Are you wondering how the use of cargo containers benefit the economy? If YES, here is how the use of cargo containers benefit the economy in 2021. Providing over 70 percent of international commercial trade, container ships are used to transport most raw materials as well as various previously packaged goods.
The cargo container, which is rectangular in shape with universal dimensions, rightfully owes its success to this standardisation. Shipping containers standardised many aspects of trade, allowing globalization to flourish and radically changing the economy of the world we live in.
Most consumer goods from bananas to bicycles have been moved across the seas in a 1950s invention, the metal box called a shipping container. Shipping containers are known to save importers and exporters a huge amount of time and money, establishing the conditions for cheap global trade to flourish.
Note that without containers, most consumer goods such as clothing, electronics and food would probably cost much more. Quite simply, containers transform how consumer goods move around the world. On or before the 1950s, moving cargo on and off ships was a highly manual, time-consuming process. Goods were meant to arrive at port in wooden crates, kegs, and sacks.
Stevedores would lift, carry, and drag the items, stack them on pallets, or shovel them by hand into the hold. At the cargo’s destination, more workers would unload the cargo manually with tools like hooks and winches. This process of loading and unloading could take days, during which a ship would sit idle alongside, racking up costs in the form of port fees and dockworkers pay.
These fees were estimated to account for around 50 – 60 percent of the total cost of shipping, and this entails that shipping companies had a major financial incentive to reduce time spent loading and unloading in port. By eliminating these costs, companies could pass savings on to consumers.
However, in the 1950s, a haulage entrepreneur called Malcolm McLean pioneered a new idea to improve the manual system. It was based on the simple concept of a metal transportation box of a standard size.
McLean’s company, SeaLand, sent the first container ship between Newark, New Jersey, and Houston, Texas in 1956. This concept of the “intermodal container”, which can move seamlessly from ship to lorry or train, underpins international trade today. The container shipping industry was born.
McLean’s invention went global around the time of the Vietnam War, ten or so years after the voyage of the first container ship. Having won a contract to supply US soldiers in Southeast Asia via a new container port in Cam Ranh Bay, by the late 1960s, SeaLand was carrying hundreds of millions of dollars’ worth of military cargo across the Pacific.
Before long, these ships rather than return empty, stopped off in Japan to buy goods such as electronics for the US consumer. This established a container-based trade seaway across the Pacific, linking the economies of Japan, Korea, and China, to US consumers. Countries that saw the benefit of sea trade with the US built their own ports capable of handling containers, and the spread of containerisation grew into a global phenomenon from there.
The cargo container has also changed how countries interact with each other, establishing the conditions for global trade to grow. Note that by promoting international standardisation, McLean also promoted the principles of mutual reliance and linked supply chains.
Every component in a containerised system is expected to work with others all over the world: the boxes themselves, their locks, the cranes, the ships, the dockyards, all have to match for the system to work.
Have it in mind that Containerisation is based on a simple premise. By reducing the costs of sea cargo, goods can be produced economically anywhere in the world not necessarily in the same country or even continent as the eventual buyer.
Given such low transportation costs, it becomes economic to produce your goods in a country with relatively low cost of labour, such as Bangladesh, China, or Vietnam, put them in containers, and ships them to countries where they can be sold for good profit. This is the basis of the modern consumer economy.
Benefits of Cargo Containers to the Economy
Even though the use of cargo containers conveys numerous advantages to freight distribution, it does not come without challenges. The main benefits include;
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Note that a cargo container is a standard transport product that can be handled anywhere in the world (ISO standard) through specialized modes (ships, trucks, barges, and wagons), equipment, and terminals.
Notably, each container has a unique identification number and a size type code. A container is a unique transport unit that can be managed as such.
Also note that cargo containers can be used to carry a wide variety of goods such as commodities (coal, wheat), manufactured goods, cars, and refrigerated (perishable) goods. There are adapted containers for dry cargo, liquids (oil and chemical products), and refrigerated cargo. Even discarded containers can be recycled and reused for other purposes.
Have it in mind that container transportation offers lower transport costs due to the advantages of standardization. Indeed, moving the same amount of break-bulk freight in a container is about 20 times less expensive than conventional means.
Containers also enable economies of scale at modes and terminals that were not possible through standard break-bulk handling. The main cost advantages of containerization are derived from lower intermodal transport costs.
Transhipment operations are minimal and rapid, and ship port turnaround times have been reduced from 3 weeks to about 24 hours. Owing to this transhipment advantage, transport chains involving containers are faster. Container shipping networks are well connected and offer a wide range of shipping options. Containerships are also faster than regular cargo ships.
Also remember that the container is its own warehouse, protecting the cargo it contains. This also entails simpler and less expensive packaging for containerized cargoes, particularly consumption goods. The stacking capacity on ships, trains (double-stacking), and on the ground (container yards) is a net advantage of containerization. With the proper equipment, a container yard can increase its stacking density.
Security and safety
Also note that container contents are unknown to carriers since it can only be opened at the origin (seller/shipper), at customs, and the destination (buyer). This implies reduced spoilage and losses (theft).
Disadvantages of Cargo Containers
Containers are indeed an enormous consumer of terminal space (mostly for storage), meaning that many intermodal terminals have been relocated to the urban periphery. Draft issues at the port are emerging with the introduction of larger containerships, particularly those of the post-Panamax class. A large post-Panamax containership requires a draft of at least 13 meters.
Have it in mind that container handling infrastructures and equipment (giant cranes, warehousing facilities, inland road, and rail access) are very crucial capital investments that require large pools of available capital. In addition, the push towards automation is increasing the capital intensiveness of intermodal terminals.
In addition, the complexity of the arrangement of containers, both on the ground and modes (containerships and double-stack trains), requires frequent restacking, which incurs additional costs and time for terminal operators. Note that the bigger the load unit or the yard, the more complex its operational management.
Owing to trade imbalances, many containers are moved empty (20 percent of all flows). However, either full or empty, a container takes the same amount of space. Note that the observed divergence between production and consumption at the global level requires the repositioning of containerized assets over long distances (transoceanic).
Theft and losses
Have it in mind that High-value goods and a load unit that can forcefully be opened or carried away (on a truck) implied a level of cargo vulnerability between a terminal and the final destination. About 1,500 containers are lost at sea each year (fall overboard), mainly because of bad weather.
Also have it in mind that a cargo container is also used in the illicit trade of goods, drugs, and weapons, as well as for illegal migration (rare).
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