Thinking Inside the Box

The history of warfare is full stories of unintended consequences, in which small actions by the military  trigger events that continue to affect the civilian world long after the fighting stops.  For example, when the British Navy sought uniform pulley blocks in sufficient quantity during the Napoleonic War, they inadvertently helped develop the concept of manufacturing interchangeable parts, fueling the Industrial Revolution. 

In the same conflict, the French offered a cash reward to anyone who could develop a method of preserving food suitable for use on ships at sea.  The prizewinning process was the method for safely canning food.  (This also means that the can of Wolf Brand Chili I’m having for dinner tonight  qualifies as French Cuisine, so I’ll serve it on the good china.)

Which brings us to shipping containers, those aluminum shipping boxes that seem to be everywhere.  I was stopped at a railroad crossing the other day and it seemed that half of the passing train consisted of flatcars carrying 40’ shipping containers.  It seems that the venerable boxcar is slowly becoming as extinct as the caboose.

While we think of container shipping as a recent development, the idea of shipping freight in standardized boxes that could be offloaded onto trucks or ships actually goes back over a century, but the idea was slow to be adopted because of numerous problems.  Wooden boxes fell apart too easily and steel boxes were too heavy, but the biggest problem of all was the constant interference by the Interstate Commerce Commission whose bizarre regulations all but prohibited any improvements in shipping technology.  Attempts were made to develop containerized cargo during the Great Depression, but the Federal Government forbade it, fearful that it would hurt employment.

This fear of improved technology disrupting the status quo is called creative destruction, and some economists believe that this irrational fear of the future has been the biggest obstacle to the creation of wealth all through human history.  

Here in the US, there was fierce union opposition to containerized shipping.  Even after the container ports in New Jersey were killing off the shipping industry in New York, unions on the docks in New York were still demanding that companies hire crews of twenty-one men to load a ship when the job was actually done by three men and a crane.

On April 26, 1956, a quiet revolution occurred on the docks of Newark, New Jersey.  Malcolm McLean had managed to quietly dance between the regulations and load 56 aluminum truck trailer bodies onto the SS Ideal-X, a former World War II tanker that had been converted to cargo use.  Five days later, a crane lifted the truck bodies off the ship in Houston, Texas.  The facts that Nabisco had just shipped its baked goods to Texas a little faster than normal and at a fraction of the usual cost was largely ignored at the time—as were the facts that that the goods had arrived in better condition than usual and that the cargo had suffered none of the usual  dockside “shrinkage".

What McLean had just done was eliminate the connection between geographical locations and manufacturing.  Factories no longer had to be built near ports and population centers.  While full implementation was still decades in the future, eventually economists would realize that fast, safe shipping all but eliminated the cost of transportation in manufactured goods.  Today, it costs more to upgrade the radio in your new imported car than it does to ship it from Asia to America. And the fact that your new radio may have been shipped to multiple countries for relatively minor steps during the manufacturing process does not figure significantly into the cost.

Which brings us to the Vietnam War and LBJ.  (Yeah, as a transition, that sucked, but remember, I have to tell this whole story in about 1500 words or people won’t stay on the page long enough for the advertisers to pay me the fraction of a penny per reader that runs this site.)

In 1965, we had roughly 24,000 soldiers in Viet Nam The logistics of supplying them was such a nightmare that the Navy was pulling rusty old World War II cargo ships out of mothballs in a desperate attempt to supply the troops.  Long before they had solved this problem, President Johnson suddenly announced the tripling of forces in the country.  Logistics immediately went from bad to totally fornicated skyward. 

The situation got worse after the Pentagon decided that since internal transportation in South Vietnam was poor (few highways, only one deepwater port, no real rail system, and dilapidated docks and harbors) the military would run a push supply system instead of a pull supply system.  This meant that instead of shipping to Vietnam what units had requisitioned, the Pentagon would ship everything to Vietnam in anticipation of future requisitions.  Or to put in more modern terms, instead of being Amazon with Prime shipping, the Army was going to be a Super Walmart.  And the people who were deciding how to stock the shelves knew nothing of shipping, the facilities available to unload and warehouse the inventory, or even the needs of combat units fighting in a jungle in Southeast Asia.

We shipped everything and the kitchen sink to Vietnam.  And the kitchen.  In triplicate and in every available color.

The docks in Vietnam were a nightmare.  First, there weren’t enough docks for the ships.  So we towed a DeLong dock from South Carolina, through the Panama Canal, across the Pacific to the new port of Cam Ranh Bay.  A DeLong dock is a 300’ barge with holes in it, designed to towed into position and secured with pilings driven through the holes.  This was to be the first of many such docks towed to Vietnam. 

Even if the docks had been there, most of the harbors were too shallow to allow deep-water cargo ships.  An LST (Landing Ship Tank) would sail adjacent to the cargo ships, the freight would be transferred by hand to the LST, which would ferry the goods to the improvised dock…where there were not enough warehouses for the material to be stored.  The military would usually just leave the goods on the ship until needed, turning a valuable cargo ship into a floating warehouse.  And usually, by the time the goods were needed, it usually took too long to unload them.  Eventually, so many ships were waiting to be unloaded that many were sent to wait in the Philippines so the Pentagon could avoid paying combat pay to the crews waiting.  And since nobody knew where (or even if something was), commanders in the field screamed for more supplies, which were shipped in triplicate, adding to the logistic nightmare.

This mess was largely cleaned up by Malcolm McLean, whose company was now called SeaLand, who lobbied and eventually persuaded the Pentagon to give him the contract for containerized freight to Vietnam.  His flat rate shipping contract paid for loading containers, shipping them to Vietnam, and offloading the containers by crane onto waiting truck bodies and delivering the cargo to any desired warehouse within thirty miles of the port.  His shipping system was run by computer with an IBM punch card for each shipping container.  Naturally, he charged enough to take the empty container back to the states and still make a good profit.

Eventually, SeaLand was shipping 1200 containers a month to Vietnam.  McLean bought new ships and an ever increasing number of aluminum shipping containers.

It is almost impossible to determine how much profit McLean made from this, but we can safely say his company was very profitable.  Profitable enough that containerized freight, although still in its infancy, expanded quickly.  McLean designed new ships, built the special docks necessary to handle containerized freight in new port cities, and expanded his operations into Europe. 

Which brings us to those unintended consequences that I mentioned in the first paragraph.  McLean rather quickly decided that since he had all those empty containers over in Southeast Asia, and since he was already being paid to ship them back, any money he could make shipping goods east would just be so much extra profit.  So he went to Japan and asked the fledgling electronics industry if it was interested in shipping goods at a discount to the United States.

His first customer was Matsui—but it sure as hell wasn't the last.  Just how much the Japanese electronics industry profited by having access to cheap containerized shipping that early on is impossible to gauge.  Exports of goods shipped to the United States increased dramatically, changing sleepy American west coast ports into active centers of commerce.

Containerized shipping was spreading worldwide and Japan was going to benefit from it even if McLean hadn’t made that initial and early offer.  And Japanese electronics firms were going to compete with American companies eventually, but there is no doubt that it would have taken years longer for companies like Sony and Matsui to penetrate the American market.  Perhaps long enough for the American electronics companies to expand and find a way to compete.

Today, I read in the news that Oakland is going to convert an old Army base into the largest container port on the West coast.  When completed, it will be capable of handling the new Super Container ships, the largest of which is the new OOCL Hong Kong.  Ships are measured today by their TEU capacity, or how many twenty foot long containers they can carry (even though most containers today are forty foot units).  This new monster ship is rated at 21,143.

Or put is this way.  She can carry the exact same as the old SS Ideal-X could carry—on 209 trips.