Good OM Reading: The Box That Built the Modern World

shipping containersFor a fascinating story called “The Box That Built the Modern World,” enjoy this article in In Transit (Issue 3, 2013). The piece follows the Hong Kong Express, docked at Hamburg’s Container Terminal for 33 hours. “Already, the ship was half empty. Cargo from Asia was stacked in neat rows of shipping containers on the dock. The ship is nearly a quarter of a mile long; from side to side it’s 157 feet. It can carry 13,167 20-foot-long containers, the standard box used in commerce around the world.” In less than 2 months the Hong Kong Express will call at 11 ports and travel more than 12,500 miles. Circling the world 4-5 times a year, it can move 1.4 million tons of cargo annually.

More than any other single innovation, the shipping container epitomizes the enormity, sophistication, and importance of our modern transportation system.  Fundamental to how practically everything in our consumer-driven lives works, it is the Internet of things. Just as email is disassembled into bundles of data you send, then re-assembled in your recipient’s inbox, the boxes are designed to be interchangeable, their contents irrelevant.

Once they enter the stream of global shipping, the boxes are shifted and routed by sophisticated computer systems that determine their arrangement on board and plot the most efficient route to get them from point to point. The exact placement of each box is critical: ships make many stops, and a box scheduled to be unloaded late in the journey can’t be placed above one slated for offloading early.

The In Transit article traces a T-shirt sewn at a factory near Beijing. Tagged, folded, and boxed, the T-shirt is stuffed into a container with 33,999 identical shirts at the factory. The merchandise passes through 36 steps before arriving at a discount clothing retailer’s distribution center near Munich. There’s the trucker who moves the box to a waiting ship in Xinjiang, the feeder ship that moves it to Singapore to be loaded onto a bigger Europe-bound freighter, the crane operator in Hamburg, customs officials, train engineers, and more. The total time in transit for a typical box from a Chinese factory to a customer in Europe might be as little as 35 days. Cost per shirt? “Less than one U.S. cent,” says a shipping exec. “It doesn’t matter anymore where you produce something now, because transport costs aren’t important.”

Teaching Tip: Global Trade, Deficits, and Logistics

If the trade deficit is a topic that arises in your OM class, a visual image of the Port of New York and New Jersey is worth 1,000 words. Fortune (Nov.15,2010,pp.14-15) discusses the “Container City” one passes in driving on the NJ Turnpike.

In the first 8 months of 2010, 70,000 more full cargo containers entered the Port  than left it.  In other terms, 45% of the containers exported from the Port are empty, a reflection of the US trade imbalance. Yet a 3rd statistic: 1.80 to 1 is the ratio of imports to exports, up from 1.75 to 1  last year.

Six of the world’s largest ports are now in China, up from two just a decade ago. The largest port in the US in the Port of Los Angeles, the world’s 16th biggest, down from 8th ranked a decade ago.

What all of this means, of course, is that we are running a huge trade deficit, of which the logistics imbalance is one surrogate measure. Who benefits? My cousin Bob is the only one I know. He ships scrap metal to China for recycling and pays only a fraction of the shipping charges he would if he were sending  from China to the US.