Sixty Years of the Shipping Container, and How It Turned Ordinary Life Upside Down | QDaily Business History

Standards, scale, efficiency, cost — all of it changed as a result.

Ask someone living 100 years ago to picture a port, and the image in their head would look nothing like the one in ours.

A century ago the docks were always in an uproar. A ship would pull in, and before the passengers had finished coming ashore a crowd of dockworkers would pour into the hold to carry out cargo of every kind — spices and tea in burlap sacks, barrels of champagne or whisky, coils of steel wire lying loose on the deck below.

Because all this cargo came through, the most economical thing a local could do was open a shop nearby or put up a warehouse. Markets and towns grew up alongside the docks, and shops, warehouses, peddlers, and merchants together made a scene of constant bustle.

Today that kind of "lived-in" dock has all but vanished from our lives. Ports sit far from towns now, and ships of tens of thousands of tons come in off the open ocean. The disembarking passengers and the dockworkers rushing to shift cargo are gone. Instead, tall gantry cranes on the quay swing slowly around, lifting containers ashore one by one and stacking them into low hills, until trucks haul them straight away.

The scene is neat, cold, and grand — it matches what we imagine "modernization" ought to look like.

Plenty of things help explain how the dock came to look like this: advances in machinery, technology replacing inefficient dockworkers, the need to move goods in bulk. But behind all of it sits one small, ordinary object doing the pushing — the shipping container, invented 60 years ago.

In 1956, Malcolm McLean completed the container's maiden voyage.

I

The container's history, in fact, runs much longer than 60 years. People were already using containers to move goods in the 1830s.

British Freight Transport records that when the British hauled coal from the mines of Lancashire to Liverpool, they used square wooden boxes, four to a wagon; once in Liverpool, a crane lifted them onto horse-drawn carts.

Even so, people still prefer to credit Malcolm McLean with inventing the container, and to treat the 1956 voyage from the Port of Newark to the Port of Houston as its maiden voyage. When they say so, of course, they are careful to put the word "modern" in front of "container."

What separates the modern container from its pre-modern ancestor is not the box but how the box is used. McLean was the one who started that.

Malcolm McLean was born in 1913 in a small town in North Carolina. After finishing high school he worked for a while as a tally clerk and as a gas station manager. In his early twenties he went into trucking, hauling steel drums to New Jersey and yarn to New England. Riding the American economy's wartime expansion, McLean built his trucking business into a company with tens of millions of dollars in annual revenue.

There was nothing special about trucking: the lowest price won the larger market, and whether a trucking company could quote a lower price came down to whether it could cut its own costs.

McLean hit on his idea in 1953: drive the truck onto a ship, send it by sea to another city, then let the truck finish the journey. At the time the U.S. Interstate Commerce Commission, which regulated shipping, allowed ship rates to fall below those of railroads and trucks, and the arrangement also spared trucks the traffic that was getting worse by the year.

Then he refined it. A truck's wheels ate up a great deal of space; strip away the truck itself, ship only the trailer, and the trailers could be stacked, which raised how much a ship could carry. From the truck's side of things this was a trailer. From the ship's side — well, wasn't that just a container?

McLean liked the idea. He brought in analysts from the Port of New York Authority to run the numbers and found that on the sea leg alone, containers would cut costs by 94% against the old method, down to 25 cents a ton. He went looking straight away for container experts who could design the right box.

Used in shipping, containers could cut freight costs sharply; carried overland, a container might be nothing more than an ordinary truck trailer.

McLean also used the container to create the idea of "intermodal transport." Until then, trucks and ships rarely carried the same cargo in sequence. When they did, dockworkers had to unload the truck and repack the goods onto the ship.

In McLean's scheme, goods were loaded into a container once, and a crane moved the container between truck and ship — which cut costs across the whole trip as well.

II

At this point McLean had only a plan. The 94% saving was still a calculation on paper, and none of it would be easy to build.

As noted, before McLean brought containers into shipping, the industry ran entirely on the muscle of dockworkers. Every morning they gathered in a square, took that day's job through a hiring hall, and carried cargo on and off the ships by hand.

In an industry stacked up out of human labor there were obviously no cranes that could lift a container straight from a truck onto a ship, and just as obviously no one could carry a big box packed with cargo.

The container's dimensions and detailed design were a problem too. McLean needed a box light enough to handle yet strong enough not to buckle in transit.

It also had to suit a ship's dimensions, side by side or stacked, without wasting hold space, and at the same time meet trucking requirements so it would not be shut out of the highways.

"McLean understood that reducing the cost of shipping goods required not just a metal box but an entire new way of handling freight," Marc Levinson writes in The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger. "Every part of the system — ports, ships, cranes, storage facilities, trucks, trains, and the operations of the shippers themselves — would have to change."

So although McLean completed his container's maiden voyage in early 1956 — the ship was called the Ideal X — work on the system went on.

In the fall of 1956 McLean acquired a new class of ship, and the container's dimensions were revised to match: 2.25 inches longer and 0.75 inches wider.

The revised boxes no longer worked with the old handling gear, so the engineer Keith Tantlinger reinvented the trailer chassis. McLean then had a steel plant in Washington State design a new kind of crane to lift the bigger containers.

What McLean was changing, then, was no longer the container alone but the whole logistics system. In today's terms: he did not invent a cardboard box for mailing things, he created the courier company that replaced the post office.

That was McLean's other contribution to the container, and the other thing that separates the modern container from its pre-modern ancestor.

III

McLean was not the first to move goods in containers — the box itself was far older than he was — so when he set out to remake shipping, the ground he stood on was delicate.

As Marc Levinson put it: "'Container' meant very different things to different groups." The U.S. military's containers were 40.5 feet long and more than 6 feet tall. One New York company had over 30 different container models. McLean's boxes were 33 feet long.

Different standards usually mean wasted resources. Sony and Toshiba once came to blows over DVD formats: had Blu-ray and HD DVD both survived, consumers would have needed two players, or manufacturers would have had to support both formats — an extra cost either way.

Shipping was no different, and because shipping was more globalized, the waste ran higher. With containers, a single common standard meant one type of crane at each port could serve every company. Ten container standards meant a port had to keep ten types of crane to lift them all.

Agreeing on a standard is never easy. Every party has its own interests, so the process fills up with schemes open and hidden and with deals struck by compromise. Containers were no exception.

The first body to take up a container standard was the U.S. Maritime Administration, which had the Navy behind it and set up two expert committees.

While those two committees were still arguing among themselves, the American Standards Association stepped forward, said setting standards was its own business, and demanded the Maritime Administration withdraw. Nor was it the only outfit to reach in: an organization called the National Defense Transportation Association also decided to study container standards.

Each body spoke for different interests. The Maritime Administration spoke for the shipping lines; the American Standards Association had the backing of trucking and railroad companies; the National Defense Transportation Association spoke for the contractors that moved military freight. Add the divided interests inside each organization, and no standard came out.

Worldwide, the International Organization for Standardization — the ISO everyone knows today — also began trying to set one. Because the containers owned by continental European railways were much smaller than the American boxes, Europeans and Americans ended up in a standoff of their own.

The differences were not easy to settle, but a few accidents, together with everyone's shared need for one standard, slowly closed the gap.

In 1965 National Castings was sold and abandoned its own container standard; the Maritime Administration, which had backed the company, dropped its standard too and took up the American Standards Association's. When the Americans carried that standard to an ISO meeting and set it beside the British one, the British conceded that the American standard was better.

After countless rounds of fighting and compromise, ISO finally published a complete draft container standard in 1970 — 12 years after the Maritime Administration's first attempt.

Still, as standardized containers and handling systems went into service at ports everywhere, and the trucks and trains that carried the overland legs were rebuilt to match, containers at last had the base for large-scale use. The 94% saving McLean had calculated for container shipping over conventional shipping was finally realized worldwide.

IV

In 1965 the container got its chance to show what it could do.

The Vietnam War was in its tenth year, and the U.S. military had been fighting there for four. Unable to win, it decided to send more troops. The strain on supply lines jumped at once: ships piled up at the ports of Cam Ranh and Saigon with no way to load or unload, and the U.S. ended up air-dropping supplies to troops fighting inland.

McLean found a way to persuade the military to ship by container, and won a $70 million contract from the Army for a route running from Oakland and Seattle to Cam Ranh and back.

Once the rebuilding of Cam Ranh was done, giant ships carrying 600 containers began sailing into Vietnam, and trucks took the cargo inland from there. The efficiency far outran what the military had expected.

The rebuilding did not even start until March 1967, yet military records that same year were already declaring that "the port congestion problem has been solved." The deputy chief of staff for logistics wrote in another report: "The potential to save millions of dollars has become apparent."

McLean's part in U.S. military supply meant more than a new customer outside commercial freight. What mattered more was that it showed where container shipping could really pay off: international ocean routes.

Before it reached the open ocean, the container had a hard time of it. Container shipping cost far less than conventional shipping, but it still had to beat trucks and trains. Trucks had an unbeatable edge over short distances, while trains, by carrying truck trailers directly, cut the cost of long overland hauls sharply.

For containers to show their advantage they had to go to sea — which was also where traditional shipping had always been strongest. Container standards were settled by then, and ports, railways, and trucking had begun to be rebuilt, but one brake on container shipping remained: the ships.

The first companies in the business used vessels retired after World War II, small and slow, no use for moving containers far and in quantity. International trade was still thin at the time, too, and with demand uncertain, rebuilding ships was a serious gamble.

From 1961 McLean began converting ships, and he bought the Alaska Steamship Company. By 1964 his debt had climbed from $8.5 million to $60 million. In 1966 his container ships began crossing the Atlantic, from Newark to Rotterdam.

Ocean container shipping turned out to be astonishingly efficient. One report found that three medium-sized container ships could handle the cargo that had taken six break-bulk ships, at half the capital cost and two-thirds the operating cost.

The next problem was finding cargo. International trade was still thin, and only a full container returned the most profit.

McLean found he could carry military supplies from the U.S. to Europe and bring Scotch whisky back into the United States. On the Vietnam run, he chose to call at Japan on the return leg and carry Japanese electronics to America.

So the container found its strength on ocean routes, and through ocean shipping the markets of different countries were joined together. What followed was a sharp acceleration in international trade and globalization.

V

Of everyone carried along by the globalization the container brought, no one gained more than Singapore.

The country holds the Strait of Malacca and was already the most important city on the sea lane; the larger international shipping trade the container created became its new opening.

In 1965 Singapore was forced out of Malaysia into independence. To survive, it launched a plan at once to draw foreign money into manufacturing, but soon switched strategy to "using containers to become Southeast Asia's trade hub."

With a loan from the World Bank, a container terminal went up in Singapore, offering transshipment for the giant container ships arriving from Japan, Europe, and North America; smaller container ships took the cargo on to the rest of Southeast Asia.

Singapore's shipping industry grew fast from there. In 1971 the Port of Singapore Authority still estimated that in ten years the country would handle 190,000 containers; by 1982 it was handling more than a million. In 2005 Singapore became the world's largest container port, passing Hong Kong.

Shipping now contributes more than 8% of Singapore's GDP, one of the country's most important pillar industries.

Hong Kong, the city Singapore passed, leaned on shipping heavily too. In the 1970s, with the mainland next door, Hong Kong became the transfer point for goods heading into China, and its shipping industry swelled quickly.

In 1979 Li Ka-shing bought control of Hutchison Whampoa, the second-largest British trading house, from HSBC, becoming the first Chinese businessman to take over a British hong; he also acquired the Hongkong and Whampoa Dock Company and folded its freight business into Hutchison's Hongkong International Terminals. Ports were the most important part of Li Ka-shing's business.

Outside Asia, some declining cities in North America and Europe found their opening in containers as well. In 1958 San Francisco, troubled by the decay of its waterfront, approved $50 million in port bonds to finance a container port. In 1960 Seattle raised $32 million to rebuild its port district. Los Angeles started a five-year plan of its own and put in $37 million.

On the other side of the Atlantic, containers redrew the map of British ports. London and Liverpool had been the two most important docks, but their locations did not suit giant container ships, and Felixstowe, 90 miles from London, took London's place.

What drove all this, and profited from it in turn, was international trade. It is a chicken-and-egg question: hard to say which factor mattered more.

Japan took up containers in 1968. Within a year its seaborne exports rose from 27.1 million tons in 1967 to 40.6 million tons in 1969. South Korea's seaborne exports stood at 2.9 million tons in 1969; once container ships began calling there, they reached 6 million tons by 1973, with exports to the U.S. doubling.

As trade grew, supply chains changed enormously. Because container shipping had cut freight costs so far, buying raw materials from other countries became possible.

The Barbie doll is the example people reach for: the molds came from the United States, the equipment from Europe, the nylon from Japan, the plastic from Taiwan, while the mainland supplied the cotton and did the assembly.

None of that would have been likely without the container, because freight costs would have made locally produced materials the cheaper choice. The savings containers brought became a major force behind the integration of the world economy.

VI

The container has already changed the world, and it has not stopped changing itself.

Scale is now the governing idea in container shipping. To push costs down further, ships keep getting bigger, ports keep getting bigger with them, and the demands on location keep rising. A good deepwater port is worth far more than it was.

The container's reach has spread beyond shipping, too.

The Copenhagen housing startup Urban Rigger turned containers into waterfront student housing. A U.S. company called Freight Farms uses containers to build vegetable greenhouses on rooftops. When the online sportswear brand Needs & Wants expanded into "physical stores," it chose containers as well, because they cost less and can be moved.

Back in shipping, where the container is at its best, what let it change the world was above all that it raised efficiency and saved money — and what made that possible was the standardization it brought.

The old shipping industry moved goods according to what the goods were. Oranges, tobacco, spices, steel: each had its own character and needed its own method.

Now, once they are inside a container, oranges, tobacco, spices, and steel look to the shipping industry like nothing but a container of cargo. Through the handling systems built around the box and the overland networks connected to it, containers can be processed fast and in bulk.

Standardization simplifies complicated work; machines, better than people at simple, repetitive tasks, then take over from human hands, and efficiency rises. Isn't that exactly what modernization is?