Have you tried The Box? – Part 2

The transformation of the Port of New York epitomizes how ports transformed worldwide: Until the early 1950s, New York’s port was doing great business, handling one-third of America’s ocean shipments. However, goods produced in other cities had to be transported to New Jersey by train and then taken to New York on small ships where they were put on larger ones. The logical solution was to produce goods in New York.

But when McLean began looking for harbor space and New York had none to offer, he found a spot in Newark, New Jersey, a location that, unlike New York, had easy access to highways and railroads. So, what was once New York’s advantage – namely, the proximity of the port to manufacturers – became its disadvantage when New Jersey, which could easily expand, became the new hub for container shipping in the New York area.

Strikes and theft were also making New York even less desirable. The lack of space for terminals hindered New York’s ability to expand, while the Port of New Jersey, which had the space, had a number of ship lines relocated there.

Jobs were also transformed. Between 1967 and 1976, the number of factories in New York decreased by one-fourth and the city lost one-third of its manufacturing jobs. Additionally, the port was no longer a major employer, so the unions, aware of the changes taking place, began fighting the container. After all, the early container ships required just one-sixth of the time and one-third of the labor that previous cargo ships had.

It was ultimately a question of automation and modernization. The unions feared lost jobs and companies didn’t want to battle over every technological development. After many years of difficult negotiations, a compromise was reached in the 1960s: the shipping companies set aside money for their workers’ retirements and instated a guaranteed payment system. In exchange, the unions let modernization run its course.

For the components of a system to work interchangeably you need everyone involved to agree on some basic principles. But as we all know from the ever so complex task of choosing a place to eat out, reaching a consensus isn’t always easy.

So although containers were all the transportation world was talking about in the late 1950s, there was still no agreement on what shape and size they should be. The Marine Steel Corporation offered 30 different container models!

Then, in 1958, the US Maritime Administration attempted to set standards for the container. After all, there was an urgent demand as more and more companies wanted to use them. However, the Maritime Administration only had control over domestic standards and could only hope that others would follow its guidelines. Not to mention that there was also the American Standards Association, a group supported by private industry that was also rearing to set standards.

The industry needed an international standard and eventually the market made the decision. So while Sea-Land, McLean’s company, continued to use 35-foot containers for years, everyone else went with 20- or 40-foot models, and the internationally accepted 10- and 30-foot sizes weren’t used anymore. That’s why the 20- and 40- foot containers are standard today.

Yet another international agreement was reached regarding the corner-fitting and locking systems – one that employed Sea-Land’s patent. However, when these systems were put into practice, there were multiple failures. For instance, the norm set by the International Organization for Standardization had to be changed for them to be secure and everything went too fast for the necessary tests to be conducted.

The consequence was that the committees involved didn’t end up with the best technical and economic standards; instead, the market had to adapt to a system based on compromise, which had been instated in the mid-1960s.

As with countless other game-changing innovations, the container faced many obstacles before it became the standard it is today. And, as is often the case, antiquated ways of thinking were what held it back.

One major roadblock in the spread of containerized transport was that ship line cartels set fixed shipping prices. These prices were based on an old mentality that costs should match the type of good being shipped, e.g., a per-mile price for coffee. So despite the fact that containers were faster and more efficient, though not necessarily capable of shipping more of any given good, the increased efficiency didn’t mean lower prices for consumers.

Another issue was that the railroads and trucking companies were unwilling to make the switch to containers. This was due to an ICC regulation that made it less appealing to invest in new container carriers. And with no single rail company spanning the entire country, the container was faced with the challenge of seeking a consensus between many different railroad operators.

While railroads were the best option for long-distance cargo transport, trucks were better suited for local distribution and some railroads even began shipping trucks but failed to link this practice to shipping in general. Railroads in Europe began adapting to containers during the latter part of the 1960s, meanwhile, the US railroads fought containerization by jacking up their prices.

Eventually, however, the major obstacles were removed and containerization took off. It was at this point that construction of the first ships specifically designed to handle containers began. The change was momentous: in 1966, only three lines ran international container services; by mid-1967, that number had jumped to 60!

When you think about the Vietnam War it’s unlikely that containers come to mind, but they actually played an essential role. In the winter of 1965, the United States began quickly amassing troops in Vietnam. The result was a logistical catastrophe as the entire country only had one deepwater port, a single railroad line and a disconnected highway system.

Another issue was that the sections of the US military employed 16 different logistical systems and, when president Johnson first ordered troops into Vietnam, there were no organized supply chains in place. For instance, ships had to remain at bay and be unloaded by ferries, an extremely time-consuming process.

So, the US Army attempted to solve the problem by building one port in Cam Ranh Bay, south of Saigon, and another one closer to the capital, called “Newport.” However, as the stream of troops steadily increased, so did the problems; cargo that needed individual handling was just too time intensive.

To solve their issues, the Army consulted shipping executives and, after he entered the conversation, McLean became obsessed with bringing container ships to Vietnam. It wasn’t long before McLean convinced the Army of his strategy; in March of 1967 he signed a contract for Vietnam.

Sea-Land would provide seven ships, tend to the shipping terminals and use their own trucks to deliver within a 30-mile radius of the piers, all for a fixed price per ton. But Sea-Land also turned Cam Ranh Bay into a modern container port, replete with a state-of-the-art computer system that tracked every container. The Army couldn’t have been happier, but for Sea-Land there was an added bonus.

On the way back to the United States their ships would stop in Japan, which was the world’s fastest-growing economy at the time. McLean boosted his profits by shipping containers between Japan and the United States, fostering the containerization of Japan in the process.

As we’ll see, all of this shipping action in Asia was just a prelude; containers would eventually help connect the entire world more closely.

Check out my related post: Do you have The Charge? – Part 1

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