A Dynamic Industry Changing the World

career advice courses logistics Oct 01, 2021

The introduction of containers resulted in vast improvements in port handling efficiency, thus lowering costs and helping lower freight charges and, in turn, boosting trade flows. Almost every manufactured product humans consume spends some time in a container.

The world's first truly intermodal container system used the purpose-built container ship the Clifford J. Rodgers, built in Montreal in 1955 and owned by the White Pass and Yukon Route. Its first trip carried 600 containers between North Vancouver, British Columbia and Skagway, Alaska, on November 26, 1955; in Skagway, the containers were unloaded to purpose-built railroad cars for transport north to the Yukon, in the first intermodal service using trucks, ships and railroad cars. Southbound containers were loaded by shippers in the Yukon, moved by rail, ship and truck, to their consignees, without being opened.

The U.S. container shipping industry dates to April 26, 1956, when trucking entrepreneur Malcom McLean put 58 containers aboard a refitted tanker ship, the Ideal-X, and sailed them from Newark to Houston. What was new in the USA about McLean's innovation was the idea of using large containers that were never opened in transit between shipper and consignee and that were transferable on an intermodal basis, among trucks, ships and railroad cars. McLean had initially favored the construction of "trailerships"—taking trailers from large trucks and stowing them in a ship’s cargo hold. This method of stowage, referred to as roll-on/roll-off, was not adopted because of the large waste in potential cargo space onboard the vessel, known as broken stowage. Instead, he modified his original concept into loading just the containers, not the chassis, onto the ships, hence the designation container ship or "box" ship.

Containerisation has revolutionised cargo shipping. Today, approximately 90% of non-bulk cargo worldwide moves by containers stacked on transport ships. As of 2005, some 18 million total containers make over 200 million trips per year. The latest development in vessel size is the L203 design SX Class commissioned by the A.P. Moller–Maersk Group and built by the Odense Steel Shipyards in Denmark, with a capacity of around 11,000 TEU, expandable to 14,800 TEU - for example the Emma Mærsk, 396 m long and launched in August 2006. It has even been predicted that, at some point, container ships will be constrained in size only by the depth of the Straits of Malacca—one of the world's busiest shipping lanes—linking the Indian Ocean to the Pacific Ocean.

Large terminals capable of serving the biggest vessels, aircraft, and trains are few, because economies of scale require only a few key load centers or hubs. A range of technologies, equipment, storage, demurrage policies, and labor productivity is necessary to handle the large container volumes carried by the new modal equipment. In addition, environmental programs are being instituted to reduce the social costs of large terminals— particularly the effects on air quality. Terminals are facing new and challenging programs to increase the security of operations from terrorism.

Use of the same basic sizes of containers across the globe has lessened the problems caused by incompatible rail gauge sizes in different countries. The majority of the rail networks in the world operate on a 1,435 mm (4 ft 81⁄2 in) gauge track known as standard gauge but many countries (such as Russia, India, Finland, and Spain) use broader gauges while many other countries in Africa and South America use narrower gauges on their networks. The use of container trains in all these countries makes trans-shipment between different gauge trains easier.

The first 50 years of the containership era can be viewed through different prisms. Naval architects and merchant seamen may concentrate on the extraordinary evolution of containership design with capacities over 10,000 TEUs. Shippers may marvel at the wonders of “just in time” chains of international delivery that bring products to market with extraordinary efficiency. Transportation planners may grow exasperated as they seek to develop more seamless links between seaports, highways, and railways, and port officials may wonder how they will find the resources to adapt their harbors for the ever-larger containerships. Economists and political scientists may continue to measure and assess the implications of a global economy in which the clothes and backpacks worn by youngsters heading to school in Middle America were manufactured in factories in the Far East and transported across the Pacific aboard containerships that fly flags of many countries.

Economic Effects

Sleepy harbors such as Busan in South Korea and Seattle moved into the front ranks of the world’s ports, and massive new ports were built in places where none had been before, like Felixstowe in England and Tanjun Pelepas in Malaysia. Poor countries, desperate to climb the rungs of the ladder of economic development, could dream realistically of becoming suppliers to wealthy countries far away.

Huge industrial complexes mushroomed in places like Los Angeles and Hong Kong, because the cost of bringing raw materials in and sending finished goods out had dropped drastically. Shipping costs no longer sheltered producers whose advantage was proximity to the customers— even with customs duties and time delays, factories in Malaysia could deliver blouses to Macy’s in Herald Square more cheaply than could blouse manufacturers in the lofts of New York’s garment district. Multinational manufacturers—companies with plants in different countries—transformed into international manufacturers, integrating once-isolated factories into networks so that they could choose the cheapest location for making a particular item yet still shift production from one place to another as costs or exchange rates might dictate

The ready availability of inexpensive imported consumer goods has boosted living standards around the world. Low shipping costs helped make capital even more mobile, making the wages for less mobile factory workers in the United States and Europe depend on the pay and productivity of their counterparts in Asia. Yet the emergence of the logistics industry in the quest for more effective supply chain management has led to the creation of new and often better-paying jobs in warehousing and transportation.

Transport efficiencies, however, hardly begin to capture the economic impact of containerisation. The container not only lowered freight bills but saved time. Quicker handling and less time in storage translated to faster transit from manufacturer to customer, reducing the costs of financing inventories that could sit unproductively on railway sidings or in pier side warehouses awaiting a ship.

Combined with the computer, the container made it practical for companies like Toyota and Honda to develop just-in-time 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. Such precision, unimaginable before the container, has led to massive reductions in manufacturers’ inventories and correspondingly huge cost savings. Retailers have applied these same lessons, using careful logistics management to squeeze out billions of dollars in costs.

The Harmonized Commodity Description and Coding System (HS) of tariff nomenclature generally referred to as "Harmonized System" or simply "HS" was developed as an internationally standardised system of names and numbers for classifying traded products developed and maintained by the World Customs Organisation (WCO), an independent intergovernmental organisation with over 170 member countries. The HS contributes to the harmonization of Customs and trade procedures, and the non-documentary trade data interchange in connection with such procedures, thus reducing the costs related to international trade.

The International Chamber of Commerce - ICC was established to facilitate international transactions and has top-level consultative status with the United Nations representing the views of business to promote international trade and investment. The ICC makes rules that although voluntary, are adhered to in countless international transactions thereby governing the conduct of transnational business in such areas as banking, arbitration, commercial crime, e-commerce, energy, financial services, taxation, and trade and investment. Statements, codes and rules include the text of the ICC International Customs Guidelines.

Because of this ever changing global environment, even seasoned logistics specialists require training to meet the challenges of international trade. ShippingCollege is a global training company that helps you stay abreast of changes to protect profitability.

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