A Short History of Supply Chains as a Business

On 26 April 1956 a converted tanker called the Ideal X left Port Newark, New Jersey, for Houston with 58 trailer-sized metal boxes fastened to a deck built over its tanks (reported). The man who had sent it was not a shipping executive. Malcom McLean was a trucking owner from North Carolina, and he had bought a shipping company to try an idea: lift the body of the truck off its wheels, put it on a ship, and lift it off again onto a chassis at the other end.

The idea was simple and its economics were not. Before containers, loading general cargo, known as break-bulk, meant handling each sack, crate and barrel individually. A ship might spend as long in port as at sea, the labour cost was a large share of the voyage, and theft on the docks was routine. McLean's own widely quoted estimate was that loading the Ideal X cost about 16 cents a ton, against about $5.86 a ton for break-bulk cargo. Even allowing for a founder's optimism, the difference was not a percentage improvement but a change in kind. A box that could be moved between ship, train and truck without being opened cut handling, theft, damage and time at every step.

McLean's company, later Sea-Land, did not win by being first. It took another decade and more for the container to become a system: for ports to build cranes and yards, for unions to negotiate the end of the old work, for railways and truckers to accept the same boxes, and for the industry to agree, through the International Organization for Standardization in the late 1960s, on common dimensions and corner fittings so that any company's box would fit any company's ship. The US military's use of containers to supply its forces in Vietnam from 1967 helped prove the system at scale. Sea-Land was later bought by R.J. Reynolds and passed through other owners before its international liner business was sold to Maersk in 1999. The container is the most important technology in this book. It is also the clearest case of a pattern the history keeps repeating: most of the value of an innovation in moving goods goes to the people whose goods are moved, not to the company that moves them.