How The Shipping Container Transformed Commerce

Breakthroughs in Logistics: How the Shipping Container Transformed the World of Commerce

This is the second article in our breakthroughs series. See also A Change in Direction: the Invention of the Four-Way and Eight-Way Pallet

The shipping container, “the box”, was an innovative idea that sparked an explosion of change in the world of trade and commerce. In the process, it made the world smaller, and the world economy bigger as new manufacturing powerhouses and ports emerged while others waned into obsolescence.

Yes, the pallet was important in improving the speed of loading and unloading rail cars, truck trailers and ship holds, and as historians have pointed out, it was invaluable in enabling effective supply lines to the far reaches of the Pacific Theatre of War during World War 2. Still, it paled in comparison to the impact of the container in terms of intermodal handling efficiency and ultimately in creating a global economy. And impressively, in a world that has had difficulty standardizing pallet sizes, a standard shipping container emerged. Let’s take a closer look at some of the key points emphasized in Marc Levinson’s book, “The Box,” as well as additional thoughts about containers and pallets.

A Brief History of Shipping Containers

To be certain, wooden containers were used in some intermodal applications as far back as the 18th Century, but until the invention of the modern steel shipping container, the loading and unloading of vessels was a painstakingly slow process, involving the hand bombing of freight in the holds of vessels. The situation was improving somewhat with the increased usage of pallets and unitized loads in the 1940s onward, but it was still an exhaustive process. Then in the 1950s, Malcolm P. McLean, an entrepreneur from North Carolina, came up with an idea of shipping loaded truck trailers by other modes, without touching the goods within them. He recognized that it would be much quicker and easier to have a container that could be picked up from a truck to a ship without unloading palletized or unpalletized products contained in the container.

Malcom McLean shipping container — Maersk Line, CC BY-SA 2.0 <https://creativecommons.org/licenses/by-sa/2.0>, via Wikimedia Commons

Based on McLean’s idea, the first standard metal shipping container was engineered. The newly designed metal containers could be easily loaded, stacked, and completely secured for maritime journeys. On April 26, 1956, a crane elevated 58 aluminum truck bodies on board an aging tanker ship in Newark, New Jersey. This was the start of a revolution and now metal shipping containers are widely used to ship almost any kind of product from one corner to another corner of the world.

The State of the World Before “The Can”

Before the shipping container, international shipping was so expensive that it did not pay to transport many products halfway across the country, let alone halfway around the globe. In 1956, when the shipping containers came along, China had not yet emerged as a manufacturing powerhouse. It would have been peculiar if not impossible for customers in Kansas to buy Mexican vacuum cleaners and Brazilian shoes. French fashion houses did not have clothing cut and sewn in Vietnam or Turkey and Japanese people did not consume beef from cattle raised in Wyoming.

The True Value of Shipping Containers

What is so very important about the shipping container? Definitely not the container itself. In fact, the value of this useful object lies not in what it is, but in the way it is used. The shipping container is at the heart of what over time evolved into an extremely automated and effective system for transporting goods from one place to another.

As a result of containerization, the demand for labor that once existed in the long-established ports and for domestic manufacturing plants withered as new ports that established the cranes and other infrastructure needed to service the loading and unloading of cans from around the globe.

As for McLean, he launched a very successful container shipping business after purchasing his first steamship company and others in the ensuing years. He followed his mantra of the “Three C’s: one Customer, one commodity, and one customer.” Eventually, however, his business found itself mired in bankruptcy, as he had positioned his fleet in smaller, more fuel efficient ships at a time when fuel prices started dropping, and as a result he lost competitive advantage to larger ships.

Through the elimination of touch labor and quick turnaround of expensive vessels, the container provided the spark for a global economy in consumer goods. As for why there could be a global standard for containers and not pallets, the answer lies in the original vision. Containers were viewed as a global solution, with an appropriate infrastructure built to support it – much in the same way that FedEx packets were a global solution.

Pallets, which were instrumental in the creation of regional economies, typically predated such global aspirations. More often than not, they were based on visions of regional supply chains, and as such, varied between regions, and have become institutionalized through legacy investments in material handling systems made to support those pallet footprints.

For emerging markets around the world, the opportunity remains to make the best choice towards a global standard, although the solution isn’t necessarily obvious. The 1200×1000 mm footprint seems most widely accepted for new markets. And as the concept of offshoring becomes rebalanced with nearshoring and next showing, the role of pallets will again take on a more pivotal material handling role in revitalized regional economies.

How the Shipping Container Transformed Commerce

A Brief History of Shipping Containers

The State of the World Before “The Can”

The True Value of Shipping Containers

References