When a Horizon Lines cargo ship dry docks, the vessel’s propulsion system is broken down to basics. Turbines are taken apart, blades are removed, and nozzles are detached. All of the complex pieces that come together to power the enormous ships are examined to verify that they are in optimal working condition.

Chuck Raymond, CEO

At a time when fuel costs are as stable as a seat on a mechanical bull, the dry-dock process helps ensure Horizon Lines gets the biggest bang for its buck. But the thorough engine inspection also provides insight into how the company operates. Just as the propulsion system is broken down and examined to optimize the use of fuel, company management is continually looking at all parts of the business to find ways to make it run more efficiently.

“We have a wonderful business here that is protected by the Jones Act,” CEO Chuck Raymond said. “The last thing we want to do is take advantage of that. We don’t want to have inordinate costs in our systems that result in costs that our customers have no choice but to pay. We want to be efficient. We’re constantly exploring new technologies and better ways to manage our fleet to help us keep our rates down. If we didn’t strive to be efficient, we’d be taking advantage of our customers, and that’s not what we’re in business to do.”

Creating a culture
Based in Charlotte, NC, Horizon Lines is the nation’s leading Jones Act container shipping and integrated logistics company, operating 16 US-flag vessels on routes linking the continental US with Alaska, Hawaii, Guam, and Puerto Rico. The company employs more than 1,800 people in offices throughout the US and at terminals in the non-contiguous Jones Act markets.

Horizon Lines was formed in 2003 when the ocean-going sector of international transportation company CSX Lines was purchased by global private equity firm The Carlyle Group. Raymond, who was serving as an executive officer with CSX, led the initiative to sell the ocean-going sector of CSX.

“We had a tremendous capability we could use across the three trade lanes,” he said. “We had the management expertise, technological capabilities, and we were unique to the industry. And we were really the only ones providing ocean transportation services to Alaska, Hawaii, Puerto Rico, and Guam—all four of those markets. None of our competitors do that. We knew if we would have a great opportunity if we could create a company that focused on that niche.”

The biggest challenge at the outset, according to Raymond, was creating a culture for the new company. As a large, publicly owned entity, CSX had access to cash. For Horizon Lines to survive early on, there had to be an intense focus on cash management.

“Immediately, I made sure all 10 of our top executives got a message on their cell phone every day that told them exactly what we had in the bank,” Raymond said with an easy laugh. “That was a message I learned from my days at Harvard Business School: never run out of cash.”

Raymond, who has spent his entire 40-year career in the transportation industry, also wanted to create an open, consistent leadership style that encouraged employees to contribute their thoughts on a regular basis. The chief executive kicked off the initiative by traveling to each of Horizon Lines’ facilities and meeting face to face with everyone in the company—a journey that took half a year.

“It was important for me to meet with our people and let them know the type of manager I was going to be,” Raymond said. “I let our people know that it was up to them to make decisions to grow the business in their markets. To do that, we created a decentralized management structure to give more authority to the local organizations. The only authority at the corporate office was to set policy. We did that, and we hit the ground running.”

Today, Horizon Lines accounts for roughly 37% of the total US marine container shipments from the continental US to the three non-contiguous Jones Act markets. And in September, the company went public with an IPO that sold 12.5 million shares of common stock.

High-tech shipping
Technology has played a critical role in the organization’s rapid growth. Horizon Services Group, a wholly owned subsidiary of Horizon Lines, offers a robust technology platform that automates cargo management and tracking services.

Clients can use the Windows NT platform to book shipments online, track and trace cargo 24/7, and format their own reports. When a customer books a shipment online, they use templates that are stored in the system. If it’s a recurring shipment, the customer can quickly pull up the first template and use the originally stored parameters to book a new shipment.

“Once it’s correct in the template, it creates tremendous savings for the client and for us because we filter out the errors before they happen,” Raymond said. “That’s a critical thing that technology brings to the business today. It’s not that you can just track and trace online, it’s that you’ve done this before so you do it the same way you did it last time. If you do it once, everything else is right, including your billing. That speeds our cash flow and increases our working capital. It’s one of they ways we’re using technology to enhance the business.”

The company is also using the latest technology to transport customers’ goods. In September, Horizon Lines announced the deployment of 900 new high-cube Reefer PlusSM refrigerated containers. The containers include several design enhancements that improve operating efficiency and durability. Each container is equipped with a new style of door-lock cam to seal the doors with a high security seal and prevent entry to the container without detection.

Further, Raymond said, the company is deploying technology that will allow customers to check the temperature of their refrigerated containers via the online system. “We ship everything you need to survive in Alaska, Guam, Puerto Rico, and Hawaii. We move lifeline materials, and that’s why our refrigerated containers are so important to us and our customers,” he said.

Full steam ahead
Horizon Lines will also look to increase efficiencies in 2006 with an investment in RFID tracking and a major vessel replacement initiative. According to Raymond, the new vessels will help increase capacity, lower costs, and pave a path for growth in 2008 and beyond. In December, the company added new personnel and underwent a management realignment to tackle the growth plan.

Most notably, Horizon Lines appointed John Handy as executive vice president. Handy brings a breadth of experience to the growing company as a retired four-star Air Force general who most recently served as Commander of USTRANSCOM, the single manager for air, land, and sea transportation for the US Department of Defense. Handy’s major responsibilities will be the continued enhancement of trade lane profitability and system service integrity, the leadership of strategic business development, and the further development of the company’s management team.

Said Raymond, “I believe these promotions and realignments of management responsibilities position Horizon Lines smartly to grow and sharpen its core business, to develop new related capabilities and earnings streams, to deploy appropriate resources to expand and deepen its investor base and to plan for its emerging senior management needs in the years to come.” He continued: “Our business is good and strong right now, and we’ve spent a great deal of time working on our growth strategy for the future,” he concluded. “But the key to our success is to continue to look for ways to run our business more efficiently.”