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The new York times

The Container That Changed the


World
By VIRGINIA POSTRELMARCH 23, 2006
THE political showdown over a Dubai company's plan to operate terminals at six
American ports briefly focused public attention on one of the most significant, yet
least noticed, economic developments of the last few decades: the transformation
of international shipping.

Just as the computer revolutionized the flow of information, the shipping container
revolutionized the flow of goods. As generic as the 1's and 0's of computer code, a
container can hold just about anything, from coffee beans to cellphone
components. By sharply cutting costs and enhancing reliability, container-based
shipping enormously increased the volume of international trade and made
complex supply chains possible.

"Low transport costs help make it economically sensible for a factory in China to
produce Barbie dolls with Japanese hair, Taiwanese plastics and American
colorants, and ship them off to eager girls all over the world," writes Marc Levinson
in the new book "The Box: How the Shipping Container Made the World Smaller
and the World Economy Bigger" (Princeton University Press).

For consumers, this results in lower prices and more variety. "People now just take
it for granted that they have access to an enormous selection of goods from all over
the world," Mr. Levinson said in an interview. That selection, he said, "was made
possible by this technological change."

When the first container ship set sail50 years ago, businesses and regulators
treated distribution not as a single process but as a series of distinct modes: ships,
trucks and trains. Every time the transportation mode changed, somebody had to
transfer physically every box or barrel.

"By far the biggest expense in this process was shifting the cargo from land
transport to ship at the port of departure and moving it back to truck or train at the
other end of the ocean voyage," writes Mr. Levinson, a Wall Street economist and
former economic journalist. This "breaking bulk" could easily consume half of the
total cost of shipping.

Goods often had to wait in warehouses for the next stage. Those transfers and
delays made shipping slow and schedules uncertain. They also created
opportunities for damage, mistakes and more than a little theft. (Whiskey was one
of the first products shipped by container because it was so subject to pilferage.)
Different companies in different industries facing different price regulations for
different goods handled each step.
Today, by contrast, "you can call one of the big international ship lines, tell them to
pick up your container in Bangkok, which is not a port, and tell them to deliver it in
Dallas, which is not a port, and they will make the arrangements to get it to a port
and get it on a ship and get it off at another port and get it onto a train or truck and
get it where it needs to be," Mr. Levinson said.

For that, shippers can thank a visionary North Carolina trucking entrepreneur.
Malcom McLean, founder of the company that became Sea-Land Service, thought
not like a seaman but like a salesman.

"His big insight was that the customer doesn't care how you're shipping the goods,"
Mr. Levinson said. "The customer wants to get it from here to there cheap and on
time. The customer doesn't care if it goes by air or land or sea."

The idea of containerization was simple: to move trailer-size loads of goods


seamlessly among trucks, trains and ships, without breaking bulk. But turning that
idea into real-life business practice required many additional innovations.

New equipment, from dockside cranes to the containers themselves, had to be


developed. Carriers and shippers had to settle on standard container sizes. Ports
had to strengthen their wharves, create connections to rail lines and highways,
build places to store containers and strike new deals with their unions.

Along the way, even the most foresighted people made mistakes and lost millions.
Malcom McLean himself bought fast fuel-guzzling ships right before the 1973 oil
crisis and slow, economical ships just as fuel prices turned down. "Almost
everybody who was concerned with containerization in any way at some point got
the story wrong," Mr. Levinson said.

It is a classic tale of trial and error, and of creative destruction.

Traditional dockworkers and maritime managers found their skills obsolete or


inadequate. Some smaller ports, like Mobile, Ala., lost business while others, like
Seattle, boomed. As London and Liverpool declined, the tiny town of Felixstowe
gained 40 percent of Britain's container traffic.

Mr. Levinson's story helps explain why port operators like the Dubai-owned
company DP World have become so important. In the container age, any city with
good port facilities, including feeder rail and truck lines, can compete with any
place in the same large region. Seattle can take business from Oakland, and
Hampton Roads can attract shippers from New York. That heightens competition
among ports.

At the same time, container lines keep building larger and larger ships to drive
down their cost per unit. To accommodate larger vessels or just keep up with the
competition, ports must constantly invest large sums of capital. Yet local
governments cannot be sure that shippers will not move to the next city that offers
them a better deal.
Private operators, who lease terminals and pay for port equipment, often have
better access to capital markets. And they have the right incentives. They will not
overinvest in hopes of spurring local business development. They can spread their
risks over many different locations and give customers whatever level of service
they are willing to pay for.

With privatization, "the public agency that actually owns the port is guaranteed
rent, and there's a higher level of security for everybody in the chain," Mr. Levinson
said. "This was a response to the riskiness of what is a very, very capital-intensive
business."

BIBLIROGRAFIA

POSTREL VIRGINIA .(23 de marzo de 2006). The container that changed


the world. The New York times.