international companies, exporting their products almost as effortlessly as selling them nearby.
Those who had no wish to go international, who sought only to serve their local clientele, learned that they had no choice: like it or not, they were competing globally because the global market was coming to them.
Shipping costs no longer offered shelter to high-cost producers whose great advantage was physical proximity to their customers; even with customs duties and time delays,
In 1956, the world was full of small manufacturers selling locally; by the end of the twentieth century, purely local markets for goods of any sort were few and far between.
The container helped bring an end to that unprecedented advance. Low shipping costs helped make capital even more mobile, increasing the bargaining power of employers against their far less mobile workers. In this highly integrated world economy, the pay of workers in Shenzhen sets limits on wages in South Carolina,
Almost every one of the intricate movements required to service a vessel is choreographed by a computer long before the ship arrives. Computers, and the vessel planners who use them, determine the order in which the containers are to be discharged, to speed the process without destabilizing the ship.
Within twenty-four hours, the ship discharges its thousands of containers, takes on thousands more, and steams on its way.
This high-efficiency transportation machine is a blessing for exporters and importers, but it has become a curse for customs inspectors and security officials.
That first container voyage of 1956, an idea turned into reality by the ceaseless drive of an entrepreneur who knew nothing about ships, unleashed more than a decade of battle around the world. Many titans of the transportation industry sought to stifle the container.
contention. In the end, it took a major war, the United States’ painful campaign in Vietnam, to prove the merit of this revolutionary approach to moving freight.
“It is better to assume that moving goods is essentially costless than to assume that moving goods is an important component of the production process.
In 1961, before the container was in international use, ocean freight costs alone accounted for 12 percent of the value of U.S. exports and 10 percent of the value of U.S. imports.
This process was so expensive that in many cases selling internationally was not worthwhile. “For some commodities, the freight may be as much as 25 per cent of the cost of the product,
By far the biggest expense in this process was shifting the cargo from land transport to ship at the port of departure and moving it back to truck or train at the other end of the ocean voyage.
making the overall cost of transporting goods little more than a footnote in a company’s cost analysis.9
The container not only lowered freight bills, it saved time. Quicker handling and less time in storage translated to faster transit from manufacturer to customer, reducing the cost of financing inventories sitting unproductively on railway sidings or in pierside warehouses awaiting a ship.
The container, combined with the computer, made it practical for companies like Toyota and Honda to develop just-in-time manufacturing, in which a supplier makes the goods its customer wants only as the customer needs them and then ships them, in containers, to arrive at a specified time.
encouraged ever longer supply chains,
The more reliable these supply chains become, the further retailers, wholesalers, and manufacturers are willing to reach in search of lower production costs
Not seeing this
In the decade after the container first came into international use, in 1966, the volume of international trade in manufactured goods grew more than twice as fast as the volume of global manufacturing production, and two and a half times as fast
The key question asked today is no longer how much capital and labor an economy can amass, but how innovation helps employ those resources more effectively to produce more goods and services.
This book contends that, just as decades elapsed between the taming of electricity in the 1870s and the widespread use of electrical power, so too did the embrace of containerization take time. Big
Once the world began to change, it changed very rapidly: the more organizations that adopted
When transport costs are high, manufacturers’ main concern is to locate near their customers,
At the shipper’s factory or warehouse, the freight would be loaded piece by piece on a truck or railcar.
When a ship was ready to load, each item was removed from the transit
The big cost item was the wages of longshore gangs, which could eat up half the total expense of an ocean voyage. Add in the tonnage fees paid to pier owners and “60 to 75 percent of the cost of transporting cargo by sea is accounted for by what takes place while the ship is at the dock and not by steaming time,
A port needed a big labor supply to handle the peaks, but on an average day the demand for workers was much smaller.
The solution to the high cost of freight handling was obvious: instead of loading, unloading, shifting, and reloading thousands of loose items, why not put the freight into big boxes and just move the boxes?
Some railroads sought to take advantage of the container not simply by lowering rates, but by changing the way they charged
For the first time, they offered purely weight-based rates:
Dravo Corporation of Pittsburgh created the Transportainer, a steel box seven feet nine inches long, and more than three thousand were in use around the world by 1954.
A 1955 census found 154,907 shipping containers in use in non-Communist Europe. The number is large, but the containers were not: fully 52 percent of them were smaller than 106 cubic feet, less than the volume of a box 5 feet on a side. Almost all European containers were made of wood, and many had no tops; the user piled the goods inside and covered the load with canvas—hardly an efficient system for moving freight. The containers promoted by the Belgian national railway were meant to be slid up a ramp to fit inside truck bodies, requiring an extra stage of handling.
American containers were typically made of steel, providing better protection but at enormous cost; one-quarter or more of the weight of a loaded container was the container itself.27
And then there was the cost of sending emptied boxes back where they had come from,
When the cost of returning it empty to Pennsylvania was figured in, container shipping was 75 percent more expensive than loose freight.28
The total cost of moving the goods carried by the Warrior came to $237,577, not counting the cost of the vessel’s return to New York or interest on the inventory while in transit.
