My Personal Summary
This book is about the invention of the shipping container and how it revolutionized the global economy.
Before shipping containers were used, the most expensive aspect of transporting goods by sea was the loading and unloading of individual crates.
Although a cross-Atlantic voyage could be completed in 5 days, it might take 10 days or longer just to load and unload the goods.
The development of the shipping container in the 1950’s along with massive cranes and massive ports meant that loading and unloading goods onto ships could be done exponentially faster and thus transportation costs dropped dramatically.
This played a major part in enabling globalization (the trading of goods between countries all over the world) and ultimately led to a huge boost in the global economy.
- “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.”
- The shipping container led to a massive increase in the variety of goods available to consumers at affordable prices.
- A shipping container carrying 9,000 40-foot containers can make a three week transit from Hong Kong through the Suez Canal to Germany with only 20 crew members on board.
- The loading and unloading of containers at ports is done by massive cranes and is completely automated by computers. Long gone are the days of individual men hustling on and off boats carrying individual goods.
- In the early 1950’s before the container was invented, the world’s largest centers of commerce revolved around docks. Many manufacturers chose to be located near docks to reduce transportation costs and many dock workers chose to live in communities close to docks.
- Before containers, dock workers had to load and unload individual cargo, which was a physically exhausting job.
- In reference to the physical labor done by the dock workers, one man remarked “Because they had to bend over to do that, you’d see fellows going home at the end of the day kind of like orangutans.”
- Being a dock worker was a dangerous job. Their injury rate was three times that of construction work and eight times that in manufacturing.
- Before containers, it took an extremely long time to load and unload goods at docks. For example, it might only take 10 days for a ship to cross the Atlantic but it could take 4 days just to unload the goods once the ship arrived at its destination.
- Malcom McLean was born in 1913 in North Carolina. He started his own trucking business in 1935 at age 22 and rapidly grew it to annual revenues of $2.2 million by 1946. By 1954, McLean Trucking was the third largest trucking company in America as measured by after-tax profits.
- In 1955, McLean bought Waterman Steamship, one of the largest shipping companies in the U.S. based in Mobile, Alabama. That same year, the first ever ship with shipping containers aboard sailed from Newark, New Jersey to Houston, Texas.
- McLean didn’t invent the shipping container. Various metal containers had been used for shipping decades before he arrived on the scene. However, his big insight was that the entire system of handling freight had to be changed for containers to provide a massive economic benefit, including the optimization of ports, ships, cranes, storage facilities, trucks and trains.
- In 1957, McLean had containerships specially built to carry only shipping containers that could be stacked 6-8 containers high. He also had custom cranes build that could load and unload the containers faster than anything seen up to that point.
- In the 1950’s, before containers, New York City handled 1/3 of all America’s seaborne trade in manufactured goods. However, due to its inconvenient location for truckers to bring goods and for a variety of other reasons, port activity became also nonexistent in NYC by the 1970’s. Instead, Newark, New Jersey, across the bay from NYC, became the primary shipping hub on the east coast.
- One huge side effect of containerization was the reduction in longshoremen jobs. Because of the ease and speed with which containers could be loaded and unloaded onto containerships, less men were needed to work the docks.
- When containers became more popular in the late 1950’s, there was no standardization on the size of containers to be used. This caused a major headache when working with different shipping, trucking and train companies that all used equipment with different dimensions. By the late 1960’s, standards were finally set on the dimensions of shipping containers that would allow east transfer between trucks, ships, trains and ports. Most containers had dimensions of about 8 feet wide, 8.5 feet tall and either 20 or 40 feet wide.
- Up until about 1950, most goods were transported on land by railroad. However, starting in the 1950’s highways and roads became much better (Eisenhower signed the Federal-Aid Highway Act of 1956) and trucks became the preferred method of transportation because they could carry heavier loads at much faster rates than trains.
- When the U.S. entered the Vietnam War in the 1960’s, shipping supplies to ports in Vietnam was initially a logistical nightmare. Using containers and containerships greatly improved the efficiency of shipping and unloading materials.
- Rotterdam in the Netherlands embraced containerization the fastest and thus became the most heavily used port in Europe starting in the 1970’s.
- In Asia, Singapore was the most assertive country to embrace container ships, building the only port in Asia at the time that could handle 900-foot containerships. They cemented themselves as the commercial hub of Southeast Asia, providing a place where large containerships could pass off their goods to smaller vessels that could be shuttled to Thailand, Malaysia, Indonesia, and the Philippines. Today, the port in Singapore handles the second most annual cargo worldwide.
- Interesting: The locks of the Panama Canal are 1,000 feet long, which explains why most containerships that sail internationally haven’t been built longer than that length.
- Another way that container ships reduced costs was by radically reducing theft – it’s nearly impossible for a dock worker to steal cargo from a sealed shipping container. Insurance premiums also dropped for shipping companies due to fewer property losses.
- Container ships have reduced inventory costs for major companies in the following way: Inventories are a cost. Whoever owns them has had to pay for them but has yet to receive money from selling them. Better, more reliable transport has allowed companies to obtain goods closer to the time they need them, instead of weeks in advance, tying up less money in goods sitting uselessly on warehouse shelves. If we assume that money needed to finance those inventories is borrowed at, say, 8 percent, then the savings for a company like Walmart would be in the billions of dollars per year. Since containerization has made the transfer between ships, trucks and trains so seamless and reliable, companies can be much more confident in the timeframe they’re told that they will receive goods.
- Products around the world are now made at the cheapest location, taking wage rates, taxes, energy costs, import tariffs, etc. into account. This has directly lead to globalization – the trading of goods between countries all around the globe in the most cost-efficient way possible.
- Places with cheap labor tend to attract manufacturing jobs, but unfortunately African countries with inefficient ports and little containership service are at such a transport-cost disadvantage that even rock-bottom labor costs will not attract investment in manufacturing.
- As time has gone on, both container ships and ports have become much larger as economies of scale have incentivized companies to build bigger and bigger ships and ports.
- Today, 7 of the 10 largest ports in the world are located in China.