ASSESSING THE ROLE OF CONTAINERIZATION ON THE IMPORTATION AND EXPORTATION OF GOODS

CHAPTER ONE

INTRODUCTION

The introduction of containers in the second half of the 1950s marked a major innovation in transportation:

the box improved efficiency by allowing automation in cargo handling, connecting sea transport with intermodal inland transport, and reducing spoilage/pilferage on and off the ship.

All these benefits generated economies of scale and slashed transit times (Levinson, 2008; Hummel’s, 2007).

Despite its ubiquity, the mechanisms through which containerization affected world trade are still unexplored.

Understanding the drivers of container usage at the decision-making level is the key to the measurement of transportation costs affecting the volume and pattern of international trade.

We provide the first such analysis using micro-level data on Cameroon exports at the firm, product and destination level for the year 2020.

We start by documenting novel facts from Douala microdata and Equatorial Guinea aggregate data: despite the perception that international maritime trade is now highly containerized, there is still an important margin of modal choice for exporters between containers and break-bulk.

As of 2020, only 40 and 53 per cent of Douala Cameroon maritime exports were containerized, respectively, with the break-bulk alternative accounting for the rest.

The data shows large variation in container usage across firms, products and destinations. We find four patterns in this variation:

FIRST, it is largely explained by exporting firms, rather than by-products and destinations.
SECOND, container usage increases with distance to the destination.
THIRD, container usage also increases with shipment size but decreases with unit prices.
FOUR, container usage increases with firm size and labour productivity.

These findings imply that conditional on physical feasibility due to product characteristics and the necessary infrastructure being available in both the origin and the destination, exporting firm still face a choice on the mode of maritime transportation and only some of them find it profitable to ship in the box.

An intermodal container is a large standardized shipping container, designed and built for intermodal freight transport, meaning these containers can be used across different modes of transport, from ship to rail, to truck-without unloading and reloading their cargo

The container help reduce the global supply chain cost; however, the management of container inventory has become a  serious concern with its gradual increase in volume over the past decades. Worldwide, empty containers account for approximately 20% of container flows at sea.

Container inventory imbalances can primarily be attributed to global trade imbalances.

Therefore, the core issue in the industry is the identification of the best method to minimize the idle time of containers,  thus optimizing their utilization that will reduce supply chain cost substantially. 

Shipping  is  a  business  that  grew  up  with  the  world  economy, exploring  and exploiting the ebb and flow of trade

(Stop ford,2009). Cross-border transportation is an engine to promote foreign trade (Zhihong& Qi, 2012). The system, which proved its potential as an increasingly efficient and swift method of transport, led to greatly reduced transport costs and supported a vast increase in international trade.

It is needless to mention that the carrier actions and their reactions to various market conditions particularly the demand for shipping have an impact to supply chains.  Some serious and recurring issues produce a degree of uncertainty that impact supply chain processes.

Global container inventory imbalance is one of such problems that is part and partial of container shipping. This problem, therefore, needs a closer look due to the ever-increasing volumes of the container shipping business.

1.1 Background of Study

Before the advent of containerization, the technology for unloading general cargo through the process of break-bulk shipping had hardly changed since the Phoenicians traded along the coast of the Mediterranean.

The loading and unloading of individual items in barrels, sacks and wooden crates from land transport to ship and back again on arrival was slow and labour-intensive.

Technological advances through the use of ropes for bundling timber and pallets for stacking and transporting bags or sacks yielded some efficiency gains, but the handling of cargo was almost as labour intensive after World War II as it was during the beginning of the Victorian age. 

From a shipper’s perspective, often two-thirds of a ship’s productive time was spent in port causing port congestion and low levels of ship utilization. 

Following the spread of the railways, it became apparent already during the first era of globalization that the bottleneck in freight transport was at the interface between the land and sea transport modes. 

Before World War II, US, British and French railway companies experimented with methods of sealing goods in different sizes and shapes of boxes before transporting them.

However, the lack of specialized capital equipment like specialized cranes for loading and unloading combined with union resistance to changes in work practices at the docks delayed the development of container shipping until the mid-1950s.

Containerization started as a private endeavour by the shipping lines. In the early stages, shipping lines had to bear most of the costs since many ports such as New York and London were reluctant to spend significant funds on ‘a new technology’ with uncertain returns at the time.

Many shipping lines had to operate from small and formerly unknown ports and install their cranes.

The process was extremely expensive. After the container proved to be successful, ports warmed up to containerization and a race started among ports to attract the most shipping lines by building new terminals and providing the infrastructure to handle containers.

Containerization required major technological changes in port facilities, which often led to the creation of new container ports.

In many countries, port authorities fall under the administration of the government. Because of the high costs, careful planning and analysis had to be undertaken by governments to study the feasibility of containerization.

In the UK, the government commissioned McKinsey (1967) to conduct a cost and benefit analysis before spending significant public funds on container port facilities.

  Five years later, McKinsey (1972) provided a quantitative assessment of the effects of containerization following the first five years after its adoption in the UK and Western Europe.

1.2 Problem Statement

The issues of sustainability in maritime transport and logistics services have been considered in terms of environment, economy, and society. Recently, a substantial amount of research has been conducted on the improvement of energy efficiency and the use of cutting-edge technology.

While there are many concerns about the ongoing US-China trade conflict and the proliferation of global protectionism, in-depth research is lacking.

Trade volume and maritime logistics services are closely linked, and sea freight prices have fluctuated widely since January 2018, as illustrated by the trend of the Baltic Dry Index (BDI).

The BDI is a shipping cost index, which is used to be a leading indicator of future economic growth.

1.3 Objectives of the Research

General objective

The role played by containers in the transportation of goods by sea.

Specific Objectives

Safety and security

Ease of transport

Evaluate the effectiveness of sea transport

Employment possibilities

1.4 Motivation

What motivated me to choose this topic are:

We want to help the AGIT SARL during their importation and exportation of goods through containers.

We wish to tell the Human Resource Department to allow people to use and understand the use of containers during their importation and exportation of goods.

1.5 Goal

The main goal of this study is to propose the best strategies for achieving a 25% performance improvement through the effective environment, economy and society in the Sea Port, applying logistics techniques within 5 business cycles.

1.6 Research Questions

How can the containers give the advantages during their transportations­­?
Why containers are very important­­?
How can we develop the productivity of used containers in the seaport?
Can the use of containers facilitate the easy transportation of goods from one place to another?

Other logistic project topics