Transportation Deployment Casebook/2018/Container Shipping

Qualitative AnalysisEdit

Introduction to Container ShippingEdit

Container shipping is an intermodal form of goods transport where goods are packed inside standard sized shipping containers. The containers are easily loaded from road or rail vehicles by crane into purpose-built container ships, where they can be transported globally. The essential technological characteristic is the standard container size, and the ease with which containers can be moved between modes. This is also one of its main advantages, in that it greatly reduced loading and unloading times, reduced the need for human labour, and therefore reduced the cost of shipping goods. Other advantages include protection against theft and weather during transit[1]. The main market for container shipping is the global goods transportation industry

Pre-ContainerizationEdit

Prior to the advent of shipping containers, break bulk cargo was the dominant means of moving goods – moving the cargo in separate pieces. This employed a huge amount of people and was a slow process. The limitation of this method was in the time and cost associated with loading and unloading at port. Further, theft was common: a dock worker could earn “$20 a day and all the Scotch you could carry home”[2].

Invention & InnovationEdit

Malcom McLean first invented the concept of intermodal container shipping in 1956 when he began to use detachable trailers to move cargo from road to water, rather than wasting time unloading trucks and loading ships as had been done previously[3]. Similar ideas in Canada had occurred previously in 1953 and 1955[4], but McLean’s entrepreneurism brought him success as he bought a tanker company, and with modified ships, began shipping special containers[5]. Originally, McLean used detachable trailers that could be driven onto the ships deck and disengaged from the truck car. As the mode grew to take advantage of railways, a simple container that could be moved with a crane was developed. This not only allowed for the expansion to railroads, but also allowed containers to be stacked, and therefore increasing the amount of cargo that could be carried on one ship.

Early Market DevelopmentEdit

The initial market niche was the cargo shipping industry as a whole: the containerisation of goods was easily transferrable throughout the industry. The containers provided functional enhancement, in that containers allowed ships to reduce unloading and loading times, and therefore increase their profit margins. Functional discovery has been realised in the decades since the 1950s: international shipping routes were built upon, international trade opportunities have arisen, and some have argued that the shipping container has been a more significant driver in globalisation as a whole than all trade agreements signed in the last 50 years[6].

Policy in the Birthing PhaseEdit

The most important role for policy in the birthing phase was the standardisation of container sizing. The original size proposed by McLean for his trailers was 35ft, simply because it was the maximum length for a trailer permitted on Pennsylvanian highways[7]: this is an example of a policy borrowed from the precursor model of road transportation of goods. The American Standards Association soon became involved, allowing for any container size divisible by 10ft: 20ft TEU (trailer equivalent unit) became the industry standard. The International Organization for Standardisation (ISO) set standard sizes for shipping containers in 1960, with the most commonly used sizes in today’s market being 2 TEU – or 1 Forty-foot equivalent unit (FEU)[8]. Another important policy issue that had to be resolved was whether the containers would be allowed on railroads. Rail companies attempted to ban container traffic on their networks, but the Interstate Commerce Commission ruled that the containers were cargo, and therefore the railroads had an obligation to carry them[9].

Growth in the IndustryEdit

Maritime alliances began to be formed during the 1980s as the container shipping industry was beginning to grow at a faster rate. These alliances are essentially agreements where multiple companies work together, carrying each other’s containers, and allowing for the easy flow of containers globally[10]. The new container shipping industry necessitated change in the global port system: ports now had to be able to accommodate the larger container ships and have systems set up to facilitate intermodal exchange. Historically ports were constructed and owned by government, but many have now been privatised[11].

Maturity and BeyondEdit

As the quantitative analysis in the following section shows, the container shipping industry still appears to transition from the growth the mature stage, with many more years of growth expected. Improvements in tracking technology and fuel efficiency are expected in the coming years. In Norway, the world’s first autonomous and zero emissions cargo ship is expected to begin running in 2019, delivering fertiliser between Norwegian hubs[12]. This could signal the beginning in a driverless cargo ship revolution. Further increases in ship size may occur, although this will be limited by the ability of current ports to accommodate larger vessels[13]. It is argued that as ship sizes increase, the number of ports will decline, while the ports that remain will increase in size to become intermodal hubs[14]. Others point out that larger ships could eventually take advantage of offshore cargo transfer, with smaller ships that can access ports easily effectively lightering for the larger ships[15]. The port size issue is in some respects an example of “lock in” constraining the growth of ship sizes, and therefore growth as a whole in the industry. The speed of container ships is an area that may also see improvements: the present day consumer expects to have access to fast goods delivery. This demand may drive innovation that addresses the turnaround time for deliveries: from mechanisms to load more than one container at once[16], to specialisation of ships that can deliver smaller quantities of consumer items (i.e. personal electronics, clothes, household items, etc.) at much faster speeds.

Quantitative AnalysisEdit

 
S-Curve for the Global Container Shipping Industry

Raw data on the number of tonnes loaded annually in the global container shipping market from 1960 to 2016[17] was used to estimate a three-parameter logistic function:

S(t)= K/((1+ e^(-b(t-t_0 ) ))) (1)

where:

S(t) is the status measure: Trade in Millions of Tonnes Loaded
t is time in years
t0 is the inflection time (year in which 1/2 K is achieved)
K is saturation status level
b is a coefficient
In this model, the following parameters are used:
t_0=2014
K=3200 millions of tonnes loaded
b=0.0975
K and b are estimated values.

The data is provided in Table 1: the actual market size values are provided in column 2, while the estimated size values are calculated using Equation 1 above.

Year Market Size

(millions of tonnes loaded) [18]

Predicted Market Size

(millions of tonnes loaded)

1980 102 112
1985 152 179
1990 234 281
1995 371 434
2000 598 651
2005 1001 940
2010 1280 1292
2011 1393 1368
2012 1464 1444
2013 1544 1522
2014 1640 1600
2015 1661 1678
2016 1720 1756


Interpretation of ResultsEdit

This model is reasonably accurate in that it fits the dataset available from 1980 to 2016. If the container shipping industry follows a normal S-curve pattern, the model provided will be a good indicator of the coming phases of its lifecycle. The birthing period runs from pre-1980 up to 1990. The growth phase follows from 1990 until 2014 when the inflexion point occurs. From 2014 to 2040 the mode is in the maturity phase, and it reaches saturation around 2060.

ReferencesEdit

  1. Garrison, W. L. and D. M. Levinson (2014). The Transportation Experience: Policy, Planning, and Deployment, OUP USA.
  2. (2013). The Humble Hero. The Economist, The Economist Groupt Limited.
  3. Garrison, W. L. and D. M. Levinson (2014). The Transportation Experience: Policy, Planning, and Deployment, OUP USA.
  4. Nurosidah, S. (2017). "The shift of containerisation influence: 50-year logistics innovation in international business." The Business & Management Review 8(4): 5.
  5. Garrison, W. L. and D. M. Levinson (2014). The Transportation Experience: Policy, Planning, and Deployment, OUP USA.
  6. (2013). The Humble Hero. The Economist, The Economist Groupt Limited.
  7. Garrison, W. L. and D. M. Levinson (2014). The Transportation Experience: Policy, Planning, and Deployment, OUP USA.
  8. (2018). "CONTAINERS." Retrieved 03/05/2018, 2018, from http://www.worldshipping.org/about-the-industry/containers.
  9. Garrison, W. L. and D. M. Levinson (2014). The Transportation Experience: Policy, Planning, and Deployment, OUP USA.
  10. Garrison, W. L. and D. M. Levinson (2014). The Transportation Experience: Policy, Planning, and Deployment, OUP USA.
  11. Garrison, W. L. and D. M. Levinson (2014). The Transportation Experience: Policy, Planning, and Deployment, OUP USA.
  12. Kongsberg (2017). YARA and KONGSBERG enter into partnership to build world's first autonomous and zero emissions ship, Kongsberg Maritime. 2018.
  13. Garrison, W. L. and D. M. Levinson (2014). The Transportation Experience: Policy, Planning, and Deployment, OUP USA.
  14. Garrison, W. L. and D. M. Levinson (2014). The Transportation Experience: Policy, Planning, and Deployment, OUP USA.
  15. Moody, C. (2016). End-to-End Automation and the Port of the Future. T. S. Catapult.
  16. Garrison, W. L. and D. M. Levinson (2014). The Transportation Experience: Policy, Planning, and Deployment, OUP USA.
  17. Statista (2017). International seaborne trade carried by container ships from 1980 to 2016 (in million tons loaded), © Statista.
  18. Statista (2017). International seaborne trade carried by container ships from 1980 to 2016 (in million tons loaded), © Statista.