Container Crunch: Standardization Leads to Shipping Growth
The standardization of the shipping container is one the greatest enablers of industrial production and globalization.
Alongside the start of the third industrial revolution in the 1950s, an innovation in goods transportation was needed. The days of loading and unloading sacks, bales, crates, and barrels across boats, trains, and trucks were a major bottleneck for industry. A man mostly lost to history, Malcolm McLean, was facing this problem within his trucking business. He recognized this problem as an opportunity and sold his trucking business to purchase an established shipping company, the Pan-Atlantic Steamship (which became SeaLand; now a division of the Maersk Group) to begin experimenting with a better way to transport goods. He ended up revolutionizing the industry by packing goods in uniform containers. This innovation, standardized by ISO 668 in 1968, led to a dramatic reduction in handling time, reduced theft, improved reliability and cut inventory costs. Without a standardized means of transport, the productivity of factories during the third industrial revolution may have been significantly stunted due to transport difficulties.
There is plenty more to the containerization origin story, including the need to transport people and munitions during wars (WWII and Vietnam), and unique perspectives from other countries. Check out “Shipping Container History: Boxes to Buildings” by Discover Containers and “The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger” by Marc Levinson to learn more about the history of the container.
An empirical study of fleet expansion and growth of ship size in container liner shipping - Scientific Figure on ResearchGate.
Flash forward a half century, and the capacity of the shipping business has grown exponentially through the use of increasingly bigger ships. The economies of scale brought to the industry by these bigger ships is reaching its limits both physical and economical:
Limited marginal returns to increasing ship capacity further. In other words, unit cost from 8,000 to 16,000 TEUs won’t decline as much as it did from 4,000 to 8,000 TEUs.
Key waterways such as the Strait of Malacca and the Suez Canal have minimum depths around 25 meters, while the biggest ships are reaching depths of 16 or more meters.
Larger ships are straining existing port infrastructure including crane technology, dredging equipment, and quay walls. Additionally, container manufacturers are currently unable to meet demand. This presents another opportunity for innovation, just as Malcolm McLean saw so many years ago.
The shipping industry must learn from another transport vertical, air. Lessons from the A380 aircraft should be studied (Wired UK) to understand the risks associated with going ‘too big’, even though “passenger numbers typically double every 15 years”.
Container troubles have been hitting the news lately, learn about the difficulties and potential future of the industry with “Why the Cost of Shipping Goods From China Is Suddenly Soaring” by the Odd Lots podcast on Spotify and “Container shipping: The next 50 years” (pdf) by McKinsey.
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