Containerisation – or why you should never shirk a signal of change

Sensemaking / Containerisation – or why you should never shirk a signal of change

Anna Simpson and Ariel Muller describe how the smart idea of an American trucker not only changed the shipping industry, but enabled globalisation to scale.

By Anna Simpson / 16 Mar 2015
John Morgan / Flickr

When we see something new, we don’t always recognise its potential relevance to our lives. Sometimes, change is so far from our radar, that we don’t notice it at all. It’s easier to keep focused on our demanding lives if we draw neat borders around what’s relevant, and dismiss anything that isn’t. The trouble is, change isn’t so easily contained. It spills over from one smart application to another, from one system to the next. Here’s a story to show how that can happen.    

One of the biggest disruptions to the shipping industry came from Malcom McLean, an American trucking magnate in 1956. Maclean wanted to figure out how to move his company's trucks on ships up the Atlantic coast, from North Carolina to New York. He believed it would be a faster way to move goods and give him a greater competitive advantage in the trucking business. It was immediately clear however the idea wouldn’t work due to the large amount of wasted cargo space on board the vessels. The vessels were not designed to move trucks. So, McLean modified his original concept to just loading the containers, not the chassis, onto the ships, hence the designation ‘container ship’ or ‘box ship’. One container could be directly loaded on to the ship without first unloading its contents. Recognising the growth opportunity, the trucking magnate sold his trucking business and bought a shipping business.

Over the next few years, McLean worked with engineer Keith Tantlinger to develop and standardise the modern intermodal container: one that could efficiently be loaded onto ships and held securely on long sea voyage. McLean patented the design, and eventually issued a royalty-free lease to the International Organization for Standardization – a move that led to wide-scale adoption across the shipping industry. Over the next 15 years, McLean built the largest cargo-shipping business in the world. By the end of the 1960s, his company, Sea-Land Service, Inc., owned twenty-seven thousand trailer-type containers, thirty-six trailer ships, and access to over thirty port cities.

Containerisation and ‘intermodularity’ is often attributed as one of the primary enablers of rapid globalisation. We now live in a world where 90% of our non-bulk goods come in containers. A 2013 report, which studied trade between 22 industrialised countries from 1962-1990, found that containerisation is associated with a 320% increase in bilateral trade in the first 5 years, and 790% over a 20-year period. A bilateral free-trade agreement, by contrast, boosts trade by 45% over 20 years. You could therefore argue that containers have boosted globalisation more than trade agreements in the past 50 years.

This level of change didn’t happen overnight. At first, opposition was strong – as Stephanie Draper points out in The Guardian: “The unions didn't like it – seeing an end to jobs. Countries protecting their national transport industries slowed implementation in major ports. It was the Korean and then the Vietnam war that changed that. US armed forces used containerisation for the huge volumes of goods that they were moving – proving the concept at scale.”

Following that, Draper explains, the increased speed and reduced cost made it a case of adapt or die for operators competing on containerised routes. “It was at this point that Maersk adopted containerisation, and the size and commitment of the company led to a massive expansion of the infrastructure. In effect, Maersk's commitment and investment made containerisation mainstream. It proved a tipping point.”

If back in 1956, a shipping strategist caught wind of the trucker who’d found a novel way to move his loads up-coast, they probably didn’t pay much attention. What was it to them?    

Ariel Muller is Director of Asia-Pacific and Head of the Futures Centre at Forum for the Future.

What might the implications of this be? What related articles have you seen?

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