During 2006, Containerisation had celebrated its 50th anniversary on the invention which had a major impact on global production and distribution departments. If globalisation is an economic phenomenon that thrives in all capital and trade while maintaining a global relationship with cultures and the people circulated within this climate, then containerisation is one of the core rationales behind the robust interaction between different nations and thus facilitated globalisation (Levinson, 2006). The aim of this discussion is to present the nature of containerisation and how the innovative use of containers transformed overtime. This case study will draw up real world examples on logistics on a global scale. The latter half of this discussion will explore the advantages of using containers to transport goods via sea, road and rail.

Containerisation

Containerisation is an inter-modal system which has been used over half a century to transport the universal cargo and non-bulk products in containers which are reinforced steel boxes (ECMT, 2005). The ease of using containers allows the flexibility to use a multi-modal system to transport the containers through road, rail, sea and air (Lowe, 2005). These containers are regulated by the International Organization for Standardisation (ISO) body which sets the foundation to ensure the containers are eligible to be loaded and conserved unharmed onto container ships, railroad cars, planes and trucks. Containerisation has revolutionised the logistic industry in imports and exports, in transportation of goods to a degree that it has diminished costs to an insignificant point in the twentieth century. One of the justifications for this inter-modal system was to expand storage capacity within the steel containers so that it can maintain space for economies of scale (Wetherly & Otter, 2008).

History & Change

Container transportation initially took place way before the 19th century. However, it became renowned during the World War II as the Australian Army would use 20 foot containers to prevent breaks of gauge and were designed in wood. During the latter half of the 1950s, the traditional container shipping system was used to transport non-bulk goods in single crates in different sized boxes and caused hiatus nuisance. For example, boxes had to be physically hauled up and stored onto ships. This traditional model was exceedingly labour intensive as well as time consuming which lead to the development of the standardised containers. Typically, container transport was first consumed via sea. However, 1956 Malcolm Mclean an American entrepreneur used his initiative to transform containers and expand its use further. For example, his ideology to transport 58 containers on a single tanker to avoid any form of road congestion conveyed the message to reduce time which eventually became a revolutionary to the logistic industry. McLean who ran his own trucking business used his philosophy to combine the use of different transport methods to originate this inter-modal system, containerisation (Mayo & Nohria, 2005).

There have been many changes in transportation of goods over the past century. Before the container came in to consideration, the break-bulk shipping system was the only form of logistic available. Mankind used barrels, and wooden crates to transfer goods to different parts of the world. However the changes after 1956 saw McLean’s vision to drop containers onto ships that sailed away to other locations to be collected by trucks in other ports which then delivered the containers to the final location as a new innovation that has changed the global transport industry. For example, today thousands of containers are being shipped and transported through other inter-modal systems such as rail, trucks and over sea by cargos (Lowe, 2005).

Using containers has reduced transportation costs and increased security measures. One of the major changes containerisation has implemented is the form of new distribution channels and the change from push to pull logistics. Container shipping has been an evolutionary as it allowed businesses to manage economies of scale at ease because of lower transportation costs. Meanwhile, containerisation has set its concern around commodities which has changed from the earlier phase of container shipping which focused purely on refined goods and parts. This change constantly evolves as container shipping is being used for many purposes. One of the major changes in transportation at the induction of container shipping was the speed and simplicity at which containers can be interchanged onto different modes such as rail, road and sea transportations. This has been one of the main reasons for containerisation to become revolutionised as different companies started to foresee the benefits of this modal. Along with this change, the use of technology to assess the status of each container has supported the system to work efficiently. For example, Technology monitored the progress of each shipment and the time period it takes for the delivery to reach destinations. This systematic concept reduced the paper work needed as computers were monitoring the performance of each and every container movements (Transportation Research Board, 1992).

Standardisation

The concept of standardisation facilitated in the implementation of containers. For example, design and shape of the container contributes towards the transformation of the transportation of goods. In the book by Hesser and Inklaar (1998), Standardisation is used to “promote trade, domestic and international, by eliminating technical obstacles due to differences in national practices and by creating a common language” (p36). This common language refers to the design and size of the containers which goods are being transported within. For example, standardisation authorized logistic firms that any substitute container shares the same quality and specifics to replace the previous container. This is what made containerisation so simplicity and efficient which reduces vast amount of time compared to traditional transportation.

The standardisation of size allowed the containers to be efficiently stacked and saved plenty of space which then lead onto standardising other form of logistics such as ships, train and truck all which required a solitary size arrangement. These single size specification allowed the containers to fit perfectly and made interchanges between different modes really efficient (Levinson, 2006). The ISO body set definite standard sizes for different containers during 1961and the two most frequently consumed sizes are the 20-foot and 40-foot lengths. These sizes are specifically designed in this way to perfectly fit onto trucks, ships or rail which makes it convenient for companies to just load and remove containers with ease.

Standardisation is one the reasons why the pioneering use of containers changed the distribution of goods. The sizes of the 20-foot and 40-foot containers embrace the capacity 4 to 8 times more of the old and established shipping. This large amount of productivity allowed logistic companies to remain profitable and approved businesses to invest in larger ships which gradually reduced transportation cost and produced more efficiency (Levinson, 2006). Furthermore, the quantity of cargo being distributed has dramatically increased due to cheap transporting rates as larger ships can manage greater economies of scale which businesses now take advantage of using this intermodal system (Transportation Research Board, 1992).

Impact on globalisation

Containerisation has also played a profound role in the world economy as well as creating a global system which changed the transportation industry. This global system took place initially in 1966 when containers was first utilised on an international level. The US government later demanded interest on container shipping during the Vietnam War as the US military troops lacked supplies as there were logistical issues. They required mass supplies and the traditional methods were not as effective as containerisation, thus the US government turned their attention to containers which was their only competent solution. This movement appealed to the world because container shipping proved its significance in mass production and exporting to different countries with ease. From this moment, containerisation became the world’s spine of global trade (Levinson, 2006).

Containerisation transformed the industry at a global rate as now every country developed and invests into vessels, ports and container production. This growth has also seen new terminals and offices adapting to newer technology to help manage modern logistics. Early 1975s, the North American Eastern Seaboard was the largest container handling district in the world, however due to globalisation and the interference from other regions which started to invest in ports, the number of containers passing through the Eastern Seaboard dropped to 7.2% in 1995 from 20.4%(McCalla, 1999). Globalisation affected many different ports as many workers were made redundant due to newer terminals operating across the world. The vast increase of developments in container vessels and ships saw connections expanding linking Japan with US west coast and Europe with the US East coast which reduced the importance of just one singular port.

According to studies, the number of occupied containers being moved globally summed up to 77.8 million TEU in 2002 in contrast to 28.7 million TEU in 1990. It has also been anticipated to increase to 177.6 million in 2015 (UNESCAP, 2005). These results justify the impacts containerisation has in correlation with globalisation. The rationale behind the robust growth in economy through containerisation was due to the cheap transportation of goods. Making container shipping cheap lead to industrialised countries foreseeing the major benefit in using containers and abused the system for cheap exports which significantly increased world economy. For example, Levinson (2006) mentioned one quarter of the 300 million 20-foot container shipments made by sea during the early year 2000s was made by China. This explains why organisations from the west use China’s cheap labour to produce products for low-cost which then is shipped in big bulks due to the advantages of containerisation through economies of scale. On the other hand, although containerisation has its advantages, globalisation affects lead to traditional dock areas suffering from high unemployment as these dock areas failed to espouse the container. This lead to newer ports taking over and containerisation made its mark because of its advantages in reducing costs thus maximising capacity to contribute to mass production and economies of scale (Wetherly & Otter, 2008).

Transportation of goods

Containerisation has developed over the past few decades and has improved the needs for many customers as well as businesses. The ease and advantages of using containers changed the way goods are moved from country to country, state to states, and even cities to cities. One of the major benefits of container transportation is the system which it operates. For example, being an inter-modal system allows the use of rail, road and sea transportation all to be correlated to make an efficient service for distribution purposes. It cuts costs and saves time and is far effective than traditional systems. The main advantage of businesses operating globally is the ensured cost effective international logistics that is available. This opportunity allows businesses to transport using containers as bulk transportation is significantly abridged. International logistics is expanding with 350 ship containers, 97,000 truck loads and 9,000 rail cars being transported everyday (Harrison and Hoek, 2008).

Advantages of sea transportation

Freight transportation via sea has many advantages when using containers. More than 95% of imports and export trades moving in and out of UK are by sea (McKinnon et al, 2010). Container freight movements by sea have many advantages over other systems. The world’s biggest container ships as of 2006, Emma Maersk can hold up to 11,000 containers at once and the Ebba Maersk can withstand a staggering 15,000 containers. Waters (2010) reveals the growth of freight transport in the Western Europe by sea is over 4250 in billion tonne-kilometres following rail which is just above 2000 as of 2007. The figures prove sea transportation is superior to any other form of logistics.

Sea transportation is cost effective and can carry bulks and weighty goods over lengthy journeys. Although transporting through ships can take longer periods, goods inside containers are protected from rainwater and sunlight. Also the innovative uses of cranes reduce the chances of breakages as they are lifted and unloaded safely of the ships and onto other logistics such as rail cars and trucks. Furthermore, containers also come in refrigerators to minimise decay on perishable goods. Shipping via sea has allowed the world to globalise and meet the world’s needs. For example, import and export businesses thrive to build relations with other countries by importing commodities such as oil and coco beans from other regions around the world. Without shipping, consumers will be left with limited choices. Thus shipping allows everyone to experience refined goods from different cultures which open doors for new choices.

Advantages of road transportation

In contrast to sea transport, road transportation uses trucks to carry containers to nearby locations. Trucks can transmit up to 26 tonnes which is equivalent to two 20-foot containers in contrast to ships which move 11000 containers at once (Price et al, 2004). However, there are many benefits using road transport for many businesses especially in the retail industry.

Road is ideal for cities and for common goods such as perishable goods. Retailers use this as an advantage since trucks are fast and have access to all warehouses and facilities run by the business. It’s seen as a convenient and economical mode of transport due to the efficiency it endorses. Another major advantage using road is the flexibility involved. For example, goods can be delivered direct to consumer doors which sea and rail transportation lack. Trucks are also suitable for smaller bulks in short journeys although they can move 26 tonnes which is generally higher than air cargo transportation and more reliable. Road transportation is also cost effective compared to other modes in under 300killometres. This is because trucks can access cities and urban areas with ease and flexibility.

According to Sadler (2007), road transportation makes the most important contributions in the inter-modal system. The advantage of using road for inter-modal transport is the exchange of goods between other modes such as rail and ships. Trucks deliver goods to ships which then sail onto other regions. Trucks are vital as they are the foremost link between each freight transport and make the most journeys on a single day. Therefore, without trucks, container movements between industrial areas and cities will not be reached.

Advantages of rail transportation

Rail transportation also has advantages as it is used mainly for larger magnitudes of goods and further distances. Rail cars travel between 300 kilometres to 2500 and through different regions transporting general goods. Containerisation has developed the logistic business in freight by rail by implementing the double stack method. For example, 70% of USA inter-modals shipment requires the use of double stacked rail transport (Sadler, 2007). This allows rail cars to handle twice as many containers per trip as each 20-foot container is stacked to save time and space. This method is also cost effective due to the larger number of containers per journey. Although it can carry supplementary load, it still lacks the door to door services trucks provide. However, trucks rely on rail transportation to reach the neighbouring station so they can assemble the containers and carry on with the delivery. This is where the advantages of inter-modal come into use as each freight mode requires the service and assistant from one another. Furthermore, rail transportation also avoids traffic and provides fast and efficient services. Usually, rail transportation is used for bulk commodities such as natural resources.

Risks in international logistic

Although international logistic has globalised the ways in which businesses and countries trade goods, there are also threats that can jeopardise global trades. Over the past decades, there have been many unforeseen disasters that affected countries and businesses. For example, the most recent disaster occurred in New Zealand as a cargo ship distorted following the outcome of 400 tonnes of fuel oil spilled across the Astrolabe reef (Guardian, 2012). These disasters have altered the way in which businesses operate in distributing goods and have lead companies to adapt to the unanticipated (Harrison and Hoek, 2008). Many businesses were lead to changing policies on container handling across the globe to reduce the number of threats from arising.

Harrison (2008) argues on the remarks and benefits of commodity transportation and its improvement to the world economy. However, he mentions the major dangers that appose threats to a countries economy. For example, the numerous weeks strike in the West coast ports in USA during 2002 which almost crippled the country’s economy. The strike affected all nearby ships waiting to load and unload containers and slowed down the movement of goods rapidly. Retail stores and businesses were not receiving stocks to continue there day to day activities which caused a ripple affect across the country due to shipments not arriving at specific destinations at the right place and right time.

Therefore, important risk management is vital for businesses who previously suffered from disasters. One way this can be accomplished is to have a disaster recovery plan especially for import and export organisations that rely on container shipments. Helferich and Cook (2002) state only 61 percent businesses across USA obtain recovery plans. These plans can assure and reduce the number of missing containers and can cover the costs if any disasters occur. It’s a form of insurance to maintain the productivity of the firm. It is also mentioned that 43 percent businesses fail to reopen after a major disaster as they cannot cover the cost of the losses from the occurrence therefore its optional to enhance risk management.

Conclusion

In conclusion, containerisation is reaching development in many environments with the effective use of inter-modal systems which has sanctioned freight transportation to become the most prevailing and cost effective mechanism of many large businesses supply chain and logistics operations. The innovative use of containers has changed the ways in which firms operate as stated in this paper. From this paper, we learn the main advantages of using containers. The standardised container has helped revolutionise containers due to the size and design which enables logistic firms to stack containers to condense space in ships. Furthermore, we also discover time and speed these containers provide to businesses. Containerships can move 11,000 containers at once which increase the demands for economies of scales from large retailers which then can sell products for cheap creating a better service for consumers.

Furthermore, this paper disputes the claims on different inter-modal freight transport lacking essence. This case study analyses has broken down the key advantages on different freight modes available for containerisation. Although one can argue road transportation is the most dominant in the UK due to its flexibility, container ships are more efficient and maximises capacity loads per trip. Container ships create sustainable environments due to lower carbon emission in contrast to trucks and rail. On the other hand, major disasters occur during container shipping due to lack of logistic management. However, if careful management is in consideration, businesses can overcome threats to operate reliably and safely. Overall, each transportation method is best used in the right intervals. For short journeys, road may be the only option available and for other journeys combined modes may be more efficient. This is the major advantage of inter-modal freight channels as it determines the best option of transport for journeys to reduce costs, improve efficiency and maintain sustainable (European Commission, 2006).

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