How did the military systems engineer disrupt industries without being noticed?
The story about Reed shows how important it is to consider the system’s context and how important it is to track architectural intent. But Reed failed to create a production system and do a scalable business; he remained a talented loner without a team, a school, and students. By contrast, McLean and Tantlinger managed to create a multibillion-dollar company and build what is now called the “business ecosystem.” They did it back in the 1970s; they implemented one of the first disruptive innovations, which destroyed the U.S. industry. All that allowed the Asian tigers and China to rise. And it all started with the idea of intermodal container transportation.
Incoterms — the emerging need for ‘the box.’
When working as a manufacturing launch engineer, one of the most common questions was, “What about the price? Is it ex-works, fob, or DDP”? To understand what these acronyms mean, one should understand the basics of international trade. We divide supply chains into several steps — goods leave the factory, get to the ship, come to the destination port, etc. The terms of delivery are related to several events that structure the supply chain. One can describe all logistics with a standard called Incoterms, the international agreement on what happens when you deliver cargo. One such term, for example, is ex-works, meaning “straight from the factory.”
Free on board means that “the seller is obliged to deliver the goods to the port and load on the vessel specified by the buyer; the cost of delivering the goods on board the vessel falls on the seller. The seller shall bear the risk of accidental loss of property or damage thereof until the goods cross the board of the vessel and by the buyer from that moment.” The Incoterms chart shows when responsibility for the goods passes from the seller to the buyer.
When I first saw this diagram, my first question was, “You only talk about three types of terms of delivery all the time, and why are there 11 of them in the standard? Why do we need eight more?” the head of the purchasing department replied: “This is for all occasions, in the most cases, though, we need three.”
The standard sea container is the basis of multimodal transportation — we guarantee the safety of cargo through the infrastructure of the entire supply chain. Indeed, shipping container reduces the risks of transportation to a minimum. Therefore all events from the moment of loading into the container are much less in demand than before. The risk of losing a shipment is so tiny in Europe or the United States that drivers cannot pretend that something was missing in the port. So it is pretty standard for truck drivers to have the keys to the store or factory to arrive at 5 a.m. or night, open the warehouse themselves, unload the container and leave. So you can save on a security guard and a night shift because we practically exclude losses on the way.
It wasn’t always this way.
The logistics and transportation industry has widely adopted the Incoterms standard and uses it in contracts. The newly formed International Chamber of Commerce (ICC) issued the first agreed terms of international trade in 1923. In this document, experts defined the six most commonly used terms after a three-year study of the logistics business practices in 13 countries. The funny fact is that almost one hundred years later, we rediscovered business analysis techniques used by the ICC and called them ‘event storming.’ In 1936, ICC published the first version of Incoterms, including FAS, FOB, C&F, CIF, Ex Ship, and Ex Quay. In 1953 the ICC published an updated version, where terms for rail transportation appeared. Our story begins there, in 1953, in the United States.
They are winning a market with a bit of help from systems engineering.
Traders are incredibly pragmatic people; they do not make unnecessary moves. They do not introduce standards until it is impossible to live without them. By the mid-50s, the volume of sea and rail traffic grew so much and, most importantly, continued to grow at such a pace that it became clear that there was no way to do without international standards. International trade needed a common language similar to that of global flight control. But business is not only about agreeing on terms and conditions; it is also about implementing these terms and conditions.
Therefore, the idea of standardizing the delivery terms in paper and inscribing them into the hardware was in the air. McLean was not the first to come up with the idea of multimodal transportation, nor was he the first to experiment with it. He was the first to make money on it, but that’s not the most exciting thing.
Historically, there were many cases when a company found a market niche and made a successful technical solution, then quickly lost everything to its competitors. The secret is not only to find this solution but also to replicate it quickly enough to have time to increase share in a rapidly growing market. For example, the crisis with the delivery of online orders to households, which took place in the spring of 2020 in big cities, clearly showed that many online retailers were not ready for this powerful market opportunity to grow several times in a few weeks. They were prepared to develop because they had a secret ingredient — a systems engineering approach. It was a rare skill those days, and this is a story of how Sea-Land acquired it. SeaLand, the company founded by McLean, albeit part of the Maersk Company, is still alive and well in the highly competitive transportation market, where the battle is for a fraction of a cent.
How McLean start-ups ‘the box.’
Open Google Maps and go to 39.819676804996845, -84.05442457597323.
Now it is the center of the rust belt of the United States, arguably a symbol of lost world domination; for some Americans, a sign of a destroyed mighty industry, millions of personal tragedies, the reason for the arrival of Trump and the popularity of the slogan “Make America great again.” This point on the map has a rich history, some of which are important for our story.
In the southwest of Ohio, there is the town of Dayton. The coordinates above are a point northeast of Dayton, almost precisely in the center of the rust belt, and it has a proper name. It is the field of the Wright brothers, now Wright-Patterson Air Force Base. In this field, in 1920, the Wright brothers worked out the world’s first commercial aircraft. And so it happened that this field became one of the centers of the U.S. aviation industry, especially since there was an automobile cluster, a metallurgical cluster, and universities around it. It was the center of industrial America, a concentration of engineering and entrepreneurial talents.
Post-war America in general, and industrial America of the 50s especially, was an illustration of both the American dream and the ideas of Ayn Rand, a born Petersburger and author of the novel “Atlas Shrugged,” in which she praised entrepreneurs as people changing this world. One such entrepreneur was McLean, who, on April 26, 1956, carried out the first intermodal transportation in a standard container (Levinson, 2008). The demo was proof of the viability of intermodal transport. As a result, McLean attracted investors to the project after many years of R&D on his account. The project’s peak, the final triumph of Maclean’s ideas and principles, was the organization of the transportation of military cargo to Vietnam during the war. After summing up the results, this large-scale logistics experiment of 1969–1973 convinced the most hardened skeptics. The speed and volume of transportation increased significantly; the cost decreased single digit. Since then, large-scale investments in container transportation infrastructure have begun, and books have grown exponentially.
But evolution leads to the disappearance of the causes that give rise to it (Prigogine and Stengers, 1994). Thanks to whom the expansion of international trade began, industrial clusters, engineers, and entrepreneurs fully felt the consequences of this evolution decades later. On May 29, 2001, the day of McLean’s funeral, all the world’s container ships signaled to escort this man of the century (a title given by the International Maritime Hall of Fame) on his last journey. In the same year, the rate of decline in U.S. industrial production reached -3.7%. The invention of a man who did so much for the industry and trade of his country eventually became one of the reasons for the formation of China, Japan, South Korea, Malaysia, and Singapore. The U.S. companies transferred their production facilities, research laboratories, design bureaus, and research universities to these countries as an unforeseen result of container transportation.
How Tantlinger comes into play?
Though some authors claim that this rise and fall attributed to McLean, one should not blame all this on him alone; he had an assistant, an engineer, who came up with most of the technical solutions for container transportation. It was Tantlinger (“Keith Tantlinger,” 2022). But how did they meet, and how did Tantlinger successfully develop technical solutions that changed entire industries and economies? How did he push international standards in container shipping in the face of fierce competition, lobbying, and clearly to the detriment of national interests in the end? To answer these questions, you will have to move away from the usual outline of the story about McLean and dive into the technical details, records of patent offices, figures and archives of ISO commissions, archives of the Air Force, and the U.S. Department of Defense. And the hidden side of the formation of container shipping will open up before us.
The 56 McLean containers that moved from Newark on the northern East Coast to Houston on the southern East Coast in April 1956 had a marking ‘manufactured by Brown Trailers.’ Brown Trailers was a company where Keith Tantlinger was then vice president. Tantlinger fully managed the contract with McLean, from developing specifications and drawings to accepting test results during the historic demo. There they met, worked together, and became friends for many years. Tantlinger was six years younger than McLean; in 1956, he was 37 years old, and McLean was 43. They were well-formed people with reputations and careers. But we must question Tantlinger’s job to get ahead in our inquiry.
Tantlinger studied at the University of California at Berkeley, so his first career choice, Douglas Aircraft Company, seemed logical because their headquarters were in Santa Monica. Tantlinger was engaged in the development of tools and equipment. From his first days on this job, he was on the B-17 “Flying Fortress” project, the plane produced by the Boeing-Vega-Douglas consortium. The B-17 project is interesting because, in 1936–1945, the consortium made 12,731 aircraft. For comparison, the USSR’s total production volume of the IL-4 and DB-3 was 6,784 aircraft. Also, the USSR produced only 97 of the Pe-8, a copy of the B-17. Tantlinger quickly gained invaluable experience. The technical complexity of heavy bombers, 39 modifications made, high production volume, and the complexity of cooperation (the Boeing-Vega-Douglas consortium included dozens of factories, design bureaus, and laboratories) helped him with that. And his education enabled him because Berkeley was in the top ten universities in the world.
The process of designing, manufacturing, assembling, and testing the B-17 was well documented, changed in a controlled manner by the results of combat use, and the military pilots of Wright-Patterson Air Force Base, with which our story began, were actively involved in finalizing the design. Among these military pilots was, for example, Fred J. Ascani, a man who was called the father of systems engineering at Wright-Patterson Air Force Base. And the engineering leaders of Douglas Aircraft Company were also not the last people in the industry:
· Ed Heineman, chief designer of the F-16 and 20 other combat aircraft;
· James‘ Dutch’ Kindelberger, chief designer of the Mustang P-51, which he designed in 4 months and which was built 42,000 pieces before the end of the war;
· Jack Northrop, founder of Lockheed, and Northrop, chief designer of the B-2 Spirit, the most expensive aircraft in the history of aviation.
From the first days, Tatlinger dived into the atmosphere of “We can do it!” and communicated with the best engineering minds of his time. The terms “engineering management” and “system engineering” will appear years later, but systems life cycle management was already there; otherwise, Douglas Aircraft Company could not maintain the production cooperation. It was the critical difference between Tantlinger and Reed — nobody needed a brilliant loner in 1942; the production of tens of thousands of complex aircraft required the highest standards of work organization.
I did not find the exact date of Tantlinger’s arrival in Douglas, but it is possible to calculate approximately. Keith was born in 1919; in 1936, he was only 17 years old, finishing school and preparing to enroll in Berkeley. Consequently, he graduated from it and received an engineering specialty just in time for the beginning of the war. Douglas was his first engineer job, so he worked on this aircraft throughout the war. One can learn a lot in this atmosphere over the five years, especially if your job involves working with a bunch of blueprints, specifications, and a lot of communication with entirely different people from different departments and organizations of the consortium and the work of making tools and equipment is just that.
Already in 1949, Tantlinger worked for Brown Trailers, although not yet as vice president of development, but as a chief engineer. This time he came up with his first container design, similar to what we see now.
But why did Tantlinger leave aviation and move to a company that made trucks? Though the whole story holds on this transfer, it was a strange career choice we need to explain. Whether MacLean and Tantlinger met or not changed everything, without Tantlinger, McLean would have built just another successful business and not changed the world. So why did Tantlinger leave aviation for a truck company? We can remember two facts from those days:
1. A post-war boom in the U.S. automotive industry has happened.
2. Charles Wilson, the former head of General Motors, was appointed Secretary of Defense in 1953.
All of that led to the construction of interstate highways in 1956.
Douglas went bankrupt without military orders, so Tantlinger left it and moved into an industry with prospects and where his talents were in demand. So, from 1949 to 1956, Tantlinger worked at Brown Trailers, where he designed and made containers for McLean’s Sea-Land company. By 1956, he was already a recognized expert on containers.
Tantlinger comes to the project at the right time. By May 1956, McLean had already done the most crucial thing — correctly defined the system of interest. McLean correctly guessed and has already made sure that the goal is to transport cargo, not an optimally filled vessel, as everyone around the industry thought (Levinson, 2008). Perhaps it was MacLean’s fresh perspective as a newcomer to the shipping industry that helped him to make a correct definition of the system of interest. In truck transportation, it is essential to deliver cargo from hand to hand. Sea transportation worked differently at that time; the stevedore was concerned with the optimal loading of the vessel with the most diverse and multi-sized cargoes. But be that as it may, strictly per the principles of systems engineering, the choice of the system of interest dictated the option of enabling systems, and the architecture of the system of interest justified the necessary changes in the architecture of port infrastructure, cranes, warehouses, trucks, trains and the principles of conducting logistics operations themselves. Who, if not a person from aviation, who worked for eight years inside massive programs, was to understand this? Tantlinger’s thought begins to work in this direction, and the prospects are simply stunning.
Tantlinger engineers the way to disrupt the industry.
Three years after a successful pilot in April 1956, Tantlinger left for the position of vice president of Fruehauf, where he continued to work on the design of containers. He searched for and promoted suitable engineering solutions and worked to standardize them through the ISO. As a result, the ISO issued two standards:
January 1968: ISO 668 — Series 1 freight containers — Classification, dimensions, and ratings, which specified the terminology, classification, and rating characteristics
July 1968: ISO 790 Freight containers — Coding, identification, and marking.
Now imagine what kind of work it was like to negotiate with dozens of large corporations, family companies, port operators, stevedores, container manufacturers, truck manufacturers, shipbuilders and car factories, logistics companies, insurers, and banks. Consider their diverse interests, negotiate them into abandoning existing developments, cancel investment plans, and revise development strategies and business plans. McLean, during his pilot, showed that container shipping reduces port costs from $5.83 to $0.158 per ton, but who says it’s his standards everyone must adopt? Wouldn’t containers of other measures have a similar effect? Why do we need unification if we can get this reduction for our volumes and live well? There were many forks and trade-offs in the project, and from Reed’s story, we remember who knows how to go through these forks and trade-offs consciously. It is a system architect, such as Tantlinger. But when did he learn that? Who were his teachers?
Let’s return to Tantlinger and Fruehauf, his place of work in the 1960s. At that time, he produced the main result of harmonizing and getting approvals for the intermodal container transportation system’s architecture. Fruehauf Trailer Corporation worked with the U.S. Department of Defense on aerospace and nuclear programs — Atlas, Bomarc, Corporal, Falcon, Genie, Hawk, Matador, Jupiter, UGM-27 Polaris, and Titan. And they knew systems engineering (even if Tantlinger didn’t learn about it at Douglas), and they dealt with systems of systems in these programs. So the latest when Tantlinger could learn about systems engineering was in 1960.
Accordingly, he had 12 months to learn a new discipline before starting active standardization work, quite enough for an experienced engineer with an excellent primary education. That is, Tantlinger worked on standards, knowing about the system-engineered approach. He was the only systems engineer on the committee and could clearly and consistently analyze the most complex problems into simple and understandable components. As a result, he could communicate complex and powerful ideas with calculated consequences to decision-makers, and the thoughts of his competitors looked confusing and riskier. It explains why the ISO standards included many of his proposals.
And then the story is known — together with McLean, Tantlinger promoted many of the ideas they needed through the standardization committee, and the world rebuilt itself following economic incentives. U.S. industrial clusters declined, manufacturing moved to Asia, and a flourishing economically developed region entangled in a network of interstate highways emptied and voted almost entirely for protectionism and Making America great again.
Of course, it is impossible to fully attribute Tantlinger’s success in promoting and coordinating the proposed technical solutions to his knowledge of systems engineering. His authority and negotiation ability played considerable merit, but I would not discount this factor either. The ability to quickly calculate the systemic consequences of the solutions proposed by competitors played into the hands of complex negotiations. The ability to separate requirements from the proposed technical solutions, see the picture of cooperation as a holistic life cycle, and think about platforms and interfaces, formed his image of a person with a systematic approach. And one thing he understood for sure — despite the negligible volume of container traffic by today’s standards in 1968, the standards laid down would force the rest of the world to rebuild after the new technology because its scaling was not limited to the capabilities of one person. And the need for large-scale transportation was already there:
- The war in Vietnam had been going on for many years,
- Japan was rebuilding after the war, and Deming optimized the production and supply chains,
- somewhere in the bowels of Toyota, the TPS production system was born and honed, which in 20 years would defeat the Big Detroit Three in his native market.
McLean thought about how to load empty containers on the way back from Vietnam, and going to Japan to pick up cargo from the port there looked like a promising idea. The ISO container was preparing to enter other markets.
Conclusion
This story teaches us a few things:
1. One of the main secrets system architects possess is that they correctly define which system of interest they design and build. It was unclear then because of the established customs of the supply chain and multimodal transportation. Porter will introduce the value chain concept only 20 years later when intermodal transit is already in full swing.
2. For the container system of interest, it was essential to define the need they address — cargo transportation- and to specify the function precisely. Containers had to ensure cargo safety throughout the journey, assemble among themselves, withstand wind load and roll, and match with port cranes.
3. System and operational contexts are accounted for and simulated, and the systems engineer can design them. But the systemic effects in the business context and at the industry level are unpredictable; the supersystem (the world freight transportation system) can change so much and unpredictably that the immediate and considered benefit from the implementation can lead to the fact that the economic incentive will destroy existing production chains and cooperation, and will lead to the emergence of fundamentally new organizational and technical solutions and even ecosystems. And those who do not have time to see their appearance in time, and miss the window of opportunity, will lose everything, no matter how strong they are.
Tantlinger extended Reeds’ ideas with powerful insights:
- We should divide the design into the invariant and modifications on top — the platform and the model. And we must control the configuration of them separately.
- We must clearly define what system of interest (SoI) we build and set clear boundaries between system layers.
- We should plan the SoI life cycle, design and build enabling systems, and manage the program entirely.
- Some stakeholders don’t mind our SoI and the technology behind it. They think about the capabilities your solution brings. You don’t build the bomber; you make the capability to deliver bombs from here to there with some essential characteristics.
- And there are a lot of stakeholders, which concerns you must consider and separate.
These insights, as well as insights from hundreds of other large-scale initiatives of the ’60 to the ’90s, led to the foundation of the Systems engineering ISO committee ISO/IEC JTC 1/SC 7 Software and systems engineering. It released hundreds of standards on the subject, and now all the knowledge of tens of thousands of systems engineers is available to us. It was one of the most significant discoveries of my life, and it could be yours too. Look at the INCOSE website or visit the ‘Guide to the Systems Engineering Body of Knowledge (SEBoK wiki).’
Systems engineering evolved from a practical application of mathematics to some kind of social engineering and technical management discipline. It took a lot of methodological and semantics aspects into itself and became a prominent set of tools and techniques to tackle the complexity. But still, huge problems with these formal methods have arisen. Formal representations have a dark side too. But that is the following story.
Bibliography
Keith Tantlinger, 2022. Wikipedia.
Levinson, M., 2008. The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger. Princeton, N.J.
Prigogine, I., Stengers, I., 1994. Time, chaos, quantum. Moscow: Progress.
