Containerization: Background and Benefits

¶ … Containerization Oceans have, since long in history, been known as a means of transportation. However, in contrast to a couple of decades ago, ships today transport goods more than they do people. The emergence of intercontinental air travel made air transport relatively cheaper and perhaps more preferable to sea travel over long distances. As a result, sea travel today is largely limited to recreational cruises and shorter trips such as ferry services.

As globalization increased, markets became more open to trade; as a result, demand levels escalated, and so and did shipping volumes. The international trade growth rate was consistently reported to be twice that of aggregate economic activity between 1950 and 2000 (Clark, 2002). Between 2000 and 2001, for instance, world trade grew at an average annual rate of 5.4%, while economic activity, measured by global GDP, only grew at annual average of 3%. This trend has seen global trade more than triple since the 1960s and currently makes up approximately 45% of annual global GDP.

The volume of goods transported to processing industries abroad almost quadrupled over the same period (Clark, 2002). With this increase in levels of trade, there was need to come up with a method that could efficiently transport billions of tones of goods across established routes of trade.

The Oxford Dictionary defines containerization as "a method of shipping freight in relatively uniform, sealed, movable containers whose contents do not have to be unloaded at each point of transfer." Containerization was conceptualized in the 1950s and had, by the late 1960s, become the most common method of transporting bulk products by sea (Clark, 2002). The most significant benefit of containerization is its transformation of "the paradigm of freight transport from 'modalism' to 'intermodalism'" (Clark, 2002, p. 239).

This implied a change of system, from one in which discrete transport modes were connected, to one where modes were integrated and complemented each other in the shipping of products between the different stages of production and distribution (Clark, 2002). It is this kind of integration that has led to the emergence of the freight facilitator, an intermediary "whose job is to stitch into a unified system all the services needed to move the container from production site to retail outlet" (Clark, 2002, p. 239).

Additional benefits of containerization can be analyzed from the container advantage point-of-view; how containerization has made transportation of bulk cargo friendlier. To begin with, containerization has significantly reduced the costs of bulk transportation (Hofstra University, 2014). Transport cost benefits accrue in the form of outcomes of scale economies and reduced transshipment costs. Moreover, insurance costs are considerably lower, given that containerized shipments are prone to lower levels of theft and face low risks of damage (Hofstra University, 2014).

Additionally, containerization has made it easier and more affordable for a wider range of importers and exporters to access international markets since the container is a minimal load unit, and thus enters international markets only as a minimal entry unit (Hofstra University, 2014). Containerization has significantly reduced the expenses brought about by inventory costs such as warehousing and packaging, creating "faster levels of.