Tag: TEUs

Video Tip: How Cargo Ships Transformed the World Economy

containerships_v2_0“The MSC Oscar, launched earlier this month, has the greatest capacity of any container ship on the planet,” writes Vox (Jan.22, 2015). It can carry over 19,200 20-foot shipping containers. That’s enough space for 117 million pairs of sneakers or 39,000 cars or 900 million cans of dog food. And it’s just the latest stage in the explosive growth of container ships since they debuted in the 1950s.But it probably won’t hold the title for long: For the last several years, the record has been broken every year. To understand how container ships got so huge, you have to go back 60 years, when overseas shipping was so cumbersome and expensive that many companies simply choose not to try. This short (2.5 min.) video explains the origins of the container ship and how they drastically changed the world.

Until 1956, most international cargo was manually packed in the holds of shipping boats by dock workers, and manually unloaded when it reached port. That year, a North Carolina trucking company owner had the idea to use cranes to directly load truck trailers onto the ship and debuted the Ideal X — the very first container ship, a converted tanker that could carry 58 containers. In 1957, he launched the much-larger Gateway City, which could hold 226 containers, stacked in racks. Other companies copied his methods, and shipping containers now come in standardized sizes (they are now 8 feet wide, 20 or 40 feet long). By the end of the 1970s, the majority of consumer goods coming to the US were being shipped by container.

It’s hard to overstate how much all of this has changed the world economy. Before the container ship, transoceanic shipping was so expensive that it didn’t make sense to send most goods around the world. Now, it’s cheap — which, combined with-free trade policies, means that vendors in wealthy countries can efficiently take advantage of cheap labor abroad. For the American consumer, it means that the vast majority of goods — shoes, clothes, flat-screen TVs, basketballs, even toothbrushes — come from abroad, via container.

Classroom discussion questions:

1. How have these cargo ships changed global economies?

2. What are the complications from the growing sizes of the ships?

Video Tip: Maersk’s Floating Empire State Buildings

maerskBreakfast in your home is a global affair. While your eggs may be from a nearby farm, your cooking pan could be from Germany, the refrigerator, toaster, and table from China, the fruit salad from 4-5 different countries, your newspaper from Indonesian wood pulp, and the coffee from Ethiopia. Regardless of national origin, pretty much all of it came from outside your town, by means ranging from 1,200-foot-long container vessel to railroad to truck. And that’s just breakfast. For all of our activities, the average American requires the movement of 57 tons of cargo per year!

“Ninety percent of the world’s freight goes by sea, and the vessels that transport it are the largest vehicles on Earth,” writes The Atlantic-CityLab (Oct.2, 2014).  The more containers that can fit on a ship (measured in 20-foot equivalent units, or TEUs), the cheaper it is to move them. Today, the Triple E class container ships built for Maersk Line are the world’s largest ships. The Triple E class can hold 18,000 TEUs, enough to transport 111 million pairs of sneakers, or enough to shoe over 1/3 of the U.S. in a single trip. The Triple E is 1,300 feet long (which is the height of the Empire State building), 194 feet wide, and 240 feet high. This 6 minute video provides a perfect interface when you discuss logistics in Chapter 11.

As ships bring bigger swells of goods and ask for quicker turnaround times, the ports are focusing on how to get those goods off the ship and on the roads or rails faster. So while ships are maximizing economies, ports are focusing on efficiency. At this point, rail proves to be the most efficient mode of land transport. In 2013, railroads moved a ton of freight an average of 473 miles on a single gallon of diesel fuel. Rail is widely considered to be 3-4 times more fuel efficient than trucks, and especially vital for moving bulk cargo—2/3 of U.S. coal shipments move by rail, for example.

OM in the News: The Shipping Revolution

Fortune (May 21, 2012) carries a fascinating analysis of the global shipping industry that fits nicely into a discussion of logistics in Chapter 11. We find in the article that nearly 90% of all goods traded across borders travel at some point by sea.The fastest growing routes are between ports in Asia, accounting for 43% of all maritime trade., with the most heavily trafficked route being between China and the US West Coast. Unfortunately for the trade deficit, 4 times as many goods travel to the US than make the return trip. New, faster routes are opening with the Northeast and Northwest Passages ice-free every summer since 2008.

The real revolution has been in the ships themselves. Back in  the 1956-1970 era, cargo vessels were 443 feet long and hauled 500 twenty-foot “equivalent container units” (called TEUs). Next year, Maersk, the Danish shipping giant, will launch its EEE-Class, the largest cargo ship in history. Length: 1,312 feet. capacity: 18,000 TEUs. Cost: $190 million/ship.

As ships have gotten bigger, economies of scale have improved, and the cost of shipping has dropped dramatically. Here are some typical ocean-crossing costs: TV, $10; DVD player, $1.50; vacuum cleaner, $1; barrel of oil, 80 cents; 6-pack of beer, 6 cents; 100 pounds of coffee, $6.80. (Oil, grain, and iron are more expensive because ships make the return trip empty.)

And the containers themselves are no longer just a steel box. They have doubled to 40 feet, and are often fitted with RFID chips to let ports and owners keep track of them. Some  containers are built to be folded up when empty. Others can float if lost at sea and  come with GPS satellites to make them easier to find in the ocean.

Discussion questions:

1. Why are the ships getting bigger and bigger?

2.  What are the dangers facing the shipping industry?