Container history 6

This process was so expensive that in many cases selling internationally was not worthwhile. “For some commodities, the freight may be as much as 25 percent of the cost of the product,” two engineers concluded after a careful study of the date from 1959. Shipping steel pipe from New York to Brazil cost an average of $57 per ton in 1962, or 13 percent of the average cost of the pipe being exported-a figure that did not include the cost of getting the pipe from the steel mile to the dock. Shipping refrigerators from London to Capetown cost the equivalent of 68 U.S. cents per cubic foot, adding $20 to the wholesale price of a midsize unit. No wonder that, relative to the size of the economy, U.S. International trade was smaller in 1960 that it had been in 1950, or even in the Depression year of 1930. The cost of conducting trade had gotten so high that in many cases trading made no sense.
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 end of the ocean voyage. As one expert explained, “a four thousand mile voyage for a shipment might consume 50 percent of its cost in covering just the two ten-mile movements through two ports.” These were the costs that the container affected first, as the elimination of piece-by-piece freight handling brought lower expenses for longshore labor, insurance, pier rental, and the like. Containers were quickly adopted for land transportation, and the reduction in loading time and transshipment cost lowered rates for goods that moved entirely by land. As ship lines built huge vessels specially designed to handle containers, ocean freight rates plummeted. And as container shipping became intermodal, with a seamless shifting of containers among ships and trucks and trains, goods could move in a never-ending stream from Asian factories directly to the stockrooms of retail stores in North America or Europe, making the overall cost of transporting goods little more than a footnote in a company’s cost analysis.
Transport efficiencies, though, hardly begin to capture the economic impact of containerization. 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-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 specified time. Such precision, unimaginable before the container, has led to massive reductions in manufacturers’ inventories and correspondingly huge cost savings, Retailers have applied those same lessons, using careful logistics management to squeeze out billions of dollars of costs.

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