Shipping industry - Business in United States of America
Definition: Enterprises that transport goods and other items for companies and individuals
Significance: Virtually every business, from grocers to jewelers, depends on the shipment of materials and goods to operate. Innovations in shipping have increased profits to corporations and savings to consumers. Modern technology enables shippers to load, ship, and unload much larger quantities in a much shorter time than was previously possible, thus providing volume savings and labor cost reductions. It has also enabled the rise of new kinds of businesses, such as warehouse stores, that depend on large inventories.
Many shipping companies had been established in the United States by the mid-nineteenth century, when steamships plied inland waterways. On land, many regional and intercity horse-dependent delivery companies such as the fabled Pony Express briefly flourished. Most interstate cargo was shipped by rail, especially following the end of the U.S. Civil War. Shipping could be a very slow process, and refrigeration was unknown, placing limits on what could be shipped. Farmers and manufacturers were at the mercy of often monopolistic owners who imposed large tariffs. As the twentieth century progressed, trucks became a factor in shipping, although rail retained its dominance into the middle of the century.
By the 1930’s, airlines also had become a factor, often competing with the United States Post Office (later U.S. Postal Service) in the shipping of mail and small packages. Before delivery companies bought their own fleets of planes, they had contracted with commercial airlines to carry small freight items on passenger flights. For trade from the United States to most other countries, shipping by sea was the only available method until commercial aviation became feasible.
After World War II, the shipping industry grew rapidly. Inexpensive ships that had been built for the war effort were available for purchase, and world trade was expanding significantly. Numerous new shipping companies came into being. However, loading and unloading goods from all means of transportation remained a protracted process, driven by manual labor. Loading and unloading a single multihold ship, for instance, could take many days, with shifts of men working long hours.
This time-consuming, laborious process was completely transformed as a result of the development of containerization during the 1950’s. Containerization is largely attributed to the efforts of one trucker, Malcolm McLean, who had about sixty rectangular metal containers loaded on a freighter. The innovative idea immediately took off. As a result, cargo could be packed into huge metal containers that then could be loaded onto ships, railroad cars, airplanes, and even semitrailer trucks.
Containerization reduces the loading and unloading times of cargoes from several days to a matter of hours. Another advantage of the system is a reduction in theft from cargoes. It has also enabled the “big box” discount and warehouse chains to thrive. Target, Home Depot, and especially Wal-Mart are leading users of shipping containers. Refrigerated containers allow for the shipping of fresh produce from far-off locations. Special container ships were designed to take advantage of the system, and shipping costs were drastically reduced. At most ports, the use of containers accounts for almost 100 percent of cargo, except in the case of large items such as automobiles.
Ever larger ships became the norm, including huge oil tankers that were in excess of one-half million tons. These ships led to the construction of new ports and terminals to accommodate such behemoths. Ship-to-ship and ship-to-shore communication became more sophisticated with the emergence of satellites. The latter part of the twentieth century saw more innovation in shipping than any other historical period.
Overnight Delivery Companies
The overnight delivery service is an important component of the shipping industry. Numerous companies offer this service, but several dominate the field. United Parcel Service (UPS), with its distinctively brown-clad delivery people, is a multibillion-dollar company. It arose from a bicycle messenger service founded in 1907 and eventually became a global powerhouse established in more than two hundred countries. By 1919, it was making deliveries by Ford Model T automobiles, mainly on behalf of department stores. In 1929, it began its air service on commercial airliners, but this was shortlived because of the onset of the Great Depression. At this time, UPS was established in most of the larger American cities. The air service was reestablished during the 1950’s, and the company ultimately bought its own fleet of planes. During the 1980’s, UPS launched its overnight delivery service. The company was by then operating some sixty-two thousand trucks around the world.
Another of the leading shipping companies is FedEx (Federal Express, originally FDX). Its commercial reach is illustrated by the fact that the company name is commonly used as a verb, as in “We’ll FedEx the papers.” The company was established in 1971 with the purchase of a small aircraft company to enable it to make overnight deliveries. By the late 1970’s, it had developed a computer system for tracking packages. By the 1990’s, it had almost a 50 percent share of the express delivery market, as compared with around a 25 percent market share for UPS, its largest competitor.
Among other major players in the express delivery field are DHL Worldwide Express (international only) and Airborne Freight Corporation. Although the leading express delivery companies account for a large share of their niche market, bulk shipping is still done via railroad, maritime vessel, and truck. Many railroad companies even have reduced or eliminated their passenger traffic to devote their resources solely to the shipment of cargo. The United States Postal Service also continues to be a major factor in the delivery of packages.
Brannigan, Martha. “Air-Freight Firms Gain Unexpectedly from an Expired Federal Excise Tax.” The Wall Street Journal, January 3, 1996, p. A4. Describes a loophole that was created by the expiration of a tax, resulting in an increase to the profitability of air freight companies.
Frock, Roger. Changing How the World Does Business: FedEx’s Incredible Journey to Success—The Inside Story. San Francisco: Berrett-Koehler, 2006. Well written, but subjective, history of the founding of FedEx by Frederick Smith and of the successes and reverses it endured before becoming a mega company. The author is a former general manager of FedEx.
Niemann, Greg. Big Brown: The Untold Story of UPS. San Francisco: Jossey-Bass, 2007. Insightful account of the history of UPS from its founding in 1907 by Jim Casey to the current time.
Sigafoos, Robert A. Absolutely Positively Overnight: The Unofficial Corporate History of Federal Express. 2d ed. Memphis, Tenn.: St. Lukes Press, 1988. Relatively objective history of FedEx that was apparently not well-received by the company as a result of its sometimes critical slant.
Trimble, Vance H. Overnight Success: Federal Express and Frederick Smith, Its Renegade Creator. New York: Crown, 1993. Somewhat negative portrayal of the growth of FedEx that presents a counterbalance to the generally more positive accounts that have been published.
See also: Air transportation industry; railroads; Transatlantic steamer service; transcontinental railroad; trucking industry; Cornelius Vanderbilt.