There is an East vs. West coast dynamic to this story.
This tale of shipping innovation is the opposite of today’s silicon valley vs. east coast institutions.
In the East corner we have a scrappy upstart, and in the West corner a large company moving slowly but surely…
McClean, the trucker discussed last week, was moving at breakneck speed with the “ready, fire, aim” strategy popular in tech culture today. Meanwhile out west there was an established shipper (Matson) that used a more academic approach.
Matson were looking to improve their operations importing sugar from Hawaii. They hired a geophysicist turned operations researcher based out of Johns Hopkins in Baltimore.
These two companies took different approaches to get to the same destination.
The first container ship out West was the “Hawaiian Citizen” in 1960 (4 years behind McClean). With the use of cranes to load and unload the ship it spent only 20% of its time at port compared to the standard 50%.
(time is money, as Mr. Krabs would say)
While that happened out West, the container killed the NYC ports in the East.
The Newark & Elizabeth ports in New Jersey (which, you will now notice lots of containers on your right as you drive north past Newark on I-95), were specifically designed to accommodate container freight.
The future of containers came via NJ, not NYC..
NYC missed the boat for a few reasons:
- Glacial bureaucrats
- Corrupt unions
- Congested trucking routes
By 1970 2/3 of the cargo moving through the region was through NJ, not NYC. Displacing the dock working/transportation jobs in that area. (This is what led to NYC waterfronts becoming more recreational, and, eventually, the building of the world trade center).
The container turned the economics of location on its head. Now, a company could replace its crowded multistory plant in Brooklyn or Manhattan with a modern, single-story factory in NJ or PA, could enjoy lower taxes and electricity at its new home, and could send a container of goods to Port Elizabeth for a fraction of the cost of a plant in Manhattan or Brooklyn.
The Box by Marc Levinson
(This shift eventually paved the way for the globalization of manufacturing. This same trend happened/happens as certain knowledge work jobs can move to lower cost areas.)
Before the container, labor productivity was flat for 2 decades. Shortly after, it doubled. Shippers negotiated with the longshoremen union that they would no longer unpack and repack (what they called “strip and stuff”) goods as they arrived.
All of this set the stage for a global economic boom, but before that could happen this new process had to get standardized across ports. Eventually leading to “just-in-time” production, which we’ll cover next week.
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