The evolution of global freight transportation

Part of a series on complexity and risk in freight transportation

Note: This post is part of a series on complexity and risk in freight transportation systems. Part 1 (Evolution) is divided into two posts: this one and Land-Based Freight (coming soon). Part 2 (Risks) is divided into multiple posts including: Globalization, Trade Policy, Giant Ships, and GHG Emissions, Satellite Navigation Systems, Ship Lifecycle (coming soon), Cybersecurity (coming soon), and others to come. Part 3 (Leverage Points) will follow.

Oceans are the highways of economic development. Ships move more cargo around the world than any other form of transportation. Not every location is accessible by sea, but those that are have a distinct economic advantage, tapping global markets for goods and services more efficiently than landlocked regions.

Since the first cargoes were moved by sea more than 5,000 years ago, the evolution of sea transportation has followed a "Westline" starting in Mesopotamia in 3000 BCE and progressing westward to the Mediterranean with the Greek and then Roman empires. Venice and the city-states of northern Italy dominated international trade until the 17th century. Development progressed further west to the Dutch and then British empires in northern Europe, which dominated trade until the early 20th century when the U.S. became a dominant global power. The later half of the 20th century saw development progress further westward to Japan and South Korea by the 1970s and finally the emergence of China as a global power in the early 21st century. [1]

The first trade networks that moved cargo by sea date back to before 2000 BCE, when Babylon grew to be the first large city. The Mesopotamians traveled on the Tigris and Euphrates rivers to the Arabian Gulf and Indus River in western India to exchange oil and dates for copper and possibly ivory. They also had a well-developed maritime code which specified fixed tariffs based on vessel size, pro rata shipbuilding prices, terms for advanced payment, and agent responsibilities. [2] The earliest known port, Wadi al Jaraf, was built by the Egyptians in the 20th century BCE for voyages that exported copper and stones from the Sinai Peninsula to the Nile Valley. [3]

Boats from this time were mostly wooden, and powered by oars or (later) sails. Oared vessels eventually grew to be powered by hundreds of oarsmen. Roman trireme—some of the best performing warships of the era—were powered by 170 oarsmen and could reach speeds of up to 20 km/h (almost 11 knots). Large oared vessels remained important for warships and coastal and canal shipping in the Mediterranean until the 17th century. Long-distance ocean transportation was dominated by sail-powered vessels. [4]

Early sailing ships had square sails which are positioned perpendicular to the long axis of the boat. Square sails work most effectively when the wind is blowing at the vessel from the stern, limiting their speed and the routes they can travel. Roman ships, for example, could cross the Mediterranean from Messina (northeast Sicily) to Alexandria (Egypt) in 6-8 days with favorable northwesterly winds [5], but the return trip could take as long as 40-70 days. Sail designs improved with the development of fore-and-aft rigging in Southeast Asia. [6]

A sail is a piece of fabric that forms an aerofoil shape when inflated by the wind, and works using a mechanism similar to an airplane wing. When air flows across an aerofoil, a lift force is generated perpendicular to the flow of air. This lift force is what keeps an airplane airborne, and "pushes" a sail-powered vessel across the water. Airflow also creates a drag force along the sail, and so the angle with which the sail is positioned relative to the wind determines how effectively the vessel can advance. Development of fore-and-aft and pivoting rigging increased the speed and maneuverability of vessels traveling with less favorable winds.

By the early 15th century, Portuguese sailors began exploring the western coast of Africa and rounded the Cape of Good Hope into the Indian Ocean in ships equipped with a combination of adjustable square and triangular sails, stern-mounted rudders, and magnetic compasses. This design would dominate the European exploration and maritime trade through the 18th and early 19th century before being replaced by steam-powered ships.

The Engines

Development of the steam engine transformed global transportation, becoming the dominant source of power by the late 19th century. "The machine was the first practical, economic, and reliable converter of coal's chemical energy into mechanical energy, the first inanimate prime mover energized by fossil fuel rather by an almost instant transformation of solar radiation." [7]

The use of steam power can be traced to the aeolipile developed in first-century Roman Egypt. The aeolipile is a simple device that rotates when water is heated. The resultant steam is directing out of angled nozzles. The technology advanced more rapidly in the 18th century driven by the need to pump water out of mines in Britain.

In 1699, Thomas Slavery developed a new steam pump for coal mines. Slavery's design used positive steam pressure—working against atmospheric pressure—to push water up out of the pump. This meant it had to be located close to—usually within thirty feet—the water level deep inside the mine.

Thomas Newcomen improved on Slavery's design around 1712 with the first commercially successful steam engine. Newcomen's atmospheric engine combined Slavery's boiler design with Denis Papin's piston steam engine. The piston in Newcomen's design is attached to a beam that rocks back and forth with the motion of the steam power stroke. The beam is then attached to a chain connected to a pump at the base of the mine. This design meant Newcomen's engine—with its heat, exhaust and voracious fuel demand—could operate at the top of the mine. It also was much larger, more powerful, and more costly to build than Slavery's pump. [8]

Despite Newcomen's improvements, the steam engine was an inefficient machine. These early designs converted less than 1% of the energy in coal to usable power, and were dependent on an abundant fuel supply. [9] This meant they only operated profitably pumping water from pits in coal mines close to a fuel source. This would change later in the 18th century with new designs by James Watt.

Watt—a Scottish engineer working at the University of Glasgow—hypothesized that the repeated heating and cooling of the cylinder in Newcomen's engine was a significant waste of energy, and developed a separate steam condenser that allowed the power cylinder to stay at operating temperature. He also developed a double-acting engine with steam power driving the piston in both directions, a centrifugal governor to maintain constant speed with varying loads, a rotary engine with gears that converted reciprocating motion into rotary motion and a number of other improvements.

Watt's designs increased the efficiency of steam engines from 0.5% to 2.5% of the available energy in coal. To commercialize his engines, Watt patented the design in 1769 and partnered with the English manufacturer Matthew Boulton. Boulton & Watt grew to be a major producer of steam engines. By 1800 nearly 500 of their engines were installed in a variety of enterprises, ultimately leading to widespread commercial use for stationary steam engines. [10]

One of the challenges with Watt's engines, however, was there size. This limited their use in mobile applications. Due to the perceived risks with pressure vessel technology at the time, Watt refused to work with the higher pressures that would increase power output and decrease size. Watt's patents gave him a monopoly over the technology slowing the development of mobile applications until their expiration in 1800.

The first mobile applications of the steam engine were river steamboats in the 1810s and steam-powered rail service starting in 1825. The first transatlantic steam-powered voyage was completed by the Royal William in 1833. Early riverboats and seagoing ships—still fully rigged—were propelled by paddle wheels. The screw propeller was introduced in 1838. [11] Gradually, larger and faster steamships displaced sailing vessels crossing the North Atlantic and routes to Asia and Australia. These new steamships transported most of the 60 million migrants who left Europe between 1815 and 1930.

After more than a century of improvement on Watt's steam engine, the technology reached an apogee in the late 19th century. With a hundredfold increase in operating pressure from Watt's designs, large steam engines reached almost 100 kW of power and an efficiency of 25% by the 1890s. This translated into fuel savings and less air pollution. Typical steam engines, however, still wasted 92% of the coal fed into the boiler. They also were heavy, limiting their use in smaller mobile applications. These limitations would be surpassed with the introduction of the internal combustion engine and liquid fuels refined from crude oil.

The impact of steamships was momentous. In the late 1830s, a top-class sailing ship from Liverpool could make it to New York in forty-eight days or so. Favorable winds made the return faster, reducing it to about thirty-six days. By the 1840s, steamships brought the normal voyage to a reliable fourteen days in either direction. [21]

The transition from animate and sail powered vessels to the steam engine ushered in a new era of shipping. No longer were voyages subject to the whims of the climate or the exhaustion of oarsmen. Ships were now fueled by an abundant energy source (coal) driving increasingly powerful engines. The development of the internal combustion engine (ICE) powered by liquid fuels accelerated this transition and firmly cemented the use of fossil fuels in international shipping.

The first internal combustion engines suitable for mobile applications were developed by Gottlieb Daimler, Wilhelm Maybach, and Karl Friedrich Benz in the 1880s. These engines ran on liquid fossil fuels. Gasoline and the other liquid fuels made from crude oil are portable and have a higher energy density than coal making them a superior energy source for mobile applications. Gasoline engines have electric ignitions. In the 1890s, Rudolf Diesel developed a more efficient engine in which the fuel (diesel) is ignited spontaneously. Diesel engines are heavier and operate at a slower speeds—while delivering more force to the output shaft—making them ideal for ships, trucks, locomotives, and heavy machinery. Diesel—a fuel oil distilled from crude oil—has a higher energy density by volume than gasoline making it a more economical fuel as well.

The first diesel-powered vessel—a small oil tanker operating on the Caspian Sea—was put into service in 1903, and the first diesel-powered ocean-going vessel—a 6,800 dwt freight and passenger ship—was launched in 1912. Following World War II, diesel engines powered a new generation of large tankers, bulk carriers, and container ships. By the 21st century, the most powerful marine diesels in super tankers and large bulk carriers are rated at almost 100 MW, a thousandfold increase from the largest steam engines of 1900. With a superior fuel source and a lighter, more powerful machine, diesel engines have become the indispensable prime movers of globalization in the 21st century. [12]

The Container

Despite great advances in ship propulsion, shipping was a highly labor-intensive industry for the first half of the 20th century. Most of the time and cost of moving cargo was spent at port. The ships used to move cargo during this period were breakbulk vessels designed to handle almost any type of dry cargo—as opposed to the bulk carriers specially designed to transport unpackaged bulk cargo, such as coal or grain.

Breakbulk ships were loaded piece-by-piece by an army of longshoremen. One gang of workers would assembly cargo onto pallets on the dock. The pallets were then hoisted up onto the boat and through an open hatch into the cargo hold below. Another gang would unload the pallet and secure the cargo inside of the hold. Unloading breakbulk vessels followed the same basic process in reverse. Unloading an incoming shipload and reloading an outgoing load could keep a vessel tied up at port for a week or more, and account for 60 to 75 percent of the cost of the voyage. [13]

Shipping was labor intensive, and the work of a longshoreman could be brutally physical and highly irregular. Injury rates were three times that of construction and eight times that in manufacturing. [14] Wages were often higher than for other manual labor jobs, but work was contingent on the ships at the dock on a given day with frequent periods of part-time or no work. Getting a job on the docks usually required having a family member in the profession.

Harsh working conditions, economic uncertainty, and insularity of the profession strengthened longshore labor unions in 20th century. Labor disputes were frequent and difficult to resolve. Unions were often unable to impose settlements on their members, and their employers were often contractors rather than shipowners or terminal operators with assets to protect. This allowed shipowners and terminals to evade responsibility for working conditions, but it also meant there was a lack of central authority to negation with the unions. The history of antagonistic labor relations intensified cargo theft on the docks and led to strong resistance by dockworkers to anything that might eliminate jobs. [15]

One solution to the high cost of freight handling was to pack cargo in large boxes—wooden crates and eventually standardized metal containers—rather than moving loose cargo. The idea was first adopted by railroads in response to competition from trucks. Containers helped railroads improve cargo handling at interchange points. After WWII, the U.S. military began using standard metal boxes (the "Conex box") to move soldier’s personal belongings.

Early experiments with containerized cargo also revealed a number of challenges. Railroads were forced by the Interstate Commerce Commission (ICC) to set rates based on the most expensive commodity inside the container. On ships, containers had to be loaded by longshore gangs alongside other cargo, and could not be loaded as tightly as loose cargo leaving unused space. And one of the most significant challenges—one that remains to this day—was coordinating the return of a container where it came from, often resulting in global imbalances of empty containers.

The first breakthrough in container shipping came from an outsider. Malcom McLean started a trucking company in 1935 at the age of 22, and by 1954 had built one of the largest trucking companies in the U.S. In the early 1950s, McLean proposed using ships to ferry his trucks along the coast to avoid highway congestion and compete with domestic shipping lines operating cheap war-surplus ships. In 1955 McLean walked away from his trucking business and purchased one of the country's largest shipping companies (Waterman Steamship Corporation) in one for the first leveraged buyouts.

In the spring of 1956, McLean's company started the first container service at the Port of Newark with a converted WWII tanker called the Ideal-X. Loading similar sized breakbulk ships of the time typically took days, and cost roughly $5.83 per ton. The Ideal-X was loaded in less than 8 hours with costs estimated at 15.8 cents per ton, proving the potential of containerized shipping. [16]

Malcolm McLean's fundamental insight... was that the shipping industry's business was moving cargo, not sailing ships... [and] reducing the cost of shipping goods required not just a metal box but and entire new way of handling freight. Every part of the system—ports, ships, cranes, storage facilities, trucks, trains, and the operations of the shippers themselves—would have to change. [17]

Following McLean's early success, the shipping industry evolved gradually toward containers over the next decade. By 1965 most of the prerequisites for containerized shipping had fallen into place: new labor agreements were reducing the cost of dock labor; international standards for container sizes and lifting methods were in place; manufacturers began to adjust their operations; regulators were encouraging competition; railroads, truckers, and freight forwarders had grown familiar with this new "intermodal" freight; and finally shipping lines began investing in new, dedicated container ships. In the spring of 1966 only three companies were offering international container service from the U.S. That number surged to 60 companies in the span of 12 months. [18]

Growth in container shipping would accelerate over the next decade, and the economies of scale gained with containerships led to an arms race in capacity. This put a premium on size leading to orders for larger and larger ships. It also consolidated traffic at large ports with sufficient trade flow and the infrastructure to handle large containerships. By 1974, ship capacity on the largest international trade routes had increased fourteen-fold. [19]

Despite the increases in container capacity, the overall cost of shipping internationally remained relatively high for shippers through the 1970s. This changed when shippers began to think differently about how they managed their freight costs. Initially, shippers managed container shipments the same way they had managed loose cargo using a decentralized organization and existing relationships with large carrier conferences. With containers, however, shippers started to embrace independent shipping lines, which proliferated with falling shipbuilding costs after the collapse of the oil tanker market. Deregulation of the shipping industry in the early 1980s had a significant impact on prices as well. The Shipping Act of 1984 allowed shippers to sign long-term contracts with shipping lines, negotiating better rates and terms of service.

Increased competition and deregulation of the shipping industry, unleashed the economics of scale with container shipping, expanding international trade flow and transforming global supply chains. For most of the 20th century, large manufacturers controlled as much of their value chain as possible—vertical integration. With faster, more reliable, and lower cost transportation, however, manufacturers and retailers discovered they could contract with other companies for raw materials and components. This meant these companies could look for the most economical location for each part of their supply chain, ultimately outsourcing many labor-intensive processes to lower-wage countries. This decimated manufacturing employment in North American and Western Europe while helping lift millions out of poverty in Asia. By the turn of the century, most containers flowing through U.S. ports contained components and partially-produced goods rather than raw materials or finished goods reflecting the fundamental restructuring of global supply chains.

Air Cargo

While cargo has moved across canals and oceans for over 5,000 years, it has moved through the air for little more 100 years. The Wright brothers' first flight of a self-propelled machine was in 1903, and the first demonstration flight delivering a package—pitting an airplane against an express train—took place seven years later. These airplanes were not capable of carrying much weight, and from that first contest with an express train, air freight has been focused on speed. The cargo they did carry was limited to mail and small packages. From these humble beginnings, the aviation sector grew steadily in the post-war era. By the 1960s passenger airlines began offering air freight services carried in the cargo holds of passenger planes.

Early airplanes like the Wright Model B were powered by reciprocating engines—which typically run on an aviation-grade gasoline—cementing the connection to fossil fuels from birth. By the 1930s these engines were 130 times more powerful than their predecessors. Gas turbines—a type of jet engine—were introduced in the late 1930s, and the first jet-powered military planes went into service by the end of WWII. These engines typically run on a kerosene-based fuel, also distilled from crude oils. Most large aircraft in service today are powered by jet engines.

Due to the inherent weight and capacity limitations of aircraft compared to other modes of transportation, many early air cargo carriers struggled. The introduction of the Boeing 747 in 1968, however, transformed the nascent industry. It was the first wide-body aircraft capable of transporting full pallets in its cargo hold, increasing capacity threefold. Federal Express (FedEx)—the largest air cargo carrier today—was founded soon after in 1971. United Postal Service (UPS) offered air cargo services as early as the 1950s, and began operating a dedicated aircraft fleet in 1988. Deregulation in late 1970s also helped the airline industry establish a foothold in cargo services allowing carriers to offer next-day services on almost any route.

Buoyed by expanding international trade and the emergence of e-commerce, the air cargo market has grown steadily since the 1990s. Growth softened following the economic recession in 2008 and 2009 owing to increasing competition from ocean freight and increasing trade tensions. In 2017, air cargo represented only 1 percent of global freight by weight, but on average the industry carries higher value goods, representing over 35 percent of global freight by value. The majority of air cargo is moved by dedicated freight aircraft. A new generation of wide-body planes—such as the Boeing 787 and Airbus A350—has allowed passenger airlines to further expand cargo services moved with their passenger operations. This segment of the market—where cargo is carried in the "belly" of passenger aircraft—has shown the strongest growth in recent years. [20]

References

[1] Stopford, M. (2009). Maritime Economics (3rd ed.). New York: Routledge.

[2] Stopford, 2009

[3] Lorenzi, R. (2014). World’s Oldest Port: Wadi el-Jarf, Egypt. Archaeology, January/February 2014.

[4] Smil, V. (2017). Energy and Civilization: A History. Cambridge, MA: The MIT Press.

[5] Wind direction refers to the direction from which the wind is blowing. This is in contrast to bearing, which indicates the direction toward which an object is moving.

[6] Smil, 2017

[7] Smil, 2017, p. 235.

[8] Wrigley, E. A. (2010). Energy and the English Industrial Revolution. Cambridge, UK: Cambridge University Press.

[9] Smil, 2017

[10] Smil, 2017

[11] Smil, 2017

[12] Smil, 2017

[13] Levinson, M. (2016). The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger (2nd ed.). Princeton, New Jersey: Princeton University Press.

[14] Levinson, 2016, p.24.

[15] Levinson, 2016

[16] Levinson, 2016

[17] Levinson, 2016, p. 70.

[18] Levinson, 2016

[19] Levinson, 2016

[20] Crabtree, T., Hoang, T., Tom, R., & Gildemann, G. (2018). World Air Cargo Forecast: 2018-2037. Boeing.

[21] Baldwin, R. (2016). The Great Convergence: Information Technology and the New Globalization. Cambridge, MA: Belknap Press. Page 52.