Malcom P. McLean was born in Maxton, North Carolina in 1913. After finishing high school his family did not have the financial resources to send him to college. He worked for several years and in 1935, McLean bought a used truck.
That same year, McLean, his sister, Clara, and his brother, Jim, founded McLean Trucking Co. Based in Red Springs, North Carolina, McLean Trucking began transporting farmers’ harvests and supplies, as well as empty tobacco barrels. McLean was one of the drivers. Through hard work and resourcefulness, the company had grown to 30 trucks by 1940.
In 1937, during a routine delivery of cotton bales from North Carolina to New Jersey, McLean watched dockworkers loading and unloading cargo from a ship. The process took many hours; dockhands had to pass many small boxes from the dock to others aboard the ship. Because McLean could not leave until his cargo was loaded aboard the ship, he thought what a waste of time and money this entailed (for him and many others).
From then until the early 1950s, McLean focused on McLean Trucking. By then it was the fifth-largest trucking company in the U.S., with over 1,750 trucks and 37 transport terminals. If he had done nothing else in his life, McLean would have been judged successful by most.
McLean Trucking and its competitors were operating under regulations mandated by the Interstate Commerce Commission (ICC). The ICC instituted new truck weight restrictions. Routinely, McLean’s trucks were fined for being out of compliance with the new restrictions.
McLean sought a more efficient method to transport cargo, and remembered his 1937 experience on the New Jersey dock, as well as the containers that the U.S. military used routinely during World War II. McLean had seen the military ability to ship a huge volume via ships in its rudimentary shipping containers.
The birth of intermodal shipping
In 1952, McLean’s original idea was to create a standard-size trailer that could be loaded onto ships. He thought he could change his business by taking his trucks off the ICC-controlled roads and move them by ship along the Atlantic Coast, from the company’s base in North Carolina to New York, with trucking hubs co-located with strategic ports. This would mean his trucking fleet would be used only for shorter, intrastate deliveries, which would fall outside the ICC’s jurisdiction.
However, he realized that the original concept of “trailer ships” would not be very efficient. Only a certain number of trailers would fit on a ship, and other cargo space on board a vessel would be wasted. McLean modified his idea so that only the containers, not the chassis, would be loaded onto a ship. The concept of a trailer ship became the “container ship” or “box ship.”
As noted earlier, the U.S. military palletized metal containers to speed the shipment of necessary war material during World War II. In the 1950s, the new U.S. Department of Defense developed specifications for a standardized steel Intermodal container.
Also during that time period U.S. law did not allow a trucking company to own a shipping line. McLean believed in his idea of a standardized shipping trailer or container; undaunted, he sold McLean Trucking for approximately $25 million. He began a new company, McLean Industries. In 1955, he secured a $42 million bank loan. McLean used $7 million to buy Pan-Atlantic Steamship Company, an established shipping company that already had docking rights in many of the eastern port cities McLean was targeting. Part of the loan also paid for the docking, shipbuilding and repair facilities necessary for his operations.
He also hired engineer Keith Tantlinger to develop what became the prototype for a new shipping container. They tested variations of the container and finally settled on a primitive form of what is now the ubiquitous shipping container. It was standardized and strong, which made it easy to load/unload, stackable and lockable (and therefore theft-resistant).
Tantlinger sought to improve on the rudimentary design used by the military during the war. His container’s metal body had corner fittings and twistlock. A twistlock and corner fittings form a standardized rotating connector for securing shipping containers. Together, they also lock a container into place on either a container ship, semi-trailer truck or railway container car. They also allow the container to be lifted by a container crane or sidelifter.
McLean now had his containers and McLean Industries as a platform. The next hurdle was to design ships that could carry containers. In January 1956 he bought two World War II-era oil tankers. They were retrofitted to carry containers on and under deck. McLean was familiar with Mechano decking, which was wooden shelter decking that had been used during the war to help carry oversized cargo, such as aircraft. The refitting, construction of containers and design of trailer chassis to haul the containers took several months.
On April 26, 1956, one of the converted tankers, the SS Ideal X, left from the Port of Newark-Elizabeth Marine Terminal in New Jersey, heading for the Port of Houston. Its cargo included 58 of the new containers, as well as 15,000 tons of petroleum. The containers were 35-feet long and were termed “Trailer Vans,” (later just called containers).
The success of McLean’s idea and designs was quickly apparent. McLean Industries was taking orders for return cargo before the SS Ideal X docked in Houston. The company offered a 25% discount on the current price of ship cargo. Not only was the cost lower than regular shipping, the lockable containers prevented cargo theft.
McLean’s containers revolutionized the industry. At the time of the SS Ideal X’s sailing, most cargo was loaded and unloaded by longshoremen at a cost of $5.86 per ton. Using the new containers, a ship could be loaded/unloaded for 16 cents per ton – a 36-fold saving! Not only did containerization cost less, there were great savings in the time it took to load or unload a ship.
In April 1957, McLean’s first true container ship, the Gateway City, began regular service between New York, Florida and Texas. In the summer of 1958 McLean’s Pan-Atlantic Steamship Corporation began container service between the U.S. and San Juan, Puerto Rico. The name of the company was changed from Pan-Atlantic to Sea-Land Service, Inc. in April 1960. The new name highlighted the company’s delivery service on the sea as well as on the land. By 1961 Sea-Land was profitable and continued to add routes and buy bigger ships.
Sea-Land opened a new 101-acre facility in Port Newark-Elizabeth Marine Terminal in August 1963 to handle the increased container traffic. The market for containers developed slowly over the next few years until the end of the decade; change was slow to come to the industry that had operated in the same basic way for more than 200 years. Infrastructure had to be modified or added; heavy-duty cranes to lift containers on and off ships were not widespread at ports. Additionally (and understandably), the unions representing dock workers were against the idea that (at a minimum) meant change and had the potential to cost many jobs.
Nonetheless, McLean’s Sea-Land continued to grow and expand. Sea-Land began service between New York and Bremen (Germany), Rotterdam (Netherlands) and Grangemouth (Scotland) in April 1966.
The U.S. government became Sea-Land’s largest account when the company was contracted to ship containers to South Vietnam in 1967. This account generated 40% of the company’s 1968-1969 revenue.
Shipping containers to South Vietnam also opened other opportunities for Sea-Land in Asia. The company began container ship service in late 1968 from Asia to the U.S. Service expanded in 1969 to Hong Kong and Taiwan, and to the Philippines, Singapore and Thailand in 1971.
McLean continued to work on standardization as a method to reduce the cost of labor and the time needed at dockside. This focus on efficiency resulted in patents for Sea-Land’s standardized container designs. However, McLean allowed others to use the patents through a royalty-free lease to the International Organization for Standardization.
As the 1970s began, Sea-Land Industries owned 27,000 trailer-type containers, 36 trailer ships and called on 30 ports around the world. Competitors began to imitate Sea-Land as the advantages of containers gained increased attention.
McLean had trucked Reynolds Tobacco Company cigarettes around the United States when he operated McLean Trucking. He began negotiations to sell Sea-Land in order to generate the cash needed to remain competitive with his imitators. Reynolds agreed to buy Sea-Land for $530 million in cash and stock; McLean personally made $160 million in the deal, and was awarded a seat on the company’s board of directors. R.J. Reynolds formed R.J. Reynolds Industries, Inc. as a holding company, which formally bought Sea-Land in May 1969.
Profits were not consistent under the Reynolds Industries tent. Nonetheless, the company had spent more than $1 billion on Sea-Land, adding ships to its fleet and building improved terminals in New Jersey and Hong Kong. And because fuel was the company’s largest expense, Reynolds purchased the American Independent Oil Co.
Sea-Land’s earnings were spectacular in 1974 ($145 million), but dropped sharply in 1975. The turmoil caused McLean to resign from the board of directors in 1977 and severed his ties with the company he founded.
R.J. Reynolds Industries spun off Sea-Land Corporation to shareholders as an independent, NYSE-traded company in mid-1984. Sea-Land had its highest revenue and earnings in its history.
A little more than two years later (September 1986), Sea-Land Corporation merged with a subsidiary of rail giant CSX Corporation. Then in 1999, the international division of Sea-Land was sold to Danish shipping company Maersk. The new company was known as Maersk Sealand; in 2006 the company was rebranded as Maersk Line.
The domestic portion of Sea-Land is now Horizon Lines. Nearly 36% of the total marine container shipments between the continental United States and Alaska, Hawaii, Puerto Rico and Guam are carried on Horizon Lines ships.
The legacy of Malcom McLean
McLean’s development of the modern intermodal shipping container revolutionized transportation and international trade in the second half of the 20th century. His containerization concept significantly lowered freight transportation costs by eliminating the repeated handling of individual pieces of cargo. In addition, the standardized intermodal container improved shipping reliability, reduced cargo theft and decreased the costs of inventory by cutting transport time across three modes (marine, rail and truck).
McLean’s container had its biggest impact in shipping. Container ships now spend 80% of their time at sea; before containers were introduced this time was around 50% (with 50% of time loading and unloading cargo).
Beyond that accomplishment, McLean created a system that goes beyond shipping containers. Container ships now fly the flags of many nations and carry the brands of many companies. But they trace their heritage to McLean’s converted oil tankers. Specialized rail cars and trucks were designed to haul shipping containers via land.
Fortune magazine included McLean in its Business Hall of Fame in 1982. American Heritage magazine named McLean one of the 10 innovators of the past 40 years in 1995.
McLean died in 2001.