The Box
The Box

The Box

Table of Contents

Since The Box appeared, however, many news stories and articles have acknowledged that, digital communication notwithstanding, the integration of the world economy depends less on call centers and trans-Pacific exports of technical services than on the ability to move goods cheaply from here to there. (Location 140)

Tags: globalisation

Note: .globalisation moving physical good cheaply contributed hugely to globalisation

CHAPTER 1 The World the Box Made

Before the container, transporting goods was expensive—so expensive that it did not pay to ship many things halfway across the country, much less halfway around the world. (Location 258)

Tags: box, shipping

Note: .shipping .box the box drastically reduced the cost of shipping so people sent more goods around the world

The value of this utilitarian object lies not in what it is, but in how it is used. The container is at the core of a highly automated system for moving goods from anywhere, to anywhere, with a minimum of cost and complication on the way. (Location 261)

In 1956, the world was full of small manufacturers selling locally; by the end of the twentieth century, purely local markets for goods of any sort were few and far between. (Location 288)

Low shipping costs helped make capital even more mobile, increasing the bargaining power of employers against their far less mobile workers. (Location 299)

Tags: newsletter

Note: .newsletter Capital became more mobile and increased the bargaining power of employers. Will something similar happen with remote work?

A ship carrying 9,000 40-foot containers, filled with 200,000 tons of shoes and clothes and electronics, may make the three-week transit from Hong Kong through the Suez Canal to Germany with only twenty people on board. (Location 308)

Tags: shipping

Note: .shipping there could be 9,000 containers and only 20 crew

The trolley stops above a rubber-tired transporter waiting between the crane’s legs, the container is lowered onto the transporter, and the spreader releases its grip. The transporter then moves the container to the adjacent storage yard, while the trolley moves back out over the ship to pick up another box. The process is repeated every two minutes, or even every ninety seconds, each crane moving 30 or 40 boxes an hour from ship to dock. As parts of the ship are cleared of incoming containers, reloading begins, and dockside activity becomes even more frenzied. Each time the crane places an incoming container on one vehicle, it picks up an outbound container from another, simultaneously emptying and filling the ship. (Location 317)

A 25-ton container of coffeemakers can leave a factory in Malaysia, be loaded aboard a ship, and cover the 9,000 miles to Los Angeles in 23 days. A day later, the container is on a unit train to Chicago, where it is transferred immediately to a truck headed for Cincinnati. The 11,000-mile trip from the factory gate to the Ohio warehouse can take as little as 28 days, a rate of 400 miles per day, at a cost lower than that of a single business-class airline ticket. More than likely, no one has touched the contents, or even opened the container, along the way. (Location 349)

The container not only lowered freight bills, it saved time. Quicker handling and less time in storage translated to faster transit from manufacturer to customer, reducing the cost of financing inventories sitting unproductively on railway sidings or in pierside warehouses awaiting a ship. The container, combined with the computer, made it practical for companies like Toyota and Honda to develop just-intime manufacturing, in which a supplier makes the goods its customer wants only as the customer needs them and then ships them, in containers, to arrive at a specified time. (Location 423)

Tags: box

Note: .box the box led to quicker shipping times, which enabled just in time manufacturing

The economic benefits arise not from innovation itself, but from the entrepreneurs who eventually discover ways to put innovations to practical use—and most critically, as economists Erik Brynjolfsson and Lorin M. Hitt have pointed out, from the organizational changes through which businesses reshape themselves to take advantage of the new technology. (Location 462)

Tags: invention, execution

Note: .execution .invention its about execution rather than the idea

CHAPTER 2 Gridlock on the Docks

Government safety rules and inspections were almost nonexistent. Outsiders may have found romance and working-class solidarity in dock labor, but for the men on the docks it was an unpleasant and often dangerous job, with an injury rate three times that of construction work and eight times that in manufacturing. (Location 549)

Tags: safety, dockers

Note: .dockers .safety loading ships was dangerous work

The big cost item was the wages of longshore gangs, which could eat up half the total expense of an ocean voyage. Add in the tonnage fees paid to pier owners and “60 to 75 percent of the cost of transporting cargo by sea is accounted for by what takes place while the ship is at the dock and not by steaming time,” (Location 584)

Tags: shipping

Note: .shipping most cost were on labour and fees to pier owners

Liverpool dock foremen specializing in forced lending were called “gombeen men,” a term derived from “gaimbin,” an Irish word meaning usury. By taking a loan to be repaid with a threepenny premium on every shilling—25 percent interest for just a brief period of borrowing—a docker could be assured of being hired, because he knew that the gombeen man would take repayment from his wages. (Location 609)

could most dockers look forward to earning steady incomes.12 The peculiarities of dockworker life had long since given rise to a distinct waterfront culture. Longshoremen rarely worked for a single employer for long; their loyalty was to their colleagues, not to “the company.” Many believed that no one knew or cared how well they did their work. Their labor was arduous and often dangerous in ways that outsiders could not appreciate, contributing to an unusual esprit de corps. Lack of control over their own time interfered with dockers’ involvement in off-the-job activities scheduled around workers with regular shifts. (Location 636)

As often as not, dockworkers had fathers, sons, brothers, uncles, and cousins on the docks as well, and they frequently lived nearby. Strangers, including men of different ethnic groups, were unwelcome. In London and Liverpool, the Irish ruled the docks, and non-white immigrants from the West Indies or Africa had no chance of finding employment. (Location 653)

Tags: racism, irish

Note: .irish .racism

Being a longshoreman meant belonging to a global fraternity of men with a common outlook on life and a common sense of exclusion from the mainstream. (Location 679)

Their employers, in most cases, were not ship lines and terminal operators with assets and reputations to protect, but contractors hired to service a particular dock or ship. This system allowed shipowners to evade responsibility for working conditions by claiming that not they but their contractors were in charge of dock labor. (Location 683)

Tags: contractors

Note: .contractors using an agency with contractors removes responsibility for conditions

The longshoremen worked one eight-hour shift per day, excluding Sunday, and required 6 calendar days (including a day lost to a strike) to load the ship. Steaming across the Atlantic took 10½ days, and unloading at the German end, where longshoremen worked around the clock, took 4 days. In sum, the ship spent half the total duration of the voyage docked in port. The last of its cargo arrived at its ultimate destination 33 days after the Warrior docked at Bremerhaven, 44 days after it departed New York, and 95 days after the first Europe-bound cargo was dispatched from its U.S. point of origin. (Location 842)

CHAPTER 3 The Trucker

The U.S. economy boomed in the years just after World War II. The maritime industry did not. The entire merchant fleet had been commandeered by the government when the United States entered the war, and many ships did not revert to private control until July 1947, almost two years after the war ended. (Location 869)

Tags: war, us

Note: .us .war the us took control of all merchant ships during the war

The ICC’s concern was not efficiency but order. Regulation protected the interests of established truck lines by limiting competition, and it protected the railroads by forcing truck lines to charge much more than railroad companies. More than anything else, the ICC wanted to keep the transportation industry stable. (Location 926)

Tags: regulation

Note: .regulation

The senior driver got a bonus of one month’s pay if a man he had trained made it through his first year without an accident. The incentives were powerful: the veteran had a strong financial incentive to train the newcomer well, and the new driver understood that he had best drive very carefully if he wanted to stick around. (Location 982)

Tags: incentives

Note: .incentives

Typical of McLean’s financial acumen, he laid out only $10,000 of his own cash to gain control of one of the country’s largest ship lines through what later became known as a leveraged buyout. “In a sense, Waterman was the first LBO,” Wriston recalled. (Location 1057)

Tags: lbo

Note: .lbo

Malcom McLean’s fundamental insight, commonplace today but quite radical in the 1950s, was that the shipping industry’s business was moving cargo, not sailing ships. (Location 1170)

Updated: Jul 28, 2020

Pan-Atlantic’s two crane drivers each sat high above the deck facing two colored lights. A green light told one driver that he could move the crane trolley over the side of the ship to deposit a container on the dock, while a red light told the other driver to wait. If both cranes accidentally dangled forty-thousand-pound containers over the side at the same time, the unbalanced weight could capsize the vessel. Matson, with plans to serve only a small number of large ports rather than many small ones, had no need to put up with this risk. The first big decision was an easy one: land-based cranes were the way to go. (Location 1333)

Tags: cranes

Note: .cranes unloading the containers via cranes on the ship has a risk of capsizing. Land based cranes removes this risk

CHAPTER 5 The Battle for New York’s Port

The wide variety among containers increased the government’s financial risk: if a ship line took Marad’s money, built a vessel to carry its own unique containers, and then ran into financial problems, Marad could end up foreclosing on a ship that no one would want to buy. (Location 2470)

Marad’s desire to set common standards was supported by the Navy, which had the right to commandeer subsidized ships in the event of war and worried that a merchant fleet using incompatible container systems would complicate logistics. (Location 2472)

Tags: navy

Note: .navy

The problems the committees faced were not entirely novel. The railway industry, for example, had gone through a standardization process. The gauge—the distance between the inside faces of a pair of rails—on North American railroads varied between 3 feet and 6 feet during the nineteenth century. (Location 2476)

Tags: railway, standards

Note: .standards .railway containers and railway tracks had similar issues with standardisation

The railway precedent suggested that ship lines might eventually make their container systems compatible without a government dictate. Yet the analogy is misleading. The gauge that became “standard” on railways had no particular technical superiority, and standardization had almost no economic implications; the width of the track did not determine the design of freight cars, nor the capacity of a car, nor the time required to assemble a train. In the shipping world, on the other hand, individual companies had strong reasons to prefer one container system to another. The first carrier with fully containerized ships, Pan-Atlantic, used containers that were 35 feet long, because that was the maximum allowed on the highways leading to its home base in New Jersey. (Location 2485)

Tags: standards, railway

Note: .railway .standards the width of a railway trck had minimal impact of design decisions

These concerns were unrepresented when Marad’s two expert committees held their first meetings on successive days in November 1958. Neither Pan-Atlantic nor Matson was seeking government construction subsidies, so the only two companies actually operating containerships in 1958 were not invited to join in the process of setting standards for the industry that they were creating. (Location 2504)

Tags: standardisation

Note: .standardisation the only shipping companies using containers were invited to the standardisation discussio

A lower height limit would benefit eastern truckers at the expense of ship lines: an 8-foot-high container held 6 percent less cargo than an 8½-foot-high container of the same length, and would be less attractive to shippers. On height standards as on length standards, the committee split, with the government once again casting a vote that would determine how private transportation companies would invest. (Location 2555)

When TC104 convened in London in January 1967, it was faced with the uncomfortable fact that the corner fittings it had approved in 1965 were deficient. Nine engineers were named to an ad hoc panel and told to solve the problems quickly. They agreed on the tests that fittings would have to pass, and then two engineers, one British, one American, were sent to a hotel room with their slide rules and told to redesign the fitting so that it could pass the tests. Requiring thicker steel in the walls of each fitting, they calculated, would solve most of the problems. No existing container complied with their “ad hoc” design. Over the bitter complaints of many ship lines that had encountered no problems with their own containers, ISO approved the “ad hoc” design at a meeting in Moscow in June 1967. The thousands of boxes that had been built since ISO first approved corner fittings in 1965 had to have new fittings welded into place, at a cost that reached into the millions of dollars. (Location 2732)

Note: Fittings that were approved in the past were determined to be deficient. These needed too be replaced

The process of standardization was proceeding nicely. The economic benefit of standardization, however, was still not clear. Containers of 10, 20, 30, and 40 feet had become American and international standards, but the neat arithmetic relationship among the “standard” sizes did not translate into demand from shippers or ship lines. Not a single ship line was using 30-foot containers. Only a handful of 10-foot containers had been purchased, and the main carrier using them soon concluded that it would not buy more. As for 20-foot containers, land carriers hated them. Ship lines “have designed, especially in their 20-foot equipment, a highly efficient port to port container without due consideration of how the box would move efficiently from port to customers,” an executive of the New York Central Railroad complained. (Location 2739)

Note: Numerous sizes were approved, but many were never actually used

Standard containers clearly were not taking the industry by storm. The large ones were too hard to fill—too few companies shipped enough freight between two locations to require an entire 40-foot container—and small ones required too much handling. As Matson executive vice president Norman Scott explained, “In the economics of transportation, there is no magic in mathematical symmetry.” (Location 2754)

Tags: standardisation

Note: .standardisation

Faced with the prospect of competing against subsidized competitors while being excluded from subsidies themselves, Sea-Land and Matson turned to Congress. Their lobbyists drafted legislation in 1967 to prohibit the government from using the sizes of containers or shipboard container cells as a basis for awarding subsidies or freight. (Location 2786)

Tags: standardisation, subsidies

Note: .subsidies .standardisation giving subsidies to those who align with the standardisation aproach is a good eay to encoirage adherence

“The key to automation is the existence of a standardized product,” (Location 2790)

Tags: standardisation

Note: .standardisation

Sea-Land and Matson, which had invested a combined $300 million in containerization, were less concerned about the cost of conversion than about the inefficiency of doing business with equipment ill-suited to their needs. Matson president Stanley Powell testified that using 20-foot containers instead of 24-footers would raise his company’s operating costs by $500,000 per ship per year in service to the Far (Location 2796)

Tags: standardisation

Note: .standardisation existing compannies had more issues with the inefficiencies of the standards than the cost of changing existing containers

Malcom McLean followed, armed with a consultant’s study showing that switching from 35- to 40-foot containers in Sea-Land’s Puerto Rico service would reduce revenues by 7 percent and costs hardly at all. “I don’t care what size container is adopted as a standard,” (Location 2799)

After months of studies, it dawned on the engineers that shippers paying a premium for the speed of air freight would be unlikely to want their cargo carried in ships, and a separate standard was developed for air containers. (Location 2814)

Tags: shipping

Note: .shipping think about whether the problem would actually occur in reality

Railroads raised a more serious problem, contending that containers needed heavier end walls. End walls bore no great loads when the containers were on ships, but the braking of a train could cause the end of a container to bump up against the end of the flatcar. (Location 2815)

Tags: shipping, trains

Note: .trains .shipping boxes had different requirements for train in order to handle the different stresses

The plethora of container shapes and sizes that had blocked the development of containerization in 1965 gave way to the standard sizes approved internationally. Leasing companies began to feel confident investing large sums in containers and moved into the field in a big way, soon owning more boxes than the ship lines themselves. (Location 2828)

Tags: leasing

Note: .leasing having certainty on standards allowed leasing companies to invest heavily

CHAPTER 8 Takeoff

their businesses had survived thanks almost entirely to government coddling. On domestic routes, government policy discouraged competition among ship lines. On international routes, rates for every commodity were fixed by conferences, a polite term for cartels, and the most important cargo, military freight, was handed out among U.S.-flag carriers without the nuisance of competitive bidding. Decisions about buying, building, or selling ships, about leasing terminals, and about sailing new routes all depended on government directives. (Location 2848)

Tags: cartel

Note: .cartel

There was only a limited amount of traffic, involving fully loaded containers going from one shipper to one recipient over water, for which containerization indisputably made economic sense. (Location 2869)

Note: It was difficult to make maximise container efficiency when there were many full containers going from selller to buyers

Not until container technology affected land-based transportation costs would the container revolution take firm hold. (Location 2873)

The use of 40-foot trailers on superhighways instead of 28-foot trailers on congested two-lane roads led to large productivity gains that helped truckers take business from railroads. (Location 2878)

Tags: trucking

Note: .trucking

Individual European ship lines had no prospect of raising financing of this magnitude: the total after-tax profit of all thirty-seven British steamship companies in 1966 came to less than £6 million. With few alternatives, the British formed consortia such as Overseas Containers Ltd., whose members shared the $185 million cost of building six ships, and containers to go with them, between 1967 and 1969. The smaller Belgian, French, and Scandinavian carriers sought strength in numbers as well. If four ship lines joined forces, each building one or two vessels, in combination they might have enough ships to be significant players. (Location 3960)

McLean turned toward an entirely unexpected source of funds: R. J. Reynolds Industries. Reynolds, based in Winston-Salem, North Carolina, was the nation’s largest tobacco company. Its cigarette business threw off cash by the bucketful, and its managers were using that cash to turn the company into a conglomerate. U.S. cigarette consumption had fallen in 1968, and impending restrictions on marketing—the government would ban cigarette advertising on American television at the start of 1971—boded ill for its core business. The ship line’s endless investment needs would provide Reynolds with a convenient shelter from corporate income tax. (Location 3977)

Tags: conglomerate, tax, tobacco

Note: .tobacco .tax .conglomerate tobacco companies were worried about the new marketing regulations and cpuld use the investment to offset corporate tax

The impact on trade flows was immediate. Japanese seaborne exports, 27.1 million metric tons in 1967, rose to 30.3 million with the start of containerization late in 1968 and then soared to 40.6 million tons in 1969, the first full year of container service to California. The value of Japanese exports to the United States leaped 21 percent in 1969 alone. (Location 4009)

Tags: japan

Note: .japan containerisation alowed jappan to export far more to the us

Electronics manufacturers had been among the first Japanese exporters to see the advantages of shipping their fragile, theft-prone products in containers. Electronics exports had been on the rise since the early 1960s, but the lower freight rates, inventory costs, and insurance losses from container shipping helped turn Japanese products into everyday items in the United States, and soon in Western Europe. Exports of televisions climbed from 3.5 million sets in 1968 to 6.2 million in 1971. Shipments of tape recorders went from 10.5 million to 20.2 million units over the same three years. (Location 4015)

Tags: electronics, japan

Note: .japan .electronics

Trade soared, as a story similar to Japan’s was repeated along the Pacific Rim. Ocean-borne exports from South Korea, 2.9 million tons in 1969, reached 6 million tons in 1973. Korean exports to the United States trebled over those three years as lower shipping costs made its garments competitive in the U.S. market. (Location 4037)

Overcapacity was an old story in ocean shipping. The flow of cargo had always been volatile, based on economic growth, changes in tariffs and trade restrictions, and political factors such as wars and embargoes. In the 1950s and 1960s, though, a temporary imbalance between the amount of space on breakbulk ships and the amount of general cargo usually was not a fatal problem. The war-surplus ships that filled most merchant fleets had been acquired for little or nothing, so shipowners were not saddled with huge mortgage payments. Their main expenses—cargo handling, fees for the use of docks, pay for crews, fuel—were operating costs. If business was bad, the shipowner could lay the vessel up and most of the costs would go away. (Location 4084)

Note: When the ships were cheap to buy it was less harmful when they didnt operate consistently, as there were less loan payments. This is similar to old planes being used for less popular cargo routes

The conferences structured their rates very much as railroads did. There was a separate rate for each commodity, or sometimes two rates, one measured by weight and one by volume. For breakbulk shipping, there was logic behind this: some commodities were more complicated to load than others, some took more shipboard space and some less, and different rates were a way to recognize the differing costs. Applied to containers, the commodity-based system made no sense at all: a ship line’s cost to move a 40-foot container of bicycle tires was identical to its cost for a 40-foot container of table lamps. (Location 4119)

Note: With containers it made no sense to have different rates for different comodities. It did make sense with the old system when all items had t be packed by longshore gangs

Economic growth around the world picked up in 1972, and with it the flow of trade. Container tonnage nearly doubled from 1971 to 1973, and as carriers finally found enough cargo to fill their ships, they earned profits once more. But the shipping industry that survived the carnage of containerization’s first rate cycle was quite different from the one that had existed in 1967. Far fewer independent companies were left, and they had no illusions about the future. Rate wars would obviously be a permanent feature of the container shipping industry, recurring every time the world economy turned down or ship lines expanded their fleets. (Location 4168)

Updated: Aug 01, 2020

CHAPTER 9 Vietnam

and residential subdivisions instead of the usual bars and brothels. The fastest way to get the port up and running was to bring in a DeLong pier, a three-hundred-foot barge with holes through which pilings could be driven into the harbor floor; the barge could then be jacked up on the pilings to the desired height above the water. (Location 3274)

McLean estimated in 1967 that loading a containership, sailing it to Vietnam, and unloading it there cost about half as much per ton as carrying the same cargo in a Navy-owned merchant ship, not counting the reduction in loss and damage. Looking back from 1970, Besson calculated that the armed forces could have saved $882 million in shipping, inventory, port, and storage costs between 1965 and 1968 if they had adopted containerization when the buildup began. (Location 3408)

“Containerization cannot be considered just another means of transportation,” Besson told Congress in 1970. “The full benefits of containerization can only be derived from logistic systems designed with full use of containers in mind.” It was a conclusion that shippers in the private sector were only beginning to reach. (Location 3426)

Malcom McLean’s persistence in pushing containerization was vital to the U.S. war effort in Vietnam. Without it, America’s ability to prosecute a large-scale war halfway around the world would have been severely limited. The U.S. military would have experienced extreme difficulty feeding, housing, and supplying the 540,000 soldiers, sailors, marines, and air force personnel who were in Vietnam by the start of 1969. Continual headlines about theft, supply shortages, and massive waste would have caused domestic support for the war to erode even faster than it did. Containerization enabled the United States to sustain a well-fed and well-equipped force through years of combat in places that would otherwise have been beyond the reach of U.S. military might. (Location 3429)

Tags: war, vietnam

Note: .vietnam .war containers played a key role is delivering goods to the army

Like everything else Malcom McLean did, venturing into Vietnam entailed considerable risk in hopes of large reward. The cost and risk of reinforcing the pier at Cam Ranh Bay, assembling the cranes, floating equipment and vehicles across from the Philippines, and building the truck terminals were entirely Sea-Land’s. The U.S. government was liable only for damage to Sea-Land’s trucks and equipment caused by enemy fire. It did not furnish men or material to help Sea-Land get its operations up and running. In a place where replacement parts could not simply be ordered from a nearby distributor, the chance that something would go wrong, blowing budgets and cost calculations, was very high. McLean was running a commercial operation in a war zone, and betting that he could control costs well enough to make a profit from his fixed-price bid. (Location 3442)

Tags: vietnam, war, reward, risk

Note: .risk .reward .war .vietnam mclean took on huge risk to build the pier and equipment in a war zone

CHAPTER 10 Ports in a Storm

Sea-Land and its competitors were not at all like Polaroid or Xerox, companies whose proprietary technology and constant stream of innovations provided inordinately high profits for decades. Ship lines’ end product was basically a commodity. Just like farmers and steelmakers, they would always be hostage to external forces, their prices and profit margins depending mainly on economic growth and on their competitors’ decisions to build new ships. (Location 4222)

Scale was the holy grail of the maritime industry by the late 1970s. Bigger ships lowered the cost of carrying each container. Bigger ports with bigger cranes lowered the cost of handling each ship. Bigger containers—the 20-foot box, shippers’ favorite in the early 1970s, was yielding to the 40-footer—cut down on crane movements and reduced the time needed to turn a vessel around in port, making more efficient use of capital. A virtuous circle had developed: lower costs per container permitted lower rates, which drew more freight, which supported yet more investments in order to lower unit costs even more. If ever there was a business in which economies of scale mattered, container shipping was it. (Location 4265)

These Panamax vessels—the maximum size that could fit through the Panama Canal— (Location 4291)

The ceaseless expansion of port capacity was driven by the same force as the ceaseless increase in ship capacity, the demand for lower cost per box. (Location 4312)

Tags: economiesofscale

Note: .economiesofscale

In 1978, the year after McLean’s departure, R. J. Reynolds ordered 12 diesel-powered vessels at a cost of $580 million and promised that Sea-Land would soon launch a “new weekly round-the-world service.”16 The idea was not entirely insane. Most ship lines suffered from highly imbalanced traffic patterns. Sea-Land, for example, was a major carrier in the North Pacific, but Japan’s huge trade surplus with the United States meant that it carried far more cargo eastbound than westbound. It had the reverse problem in the Middle East, where countries flush with petroleum revenues were importing large quantities of manufactured goods but had little containerized freight to export. A service sailing east-bound around the world could help resolve this imbalance by allowing ships to discharge full containers at Middle Eastern ports, take on empties that had been delivered on previous voyages, and carry them onward to Japan. (Location 4388)

Tags: shipping

Note: .shipping saiiling around the world could help solve the trade imbalannce between certain countries

McLean’s strategy was different from Chang’s. His ships would circle the globe only in an east-bound direction, and they would do so slowly. McLean had learned from his mistakes with the speedy SL-7s, whose fuel bills ate up all their profits. The new ships were built for an era of expensive oil. They would conserve fuel by sailing at only 18 knots, taking longer than Evergreen’s vessels to sail around the world. (Location 4417)

Tags: oil

Note: .oil he planned for a surge in oil prices

Neither Evergreen nor United States Lines had faced the fact that their ships might not be the best way to move cargo; although shipping containers cross-country on double-stack trains cost more than sending them through the Panama Canal, American President Lines’ ship-rail service could get a container from Japan to New York in only 14 days, a transit time neither Evergreen nor United States Lines could come close to matching. (Location 4438)

Disaster was not long in coming. Instead of rising from $28 to $50 a barrel, as McLean had expected, oil prices collapsed to $14 in 1985. United States Lines’ slow, fuel-conserving ships were suddenly the wrong vessels for the market, and the oil sheikdoms of the Middle East could no longer afford the limitless quantities of imports that were supposed to keep the Econships filled with cargo. (Location 4444)

Tags: oil

Note: .oil the price of oil went down, so slow ships werwnt an advantage and there was less demmand for goods in the middle east

The collapse of United States Lines was, at the time, the largest bankruptcy in U.S. history. It was also one of the most tangled. A total of 52 ships were arrested at ports from Singapore to Greece. The seven U.S. banks that held the mortgages on the Econships scrambled to recover what they could from vessels that no other company wanted; 16 months later, the ships were sold to Sea-Land for 28 cents on the dollar. (Location 4453)

Tags: bankruptcy

Note: .bankruptcy

CHAPTER 13 The Shippers’ Revenge

For most shippers, except perhaps government agencies, the cost of transporting goods was decisive in determining what products they would make, where they would manufacture and sell them, and whether importing or exporting was worthwhile. The container would reshape the world economy only when it changed shippers’ costs in a significant way. (Location 4489)

Breakbulk ships transported more of the United States’ general-cargo trade than did containerships until 1973. They remained important on routes to developing countries in Africa and Latin America well into the 1980s, because in many trades the flow of cargo was too small to justify the capital outlay for dedicated containerships and ports. (Location 4586)

The containerization of ocean shipping initially did not reduce the costs on land. In many countries, rates for truck lines and railroads were based on the commodity and the distance, just like ocean freight rates. Regulations in the United States barred ship lines even from quoting a single through rate to an inland destination, much less negotiating special discounts for land transportation on behalf of their customers. Moving a container of televisions from Hiroshima to Chicago thus required the exporter to pay the standard Japanese truck rate for televisions, plus the appropriate ocean freight rate, plus the domestic U.S. truck or rail rate for electronic products, plus a payment to a freight forwarder to make all the arrangements. Land freight rates moved sharply higher during the 1970s, driven by increased fuel prices and higher wages. Shippers exporting to the United States increasingly favored routes that involved longer ocean voyages and shorter land hauls, an indication that land transport costs were increasing relative to the cost of ocean freight. (Location 4610)

Tags: trucking, regulation

Note: .regulation .trucking exporters had many transport companies to deal with. Regulators prohibited shipping companies quoting for the full delivery

Businesses near ports ignored by container operators may have ended up with disproportionately higher shipping costs in the 1970s, because their goods now had to move much longer distances over land. (Location 4618)

Tags: transport, location

Note: .location .transport access to cheap transport routes is key

Packing full containers at the factory eliminated the need for custom-made wooden crates to protect merchandise from theft or damage. The container itself served as a mobile warehouse, so the traditional costs of storage in transit warehouses fell away. Cargo theft dropped sharply, and claims of damage to goods in transit fell by up to 95 percent; after insurers were persuaded that container shipping in fact had fewer property losses, premiums fell by up to 30 percent. (Location 4626)

Tags: insurance

Note: .insurance

CHAPTER 14 Just in Time

Keeping inventory to a minimum brought discipline to the entire manufacturing process. With few components in stock, there was little margin for error, forcing every firm in the supply chain to perform as required. (Location 4831)

Tags: justintime, toyota

Note: .toyota .justintime

The improvement in logistics shows up statistically in reduced inventory levels. Inventories are a cost: whoever owns them has had to pay for them but has yet to receive money from selling them. (Location 4850)

Tags: inventory

Note: .inventory inventory is like product development, value is locked up until it is in the hands of customer. Keep inventory levels low and delivery products quickly

The container, combined with the computer, sharply reduced that risk, opening the way to globalization. Companies can make each component, and each retail product, at the cheapest location, taking wage rates, taxes, subsidies, energy costs, and import tariffs into account, along with considerations such as transit times and security. The cost of transportation is still a factor in the cost equation, but in many cases it is no longer a large one. (Location 4862)

Tags: transportation, globalisation

Note: .globalisation .transportation the container reduced transport costs and make the cost off transportation less of a factor when deciding where to manufacture an item

Ocean freight rates fell 70 percent between 1840 and 1910, encouraging increased shipment of commodities and manufactured goods around the world, while the telegraph—the nineteenth-century counterpart of the Internet—gave people in one location current information about prices in another. Prices of grain, meat, textiles, and other commodities converged across borders, as traders found it easy to increase imports whenever domestic prices rose or domestic wages got out of hand. (Location 4868)

Tags: globalisation

Note: .globalisation

African countries with inefficient ports and little containership service are at such a transport-cost disadvantage that even rock-bottom labor costs will not attract investment in manufacturing. (Location 4897)

Tags: africa

Note: .africa

“Any change in technology,” the economist Joel Mokyr observed, “leads almost inevitably to an improvement in the welfare of some and to a deterioration in that of others.” (Location 4910)

Note: There will always be winners and losers when tech advances

Being landlocked, one study calculated, raises a country’s average shipping costs by half. Another study found that it cost $2,500 to ship a container from Baltimore, on the U.S. Atlantic Coast, to Durban, in South Africa—and $7,500 more to haul it by road the 215 miles from Durban to Maseru, in Lesotho. (Location 4917)

Tags: geography

Note: .geography landlocked is a huge disadvantage for a country

Around 20 percent of all containers shipped internationally are empty, but on some routes the imbalance is far worse: at Los Angeles, the United States’ largest containerport, half the outbound containers in 2014 were empty. (Location 4925)

Container shipping, it is clear, has helped some cities and countries become part of the new global supply chains, while leaving others to the side. It has assisted the rapid economic growth of Korea while offering precious little to Paraguay. (Location 4942)

Major ports began to sprout in places like Chittagong, in Bangladesh, and Haiphong, in Vietnam, as those countries became important exporters of apparel. (Location 4946)

Only the biggest ports are worth a time-consuming stop: in 2014, 46 percent of world container shipments moved through just 20 ports, the smallest of which handled more than four million 40-foot containers. The ports that can load the most containers per hour consume less of a vessel’s precious time. (Location 4960)

A country cursed with outmoded or badly run ports is a country that faces great obstacles to finding a larger role in the world economy. In 2004, the World Bank estimated that if Peru were as effective at port management as Australia, that alone would increase its foreign trade by one-quarter. (Location 5034)

By some estimates, the giant vessels cut 30 percent or more off the cost of moving a container from Asia to Europe: a ship laden with 10,000 full-size containers burns perhaps half as much fuel per box as one carrying 3,000 containers, and the size of the crew need be no larger. (Location 5044)

Tags: scale

Note: .scale larger ships drastically reduce costs

CHAPTER 15 Adding Value

The project’s timing was fortuitous. As the first phase was completed in 1979, soaring oil prices left Saudi Arabia flush with cash but lacking a modern port to handle the consumer goods that were flooding in. Dubai quickly filled that niche. Building on that small success, the government created a free trade zone in 1985, enabling shippers to bring merchandise into the country, store it taxfree in warehouses near the port, and then ship it onward. That move turned Jebel Ali from an import destination into a hub. (Location 5180)

Tags: dubai

Note: .dubai

Jebel Ali containerport helped remake Dubai’s economy. In 2013, re-exports from the emirate and its free trade zone were far larger than the emirate’s gross domestic product. Some $100 billion of goods, nearly half the total value of imports, was re-exported to the other emirates, Saudi Arabia, East Africa, and South Asia. Its status as the trade hub of the Persian Gulf helped the emirate become the region’s financial hub, to the point that property, business services, and financial services accounted for a full quarter of economic output. (Location 5196)

Tags: dubai

Note: .dubai