One of the most important dates in recent human history is the 26th of April 1956. That was the day that the first dedicated, and specially designed container ship, the Ideal X sailed from New Jersey.
It was the brainchild of a trucker, an entrepreneur called Malcolm McLean, who had observed that the amount of time that ships took to be unloaded and transfer the material on and transfer it into trucks was longer than the goods in questions spent in either trucks or ships. And being an entrepreneur, he saw this as a business opportunity, and he came up with a genius and brilliantly simple solution, the container ship. Now, what did this actually do?
It was the container more than anything else, which made possible the huge growth in world trade.
Well, it reduced the amount of time taken to move goods around the world by 85%. It reduced the cost of shipping by a factor of 30, and it reduced the total cost of shipping, when you take into account the cost of infrastructure, by 35%. Now, it took a long time for this to catch on.
Partly because there was an enormous investment required in specialized port facilities, but also because of strong resistance and opposition from politicians, and above all, from organized labor. However, by the mid-1960s, the containerization revolution was in full fledge. And this led, amongst other things, to an enormous growth in world trade because of the huge reduction in cost that it brought about. But it also made possible all kinds of other things that we now take for granted.
The container makes possible incredibly accurate time keeping of prediction for moving goods around the world. For a three week voyage, for example, which is the average kind of length of a voyage in most parts of the world, you can predict the time of arrival of a container to within 15 minutes. Now, what this makes possible, is what's known as just in time or lean manufacturing processes. Just in time manufacturing or lean manufacturing as it's known, is a process by which firms no longer keep large stores of inventory of parts or required raw materials.
Instead, the raw materials or the parts are delivered to the production facility, almost exactly at the time that they are required for the production process. This makes the whole process much much quicker, and far less costly, because you no longer have to pay the fixed overhead cost of warehousing and storing large amounts of inventory that you need for the production process, things which enormously reduce the cost of manufacturing and the organization and production of supply chains throughout the economy.
The Container has completely transformed everybody's lives in all kinds of ways.
It was the container more than anything else, which made possible the huge growth in world trade, the process of globalization that took place in the last part of the 20th Century, and which brought about the largest reduction in human poverty in the whole of human history.
It has completely transformed everybody's lives in all kinds of ways. Every household in North America, Europe or any other parts of the world for that matter now, contains a whole range of goods and products from other parts of the world, which are cheaply and easily available to them. And this is almost entirely due to the insight of Malcolm McLean and the revolution in shipping and transportation that was brought about via the Ideal X on that first voyage back in 1956.
Reprinted from Learn Liberty.