Sea-Land effect
| Wright |
What does Horizon Logistics have over other start-up non-vessel-operating common carrier services? The answer is quite simple: the Sea-Land effect
. Horizon Logistics is part of Horizon Lines, the U.S.- flag domestic liner piece of the once mighty international container carrier Sea-Land Service, which was acquired by A.P. M'ller – Maersk in 1999. Sea-Land also once operated one of the most prominent freight consolidation services in the transpacific trade, known as Buyers Consolidators
. 'It's like Sea-Land without the ships,' said Duncan Wright, director of NVOCC operations for Horizon Logistics, based in Dallas. 'We have all the systems, sales teams and legal knowledge in place for this service.'
Wright noted that when Sea- Land was acquired by Maersk, the company had management and staff located around the world, many of whom stayed in the ocean freight logistics business.
'If we have a shipper who is looking for help in a certain country that we don't currently operate in, we have strong networks in place that we can quickly tap into and set up the services and legal agreements we need,' he said.
In recent years, Horizon has received numerous inquiries from its domestic shipper base about offering international freight transport, such as an NVO service.
'Many customers that we work with at Horizon have components of imports and exports moving through their networks,' said Brian Taylor, president and chief executive officer of Horizon Logistics. 'They're now giving us opportunities to look at what they do internationally.
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| Taylor |
'And it's not just the large customers,' he added. 'We have a lot of smaller customers that are looking for help in this area. We're very encouraged with how we're starting to get some traction with this service.'
Horizon's sales team has also been actively contacting current customers to let them know about the NVO service. Some of Horizon's shipper relationships are now 40 years old.
Unlike Buyers, which specialized in consolidating multiple shipments for large retail shippers in overseas hubs, such as Hong Kong, and shipped them to the United States for breakdown and distribution, Horizon's NVO service will initially focus on handling full containerload movements in the transpacific trade between Asia and North America, providing any required inland logistics and customs clearance services.
While the transpacific lane has softened due to sagging U.S. import demand, Wright pointed out that there are still significant volumes moving within the trade. Besides, he said, when you're starting from zero loads, the only direction for Horizon's NVO freight volumes is up.
Wright believes some freight opportunities may come to Horizon through the closure of other NVOs, who fail to weather the economic storm. 'Being part of a $1 billion-plus, profitable carrier with supporting NVO services makes us unique in the marketplace as shippers look for stability and strong partners,' he said.
Horizon executives point out that the Asia/U.S. West Coast trade ties well with other Horizon Lines assets, such as its warehouses in Tacoma, Wash.; Oakland and Los Angeles; and Laredo, Texas, and its drayage operations in these locations. The company provides its own drayage, transload and intermodal services to support basic port-to-port services provided by other liner carriers. Wright said this will become an additional selling point for Horizon as more carriers scale back to just offering shippers port-to-port services.
'We found that we could build a network that allows us to become an international NVO and have a great deal of influence in the market,' Taylor said. Wright added: 'Trust is also something we feel is lacking in some market segments of the NVO business, and we believe our long term relationships as a trusted partner will help us grow.'
To counter eroding rate levels in the trade, Horizon has established a markup or margin-level per container, which stays the same no matter the rate conditions. 'The end result is we have to make sure our customers have the most competitive rate in the marketplace so that they are competitive,' Wright said.
The new Horizon NVO service enjoys 'scalability' in the market. If freight volumes expand slowly, the company will operate accordingly, and vice versa will add head count during growth periods. 'We truly believe that by aligning with some of our key accounts, and the businesses they are in, demand will not be a concern,' Wright said. 'If you are 100- percent import retail, high-end clothing, you could be wiped out in 2009, but we are not focusing on those market segments.'
Due to the severity of the international market, Horizon expects more shippers will avoid entering traditional service contracts with liner carriers.
'Customers are looking for flexibility right now,' Taylor said. 'They're not sure how this economic slump will affect their volumes. NVO relationships do not require a contractual commitment.' It's also not out of the realm of possibilities for Horizon to eventually add less-than-containerload shipments to its NVO portfolio.
'We see the potential, but we have not yet connected all the dots,' Taylor said. 'Our primary motivation right now is going after the full containerloads to integrate with our intermodal business.' Horizon has started to receive some inquiries from shippers who seek NVO services outside traditional transpacific markets. Some shippers, for example, have asked Horizon to provide NVO services from Asia to Hawaii, and Mexico to Puerto Rico. 'Without an NVO, we would not have the ability to service these needs,' Wright said.
The company has also begun international NVO export services. Horizon recently handled export shipments to and from locations such as Scotland, Australia, New Zealand, Venezuela, Palau and Mexico. The company is finalizing a Central America agreement that will give it import and export services into most of Latin America.
'We plan to be full service internationally across all major trade lanes by the end of the year,' Wright said. 'Our catch phrase at Horizon is 'we're back and we're here to stay.' '