Shipping/Logistics— Malcolm McLean, Unsung Innovator Who Changed the World
From American Business History:
In 1937, 24-year old Malcolm McLean (later changed to Malcom)
delivered a load from the south to the New Jersey docks for export. He
had been in the trucking business for two years. The rural North
Carolina native was running a gas station when he learned he could make
$5 a load to truck the gas to his station. He bought a truck, paid for
on time, and began to build a trucking company with his brother Jim and
sister Clara. On this day in 1937, legend has it that, as he watched
the stevedores gradually unload his truck bale by bale, and load the
ship equally slowly, he dreamed of a day when the whole truck trailer
could just be lifted onto the deck in one motion. His dream would have
to wait almost 20 years.
Young McLean proved himself an innovator in the trucking industry.
By 1945, he had 162 trucks, hauling primarily textiles and cigarettes
from North Carolina to the northeast. When soldiers returned from World
War II, they were eligible for GI loans to finance vehicles, including
trucks. He offered them haulage contracts as independent operators,
allowing him to indirectly benefit from the financing offers. In this
way, he added 600 more trucks to his fleet between 1947 and 1949. In
those days, before the Interstate Commerce Commission was eradicated,
the ICC had full control over where truckers went, how much they
charged, and what they carried, all in the name of “fair competition.”
Competitors could protest any move you made – in a committee room that
took forever to make decisions rather than in the fast-moving
marketplace dictated by customers. His trucks carried RJ Reynolds
tobacco to the northeast by roundabout routes, and usually came home
empty since he did not have the ICC authority to bring other goods
home. McLean bought or leased other truck lines to gain better routes
and freight rights. Above all else, he was always seeking efficiencies:
ways to lower his costs and thereby lower his rates, although the ICC
sometimes rejected his applications to charge less (the other truckers
and the railroads fought him all the way). By 1954, McLean Trucking was
the 8th largest US trucker in revenue, but 3rd in after-tax profits.
But McLean never stopped thinking about how to make ocean shipping
more efficient, how to skip all that loading and unloading that took at
least 8 days on each end of each ship’s journey. This idea was not his
invention – in 1929 ships took railcars to Cuba, and the military had
experimented with small containers during World War II. To all that
studied the issue, the problems seemed intractable: tight government
regulations that stifled creativity, powerful longshoremen’s unions who
would fight to protect their jobs, ships that were not built for
containers, docks that could not handle container ships and had no
cranes to lift such heavy loads, no money to do any of this, and on and
on. Not only would changing the system take lots of money, it would
take lots of persuasion. Others could not see through the fog. But to
McLean, “It just made too much sense.” His colleagues report that he
could not see problems like others saw them – he took big issues and
broke them down into components, which he attacked one at a time.
Realizing that oil tankers travelled with empty top decks, in 1955
McLean bought an oil tanker and added a steel deck. On April 26, 1956,
the ship Ideal X sailed from Newark toward Houston with a
whopping 58 containers on board. As he watched the ship sail, one top
longshoremen’s official reportedly said, “I think they ought to sink the
sonofabitch.” Despite all the prior experiments, this was the birth of
successful containerization. It was driven by a man who thought in
terms of systems, of how to integrate things and make them happen,
rather than only in terms of the individual components.
In time, he acquired the Waterman Steamship Company of Mobile as a
base of operations. The ICC said he could not be in the trucking
business and the shipping business at the same time, so he got out of
trucking. His friends thought him nuts. A young banker at First
National City Bank of New York (now Citibank/Citicorp) named Walter
Wriston agreed to finance the purchase of Waterman with a $22 million
loan, but his bosses rejected the deal as too risky. McLean went to the
bosses, made his case, and in reference to Wriston said, “He may just
be a trainee, but he’s going to be the boss of both of you pretty
soon.” He got the loan. Wriston, considered by many to be the most
important commercial banker of the late 20th century, went on to preside
over the giant bank from 1967 to 1984. (My first job out of college
was at First National City from 1973 to 1975, so I was fortunate to hear
speeches by the visionary Wriston who gave us the Certificate of
Deposit and early on promoted the ATM and credit card as well as global
corporate banking.)
One of McLean’s key moves was to not patent the container.
Instead, he backed the people at the Fruehauf trailer company to develop
the containers, and insisted that the technology be made available to
the entire industry, including all his competitors. But they all
thought he would fail, that containers would never make it. Over time,
McLean made peace with the longshoremen and with the all important
ports. His later ships could carry over 200 containers. By the
mid-1960’s, The Port Authority of New York committed to spend $332
million to build a container port at Elizabeth, New Jersey. In April,
1966, in his first transoceanic sailing, his Sea-Land Service sent a
ship from Port Elizabeth to Rotterdam, arriving four weeks faster than
any prior ship when loading time was included....
