Containerization’s Godfather:
Malcom McLean
Few, if
any, innovations have ever had the same impact to the transportation industry
than the introduction of containerization.
Containerization became the driving force behind globalization and
foreign trade because of the drastic reduction of transportation costs due to
the creation of the “box.” The individual
responsible for this tremendous innovation was a gentleman by the name Malcom
Purcell McLean. Nick Cretan the Executive Director of
the Maritime Assn. Port of New York-New Jersey said "He was probably the
one individual who had more impact on world trade and transportation than any
other living human being" (Malcom McLean; Pioneered Use of Shipping
Containers, 2001). Many things led to Malcom McLean’s motivation
to change the shipping world, which include his early life and owning his
trucking company.
On
November 14, 1913, Malcom McLean was born in Maxton, North Carolina; a
farm town in Robeson County.
Originally named Malcolm, he decided to change his name to Malcom late in his
life in order to match the traditional Scottish spelling (Malcom McLean – The
Inventor of ISO Shipping Containers, 2009).
Growing up on a farm Malcom was required to do his fair share of work to
help out. His father had to work a
second job as a mail carrier in order to support the family and farm (Mayo,
Anthony J., Nohria, Nitin. 2005). Seeing how hard his dad worked to support the
family and working on the farm himself to do what he could to help out shaped
Malcom’s work ethic.
Completing High School in 1931,
amidst the Great Depression, Malcom was unable to afford secondary
schooling. Instead, Malcom went to work
pumping gas at a station near his hometown. Unable to fully support his family enough,
Malcom began saving up and in 1934 he bought his first second-hand truck for
120 dollars (Sea Land: Malcom McLean, n.d.).
With the help of two of his six siblings; his sister, Clara
McLean, and brother, Jim McLean;
McLean Trucking Company was born (Levinson, Marc, 2006). The three Mclean siblings were able to build
the company into one of the countries largest and were also the first company to
begin using diesel trucks (Saxon, Wolfgang. 2001). The McLean Trucking Company began by
transporting dirt, produce, and other goods for the local farming community
where reliable service had always been lacking.
The McLeans were able to quickly
build their fleet to five trucks and were able to hire a team of drivers. This allowed Malcom to quit driving the
trucks himself and focus of recruiting new customers; however, a lull in the economy
forced the Mclean’s to scale down the business and Malcom was began driving
again (Mayo, Anthony J., Nohria, Nitin. 2005).
While it seemed like a major setback to Mclean Trucking Company, if
Malcom hadn’t started driving again containerization may never have come to be. It was during this period that the idea of
containerization came to Malcom. It
occurred in 1937 when Malcom took a delivery of cotton bales from
Fayetteville, North Carolina to the port in Hoboken, New Jersey (Malcom McLean;
Pioneered Use of Shipping Containers, 2001).
During an interview with the magazine American Shipper McLean described that day saying, “I had to wait
most of the day to deliver the bales, sitting there in my truck, watching
stevedores load other cargo. It struck me that I was looking at a lot of wasted
time and money. I watched them take each crate off a truck and slip it into a
sling, which would then lift the crate into the hold of the ship. Once there,
every sling had to be unloaded, and the cargo stowed properly. The thought
occurred to me, as I waited around that day, that it would be easier to lift my
trailer up and, without any of its contents being touched, put it on the ship”
(Malcom McLean, 2001).
While the idea of containerization
came to Malcom in 1937, he didn’t proceed to pursue the venture until a couple
decades later. In order for him to finance
the project he was going to need a substantial amount of financial
capital. In order to obtain this capital
Malcom continued to focus on building up the McLean Trucking Company with his
siblings. In 1940 the fleet had been
built up to 30 trucks (Malcom McLean, 2001).
In the next decade the company grew it’s fleet size nearly 45 fold, and
by the early 1950’s came the McLean Trucking Company had built up it’s fleet to
1,776 trucks (Dao, Long. 2015). This
made McLean Trucking Company the largest trucking company in the south, and the
fifth largest trucking company within the entire United States (Mayo Anthony
J., Nohria Nitin. 2005).
With
his capital built up, McLean was able to sell his portion of McLean Trucking
Company to Jim and Clara for a total of 6 million dollars, which is equal to 40
million dollars today (Malcom McLean, 2001).
In January 1955 Malcom McLean started his venture into creating
containerization by purchasing a the small steamship company Pan-Atlantic, a
subsidiary of the Waterman Steamship Company, based out of Mobile, Alabama (Cudahy,
Brian J. September–October 2006). He had
originally tried to take control over Pan-Atlantic by buying a block of
Waterman Steamship Company’s stock; however, this plan did not work out for
Malcom.
Three
months after purchasing Pan-Atlantic, McLean put in motion an even larger
plan. By financing through the National
City Bank of New York, Malcom secured a 42 million dollar investment by using
Pan-Atlantic as collateral. This
investment meant that McLean had become the owner of Waterman Steamship Company
itself, and was only made possible because of a relationship that Malcom had
made during his McLean Trucking days.
That relationship was with a man named Walter Wriston, who worked at the
National City Bank in New York and helped get McLean the full investment,
although Malcom’s persistence with the bank’s chief executive did help his
cause. The transaction was to include
thirty C-2 cargo ships, a shipyard and offices in Mobile, and a number of other
Waterman subsidiaries; however, was blocked by a temporary restraining order
issued the Federal District Court in Washington D.C. after a suit had been
filed by a Waterman Stakeholder. This
order was lifted soon afterwards by the Federal Court of Appeals when it was
determined that the stockholder had filed the suit after colluding with the
Ward Line, a rival steamship company who had previously failed to secure
control of Waterman Steamship Company (Cudahy, Brian J. 2006).
“With
McLean and his associates now controlling in excess of 90 percent of Waterman
stock, in early May 1955 a new board of directors was elected, with Malcom
McLean serving as chairman, while his brother, James McLean, was named
president. Before the first meeting of
the new board was called to order, McLean’s people realized that a quorum would
not be present. One of the lawyers went
out into the street, approached a total stranger, and asked him if he wanted to
earn fifty dollars. The man said yes and
was escorted inside and elected to the board—something that apparently could
happen in the absence of a quorum. The
stranger’s presence allowed the meeting to proceed.”
-Brian J. Cudahy
Malcom
McLean’s adventure into the cargo-shipping world was never a smooth
venture. He faced many legal battles
that had similar stories to the one held after taking control over Waterman
Steamship. McLean continued to grow his
shipping empire and once word got out about his plan to carry loaded trailer
trucks on ships as a coastal delivery service railroad lobbyists began to take
notice. They all had an interest in
preventing McLean’s venture to move forward, and with leadership from the
Wilmington, North-Carolina Atlantic Coast Line, formed a joined alliance to
petition the ICC to prevent McLean’s proposed business from gaining
traction. The railroad lobbyists had two
main arguments:
“One
held that McLean had failed to divest himself fully of McLean Trucking and the
ICC clearly prohibited cross ownership of rival companies providing cargo
services by different modes. The second
argument was that the certificates of convenience and necessity the ICC had
earlier awarded Pan-Atlantic envisioned the carrying of ‘general cargo’ not
loaded trailer trucks.”
-Brian J. Cudahy
The ICC ruled in
favor of McLean in terms of both arguments declaring that loaded truck trailers
were in fact general cargo. The irony
comes from the case precedent used by the ICC in McLean’s favor finding their
results “consistent with an earlier decision it rendered in 1954 that permitted
railroads to carry trailer trucks aboard flat cars without first receiving certification
as motor carriers” (Cudahy, Brian J. 2006). During the same ruling, however, Malcom McLean
was forced to completely remove himself from McLean Trucking in order to remain
in compliance with ICC rules. Not long
after taking control of Pan-Atlantic, McLean filled an application with the
Maritime Commission in an attempt to get ship-mortgage insurance for the
construction of seven new vessels, each with an estimated cost of nine million
dollars (Cudahy, Brian J. 2006). The
federal government finally agreed to insure $55.1 of the $63 million dollar
insurance policy, and the new roll on/roll off ships construction set underway. The vessels were set to be built by Bethlehem
Steel, and were designed to have a carry capacity of 268 truck trailers while
maintaining a cruising speed of 19 knots.
In the same time, the U.S. Office of Defense Mobilization allowed
Pan-Atlantic to write of 60 percent of the total cost of the vessels in only
five years. The purpose of this tax
break was to provide the nation with newer vessels for merchant cargo, while
allowing the military to call on said vessels during and future national
emergencies (Cudahy, Brian J. 2006).
Malcom McLean was never the sort
of businessman that kept his business in static growth, and even though
construction of the nine new roll on/roll off ships was progressing forward, he
was still pursuing a similar yet distinct business venture. McLean bought himself a pair of T-2 tankers
from the World War II era and had them refurbished, done again by Bethlehem
Steel, with new spar decks being installed.
His intentions were similar to the C-2 vessels he had, which was to
utilize the ships deck to transport trailers; however, unlike the C-2 vessels
that were roll on/roll off, the refurbished T-2 tankers were to be the first
true containerships. He envisioned truck
trailers that detached from their wheelbase at the port of departure before
being loaded onto their ship, and then would be lowered onto a new wheelbase at
the port of destination after being unloaded.
His main argument for creating these new container trailers was because
of the importance of the limited space available on cargo ships. He proposed
that leaving the wheelbase attached to the trailers was just a waste of
essential square footage, and detaching the trailer from the wheels meant that
more cargo could be lower, which means that the cost of shipping per item would
go down drastically (Cudahy, Brian J. 2006).
One of the two T-2 tankers,
formerly running as the Potrero Hills, would become McLean’s famous
containership Ideal X. The ship was
first launched as the Potrero Hills back on December 30, 1944 under the
Marinship Corporation of Sausalito, California, and changed names and owners
multiple times before Malcom McLean was able to get his hands on it in
1955. A year later, after refurbishments
on the Ideal X had been complete, Malcom set out to launch his new containership
for the first time. On April 26, 1956
the Ideal X set sail from Berth 24 in Port Newark, New Jersey. The Ideal X was loaded up with 58
wheelbase-free containers, but the 15,000-ton total capacity of tanks below the
spar deck was left empty for this maiden voyage (Bryant, Dennis, 2012). Leaving the tanks empty was not an issue
though, because McLean had calculated that loading a medium-sized ship the
conventional way was costing shippers $5.83 a ton at that time, while loading
the Ideal-X had cost him less than $0.16 cents per ton, nearly 37 times cheaper
than the conventional method (Rodrigue, Jean-Paul. 2015).
Even with the improved efficiency
and greatly reduced shipping costs per ton, many organizations were reluctant
to recognize the impact that McLean’s method of containerization shipping would
have, and “a few days after the Ideal X first sailed with containers, New York
port officials announced plans for a new pier at the foot of Houston Street in
Manhattan to handle break-bulk cargo and passengers. Executives of traditional
ship lines said intermodalism would never have more than limited application” (Container
Revolution, 2005).
Driven to prove everyone wrong, a
year later, in 1957, Malcom bought the SS Gateway City and had it refurbished
to carry containers. Unlike the Ideal X
conversion that only allowed containers to be stacked on the deck, the
conversion of the SS Gateway City allowed containers to be stacked both above
and below the deck. This meant that the
SS Gateway City, which was 72 feet shorter than the Ideal X, could carry a
total of 226 containers, 168 more than the Ideal X could carry (Bryant, Dennis,
2012).
Malcom continued to build his
shipping empire, eventually renaming Pan-Atlantic to Sea-Land Service. As we all know, McLean was right and
containerization has exploded throughout the globe. Without Malcom’s innovation in the shipping
world, the global economy and trade as we know it would not be able to function
smoothly or cost effectively. Because of
this enormous impact he brought to the world, Malcom McLean’s reinvention of
the shipping world via containerization is the biggest innovation in the world
of transportation. It also goes to show
that if you truly believe in what you are trying to accomplish you can always achieve
your goals, even if the rest of the world doesn’t have faith in you.
References
(2005). Container Revolution. The Journal of Commerce. Retrieved from http://www.joc.com/sites/default/files/joc_inc/history/p15.html
(May 29, 2001). Malcom McLean;
Pioneered Use of Shipping Containers. Los
Angeles Times. Retrieved from http://articles.latimes.com/2001/may/29/local/me-3847
(May 31st 2001). Malcom McLean. The Economist. Retrieved from http://www.economist.com/node/638561
(Jan. 19, 2009). Malcom McLean – The
Inventor of ISO Shipping Containers. International
Marine Consultancy. Retrieved from http://www.imcbrokers.com/blog/overview/detail/malcolm-mclean-the-inventor-of-iso-shipping-containers
Bryant, Dennis. (Mar. 27, 2012). SS
Ideal X. Maritime Professional.
Retrieved from http://www.maritimeprofessional.com/blogs/post/ss-ideal-x-13478
Cudahy, Brian J. (2006). How
Containerships Changed the World. Box
Boats (pg. 23-27). Retrieved from http://fordham.bepress.com/cgi/viewcontent.cgi?article=1000&context=transportation
Cudahy, Brian J. (September–October
2006). The Containership Revolution. Tr
News (number 246, pg. 5-6). Retrieved from http://onlinepubs.trb.org/onlinepubs/trnews/trnews246.pdf
Dao, Long. (2015). Malcolm McLean - the
man changed the world. Container
Transportation. Retrieved from http://www.container-transportation.com/malcolm-mclean.html
Levinson, Marc. (Mar. 13, 2006). The
Box That Changed Asia and the World. Forbes.
Retrieved from https://web.archive.org/web/20070301050148/http://members.forbes.com/global/2006/0313/030.html
Mayo, Anthony J., Nohria, Nitin. (Oct.
3, 2005). The Truck Driver Who Reinvented Shipping. Harvard Business School. Retrieved from http://hbswk.hbs.edu/item/5026.html
Rodrigue, Jean-Paul. (2015). First
Containership, Ideal-X, 1956. The
Geography of Transport Systems. Retrieved from http://people.hofstra.edu/geotrans/eng/ch2en/conc2en/idealx.html
Saxon, Wolfgang. (May 29, 2001). M. P.
McLean, 87, Container Shipping Pioneer. The
New York Times. Retrieved from http://www.nytimes.com/2001/05/29/nyregion/m-p-mclean-87-container-shipping-pioneer.html
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