Malcom McLean

Malcom Purcell McLean

McLean at railing, Port Newark, 1957
Born Malcolm Purcell McLean
November 14, 1913
Maxton, North Carolina
Died May 25, 2001
Known for Pioneer of containerization

Malcom Purcell McLean (born “Malcolm”; but later in life he changed his given name to its historic traditional Scottish spelling), born in 1913 in Maxton, North Carolina, was an American transport entrepreneur who joined forces with Roy Fruehauf and the Fruehauf Trailer Corporation to develop the shipping container. McLean contributed to the widespread adoption of the shipping container which revolutionized transport and international trade in the second half of the twentieth century. He is hence often called "the father of containerization" although the patent was issued to Keith Tantlinger of the Fruehauf Trailer Company. Roy Fruehauf knew through experience that standardization would benefit the entire industry through growth and collaboration. His efforts to increase efficiency resulted in standardized container designs that were awarded patent protection. The Fruehauf patent was returned to industry and made available by issuing a royalty-free lease to the International Organization for Standardization. McLean's vision and Fruehauf's technology revolutionized the shipping industry, (even though the concept had been introduced more than 100 years previously on the railways of Britain, following even earlier attempts on the canals).

In 1956, McLean, a Fruehauf customer, approached Roy Fruehauf about a problem which could be solved by a metal shipping container, which replaced the traditional break bulk method of handling dry goods and revolutionized the transport of goods and cargo worldwide. Fruehauf's V.P. of Engineering, Keith Tatlinger arranged for a team of engineers in research and development to create some designs. The majority of Fruehauf's over one thousand patents had been developed solving problems for customers. Engineers from Fruehauf collaborated with McLean to develop a design. It was perfected and patented by Fruehauf. Jim Schmidt, a Fruehauf engineer recounted stories of early container designs being raised fifty feet into the air by a crane and dropped to test strength and durability. Roy Fruehauf and Keith Tatlinger insisted that the patent be returned to industry in order to insure standardization. McLean later founded Sea-Land Service, Inc., who received container boxes manufactured by Fruehauf. These were then completed with final hardware, sold and put into final service by Sea-Land as intermodal cargo transport business.[1] McLean was named "Man of the Century" by the International Maritime Hall of Fame.

Biography

With only a high school education, McLean pumped gas at a service station near his hometown and saved enough money by 1934 to buy a second-hand truck for $120. He and his sister, Clara McLean, and brother, Jim McLean, founded McLean Trucking Co. Based out of Red Springs, North Carolina, McLean Trucking started out hauling empty tobacco barrels – with Malcom as one of the drivers.[2]

From that beginning, with his single pickup truck, he built it into the second-largest trucking company in the U.S., with 1770 trucks and 32 terminals. On January 6, 1958 (after McLean had sold his interest in the company), McLean Trucking became the first trucking company in the nation to be listed on the New York Stock Exchange. Carrying trucks, or carriages, was not new - it had been done on the Dover-Calais trade.

The idea of transporting trucks on ships was put into practice during World War II, and in the early 1950s McLean decided to attempt it commercially. By 1953, he was developing plans to carry his company's trucks on ships along the U.S. Atlantic coast, from North Carolina to New York. These ideas had been pioneered by his trailer supplier, the Fruehauf Trailer Company. Fruehauf had been engaged in piggy-backing and fishy-backing in the years following WWII. As large military contractors, Fruehauf had utilized these ideas during WWI. Fruehauf specialized in customization for clients and worked with McLean to adapt these ideas and technology to private commerce. It soon became apparent that "trailerships," as they were called, would be inefficient because of the large waste in potential cargo space on board the vessel, known as broken stowage. The original concept was modified into loading just the containers, not the chassis, onto the ships, hence the designation containership or "box" ship. At the time, U.S. regulations would not allow a trucking company to own a ship line. In 1955, McLean sold his trucking company for $25 million and purchased the Pan-Atlantic Steamship Company and the Gulf Florida Terminal Company from Waterman Steamship Corporation, with the idea of using Pan-Atlantic's vessels and operating rights to carry containers. These purchases were made under the name of a newly formed corporation called McLean (occasionally spelled as "McClean") Industries, Inc of New York. Later the same year, McLean Industries acquired the capital stock of Waterman Steamship Corporation.

McLean secured a bank loan for $500 million and in January 1956 bought two World War II T-2 tankers, which he converted to carry containers on and under deck. McLean oversaw the construction of wooden shelter decks, known as Mechano decking. This was a common practice in World War II for the carriage of oversized cargo, such as aircraft. It took several months to refit the ships, construct containers to carry on and below the vessels’ decks and design trailer chassis to allow removable containers.

In some ways, McLean's vision was nothing new. Beginning in 1929, Seatrain Lines had carried railroad boxcars on its sea vessels to transport goods between New York and Cuba. Likewise, the idea of putting truck trailers on railroad flatcars was a method of moving less-than-railroad carload shipments economically. This integrated transport concept held the hope of competing with trucks, which were taking more and more of this business from the railroads. From 1926 to 1947, the Chicago North Shore and Milwaukee Railroad carried motor carrier vehicles and shippers' vehicles loaded on flatcars between Milwaukee and Chicago. In the mid-1930s, the Chicago Great Western Railway and then the New Haven railroad began piggy-back service limited to their own railroad. By 1953, the CB&Q, the C&EI and the SP railroads had joined the innovation. The Fruehauf Trailer Company partnered with many railroads to apply this piggy-backing technology for rail. Their concept, known as the Flexivan was adopted by the Lackawanna Rail Road, The New York Central Railroad among others. Most cars were surplus flatcars equipped with new decks. By 1955, an additional 25 railroads had begun some form of piggy-back trailer service. What was new about McLean's innovation was the idea of using containers larger than hitherto (which, as before, were never opened in transit between shipper and consignee and were transferable on an intermodal basis, among trucks, ships and railcars).

On April 26, 1956, with 100 invited dignitaries on hand, one of the converted tankers, the SS Ideal-X (informally dubbed the "SS Maxton" after McLean’s hometown in North Carolina), was loaded and sailed from the Port Newark-Elizabeth Marine Terminal, New Jersey, for the Port of Houston, Texas, carrying fifty eight 35-foot (11 m) containers, along with a regular load of liquid tank cargo. As the Ideal-X left the Port of Newark, Freddy Fields, a top official of the International Longshoremen's Association, was asked what he thought of the newly fitted container ship. Fields replied, "I’d like to sink that son of a bitch."[3] McLean flew to Houston to be on hand when the ship safely docked.[2]

In 1956, most cargo was loaded and unloaded by hand by longshoremen.[4] Hand-loading a ship cost $5.86 a ton at that time. Using containers, it cost only 16 cents a ton to load a ship, a 39-fold savings. Containerization also greatly reduced the time to load and unload ships. McLean knew "A ship earns money only when she's at sea," and based his business on that efficiency.[5]

In the mid-1950s, mechanization overall was entering the shipping industry as operators tried to increase profit margins. The mechanization they had in mind, however, was larger slingloads, palletization, mechanical conveyor belts and other ways of using more machinery to move break bulk cargoes. McLean's container concept moved the mechanization movement ahead by a quantum leap.

In April 1957, the first container ship, the Gateway City, began regular service between New York, Florida and Texas. During the summer of 1958 McLean Industries, still using the name Pan-Atlantic Steamship Corporation, inaugurated container service between the U.S. and San Juan, Puerto Rico with the vessel Fairland.

The name was officially changed from Pan-Atlantic Steamship Corporation to Sea-Land Service, Inc. in April 1960.

McLean’s operation was profitable by 1961 and he kept adding routes and buying bigger ships.

In August 1963, McLean opened a new 101-acre (0.41 km2) port facility in Port Elizabeth, New Jersey, to handle even more container traffic. The development of the container market was slow until the late 1960s. Many ports did not have the cranes to lift containers on and off ships, and change was slow to come to an industry steeped in tradition. Moreover, unions resisted an idea that threatened their very livelihood.

In April 1966, Sea-Land commenced service between New York and Rotterdam, Bremen and Grangemouth (Scotland).

The following year (1967), they were invited by the U.S. Government to start a container service to South Vietnam. The service to Vietnam produced 40% of the company's revenue in 1968/69.

In late 1968, commercial containership service was inaugurated from the Far East to the United States. This service was expanded to Hong Kong and Taiwan in 1969, and to Singapore, Thailand, and the Philippines in 1971.

To achieve dramatic reductions in labor and dock servicing time, McLean followed Roy Fruehauf's lead and became vigilant about standardization. His efforts to increase efficiency resulted in standardized container designs that were awarded patent protection. Believing that standardization was also the path to overall industry growth, McLean chose to make his patents available by issuing a royalty-free lease to the International Organization for Standardization.

The move toward greater standardization helped broaden the possibilities for intermodal transportation. By the end of the 1960s, Sea-Land Industries had 27,000 trailer-type containers, manufactured by Fruehauf, 36 trailer ships and access to over 30 port cities.

As the advantages to McLean's container system became apparent, competitors quickly developed. They built bigger ships, larger gantry cranes and more sophisticated containers. Sea-Land needed cash to stay competitive. McLean turned to Reynolds Tobacco Company, a company he knew from his trucking company days when his trucks transported Reynolds cigarettes across the United States. In January 1969, Reynolds agreed to buy Sea-Land for $530 million in cash and stock. McLean made $160 million personally,[6] and got a seat on the company’s board. To carry out the purchase, Reynolds formed a holding company, named R.J. Reynolds Industries, Inc., which bought Sea-Land in May 1969. That same year, Sea-Land ordered five of the largest, fastest container ships in the world - SL-7 class vessels. They had come a long way since the inaugural sailing of the Pan-Atlantic "Ideal-X" in 1956.

Under Reynolds, Sea-Land’s profits were intermittent. By the end of 1974, Reynolds had put more than $1 billion into Sea-Land, building huge terminals in New Jersey and Hong Kong and adding to its fleet of containerships.

Sea-Land's biggest expense was fuel, so in 1970, RJR bought the American Independent Oil Co., better known as Aminoil, for $56 million. RJR put millions into oil exploration, trying to get Aminoil to the size to compete in the world exploration market.

In 1974, R.J. Reynolds Industries had its best year. Sea-Land's earnings increased nearly 10 times, to $145 million. Aminoil's earnings soared to $86.3 million. Dun & Bradstreet, the financial-ratings firm, named RJR one of its five best-managed companies in America. But in 1975, Sea-Land's earnings dropped sharply, along with Aminoil's.

Increasingly frustrated with the conservative culture within Reynolds, McLean gave up his Reynolds board seat in 1977 and cut ties with the company.

In June 1984, R.J. Reynolds Industries, Inc. spun off Sea-Land Corporation to shareholders, as an independent, publicly held company, with stock trading on the New York Stock Exchange. Sea-Land achieved the highest revenues and earnings in its 28-year history.

In September 1986, Sea-Land Corporation merged with CSA Acquisition Corp., a subsidiary of CSX Corporation. Sea-Land Corporation common stock was exchanged for $28 per share, cash.

Sea-Land’s international services were sold to Maersk in 1999, and the combined company was named Maersk Sealand, which, in 2006, became known simply as Maersk Line.

The former Sea-Land's domestic services now operate as Horizon Lines, which accounts for approximately 36% of the total U.S. marine container shipments between the continental U.S. and the markets of Alaska, Hawaii and Puerto Rico, and to Guam. The company is headquartered in Charlotte, North Carolina.

Subsequent business ventures

In 1968 Mclean financed a real estate project in Waveland, Mississippi, that has become Diamondhead.

In 1978, McLean purchased United States Lines. There, he built a fleet of 4,400-TEU container ships that were the largest afloat at the time. The ships, operating in round-the-world service, were designed in the aftermath of the 1970s oil shortages and were fuel-efficient but slow, and therefore not well-adapted to compete in the subsequent period of cheap oil. USL went bankrupt in 1987. McLean took very personally the criticism directed against him after the collapse of USL and the resulting loss of many jobs associated with and dependent on USL.

In 1982, McLean made the Forbes 400 Richest Americans list with a net worth of $400 million, however, a few years later, having gambled on rising oil prices that failed to materialize, McLean had to file for Chapter 11 bankruptcy owing debt of $1.3 billion.

In 1991, at 78, McLean founded Trailer Bridge, Inc., which operates between the US mainland (Jacksonville, Florida), Puerto Rico and the Dominican Republic.

McLean also developed non-maritime inventions, including a means of lifting a patient from a stretcher onto a hospital bed.

Significance of accomplishments

McLean’s "containerization” process of using large containers to hold goods on cargo ships allowed huge increases in port and ship productivity, helping to lower the cost of imported goods. The container transformed economic geography, devastating traditional ports such as New York and London and fueling the growth of previously obscure ones, such as Oakland, California and Tanjung Pelepas, in Malaysia. By making shipping so cheap that industry could locate factories far from its customers, the container paved the way for Asia to become the world's workshop and brought consumers a previously unimaginable variety of low-cost products from around the great and aspiring world.

Death

When McLean died at his home on the East Side of Manhattan on May 25, 2001, age 87, the U.S. Secretary of Transportation made the following statement:

I would like to extend my deepest sympathies to the family of Malcom McLean. A true giant, Malcom revolutionized the maritime industry in the 20th century. His idea for modernizing the loading and unloading of ships, which was previously conducted in much the same way the ancient Phoenicians did 3,000 years ago, has resulted in much safer and less-expensive transport of goods, faster delivery, and better service. We owe so much to a man of vision, ‘the father of containerization,’ Malcom P. McLean.

— Norman Y. Mineta, Statement of U.S. Transportation on the Death of Malcom P. McLean

McLean died in relative obscurity, although he was influential in the world's economic growth in the 20th century. In an editorial shortly after his death, Baltimore Sun stated that "he ranks next to Robert Fulton as the greatest revolutionary in the history of maritime trade."[7] Forbes Magazine called McLean "one of the few men who changed the world."[7]

On the morning of McLean's funeral, container ships around the world blew their whistles in his honor.[8]

Honors

Fortune magazine inducted McLean into its Business Hall of Fame in 1982. In 1995, American Heritage magazine named him one of the ten outstanding innovators of the past 40 years. And in 2000, he was named Man of the Century by the International Maritime Hall of Fame.

McLean was inducted into the Junior Achievement U.S. Business Hall of Fame in 1982.

In 2000, Mclean received an honorary degree from the U.S. Merchant Marine Academy.

McLean is the only person to found three companies that were later listed on the New York Stock Exchange (plus two others on the NASDAQ).

Trailer Bridge, Inc., which McLean founded in 1992, annually awards the Malcom P. McLean Innovative Spirit Award. The annual McLean Award recognizes an outstanding graduating student at George Mason University, selected by professors.

McLean was inducted into the North Carolina Transportation Hall of Fame in 2006.

References and notes

  1. ↑ The ocean-borne intermodal transportation system is the “highway” that facilitates the nation’s ever increasing flow of imported and exported containerized cargo. This “supply chain” for containerized cargo has developed over many years and has permitted the seamless movement of our ocean-borne containerized commerce. In turn, this has allowed the thousands of U.S. importers and exporters to remain competitive in the global marketplace and benefited millions of consumers throughout the U.S. Within this system is a network of stakeholders who provide the necessary capital and know-how to build, maintain and continually expand this global freight transportation network. These stakeholders include:
    • Marine container terminal operators
    • Ocean carriers
    • Labor organizations
    • Port authorities
    • Trucking companies
    • Railroads
    • Warehousemen & logistics providers, and
    • Many others.
  2. ↑ 2.0 2.1 Cudahy, Brian J., - "The Containership Revolution: Malcom McLean’s 1956 Innovation Goes Global" TR News. - (c/o National Academy of Sciences). - Number 246. - September–October 2006. - (Adobe Acrobat *.PDF document)
  3. ↑
  4. ↑ Break bulk cargo unloading was done for centuries before the development by McLean of the shipping container. Goods often had to wait in warehouses for the next stage. Those transfers and delays made shipping slow and schedules uncertain. They also created opportunities for damage, mistakes and more than a little theft. (Whisky was one of the first products shipped by container because it was so subject to pilferage.) Different companies in different industries facing different price regulations for different goods handled each step. Costs were extremely high, much cargo was lost, damaged or stolen and inefficiency was rife, since a slower loading and unloading process benefitted the longshore workers with less physical exertion and more guaranteed work.
  5. ↑ Ebeling, C. E. (Winter 2009), "Evolution of a Box", Invention and Technology 23 (4): 8–9, ISSN: 8756-7296
  6. ↑ Hanseatic Lloyd—News
  7. ↑ 7.0 7.1 "Shipping Pioneer Largely Ignored". - The Baltimore Sun. - June 14, 2001. p.23A.
  8. ↑ On May 29, 2001, four days after McLean’s death, The New York Times ran a fairly short, 588-word obituary in section C, page 13, noting his death and accomplishments. "M. P. McLean, 87, Container Shipping Pioneer," by WOLFGANG SAXON, The New York Times, May 29, 2001

External links