Horizon Lines – Horizon Services GroupSeattle - Alaska RFID Project Summary

October, 2006

Industry Overview• No visibility to inland equipment.• Inverse matching, loads to empty move.• Inventory management.• Manual work done providing shipper data.• Shippers spend $billions of dollars on order

management systems and internal inventory tracking, but don’t work if no container data.

• Has product been delivered?• DHS risks, no actual operational data. Where is

a box?

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Project Overview – Objectives & Scope

ObjectiveThe Horizon Lines Alaska RFID Project has established the infrastructure and processes required to support an RFID container tracking solution in the Alaska trade lane. The goal in establishing this backbone is to provide end-to-end visibility container shipments to both customer and Horizon Lines personnel in order to provide new levels of customer service and to develop internal operational efficiencies.

Scope• The project initially focused on establishing an RFID backbone within the ports of

Tacoma and Anchorage to support the tagging and capture of container identification data for a large customer for their northbound shipments by September 30, 2006.

• The RFID backbone has been extended to several Alaska D.O.T. facilities between Anchorage and Fairbanks to provide in-transit visibility to the container shipments during the intermodal move.

• Finally, as part of a customer pilot, Horizon Lines partnered with a major shipper to expand this capability within its distribution centers and store locations in order to provide true end-to-end visibility that will supplement existing supply chain management capabilities.

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RFID Primer – Example Deployment

The following is an example of the major components that are included in the Active RFID container tracking solution:

RFIDAntenna

A permanently mounted Active RFID tag will transmit a beacon with a unique serial number on a pre-determined interval

An RFID antenna/reader configuration will be utilized to capture the data from the tag and transfer the information to a data repository for processing

RFIDReader

Centralize DataRepository

Data transmission will occur over a network or cellular connection

RFID data is processed and associated with the container/shipment information in the data repository

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2

3

4 5

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Customers and Operation personnel will see the RFID container sighting events and locations within existing applications

RFIDAntenna

RFIDAntenna

RFIDAntenna

A permanently mounted Active RFID tag will transmit a beacon with a unique serial number on a pre-determined interval

An RFID antenna/reader configuration will be utilized to capture the data from the tag and transfer the information to a data repository for processing

RFIDReader

Centralize DataRepository

Data transmission will occur over a network or cellular connection

RFID data is processed and associated with the container/shipment information in the data repository

1

2

3

4 5

`

Customers and Operation personnel will see the RFID container sighting events and locations within existing applications

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Vendor Solution

• After several failed pilots, Horizon Lines selected one vendor to deploy an Active RFID capability including the necessary reader, tag and software components.

• The selected solution provides Horizon Lines with the flexibility to deploy an end-to-end solution in accordance with some of the unique requirements of the project:– Small, cellular-based readers allow for low-impact deployments to

the Alaska D.O.T. and customer locations.– The ability to read multiple tags at high-speeds are a key feature for

capturing reads along the highways.– A modular infrastructure allows Horizon Lines to evolve the solution

over time as new standards and capabilities become available.

Active RFID Tag RFID Reader

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Current Project Status

• We finished installing the RFID readers and integrating software modifications and has already tagged 4000 containers as of this morning and over 8400 RFID Sighting events in our environment. About 3000 left to tag.

• The project team has mapped the processes required to manage the new RFID capability as well as developed the necessary hooks into existing customer-facing applications (NetCaptain) and other operational tools (TOMS).

• The Alaska D.O.T. supported this initiative and allowed Horizon Lines to install RFID reader hardware at Houston and Healy between Anchorage and Fairbanks and at Summitt Lake between Anchorage and the Kenai Peninsula.

• The RFID solution, including the infrastructure deployments, hooks into existing applications were completed on September 30, 2006

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Customer implementation

• Horizon Lines has partnered with a fortune 200 company in a customer pilot program to further deploy the RFID capability in order to provide in-transit visibility for all northbound shipments from origin to destination.

• Horizon Lines has located RFID readers within the key distribution centers in Auburn, Bellevue and Anchorage along with a storefront in Fairbanks and a storefront in Kenai while having minimal impact to existing processes and operations.

• Infrastructure installation for each location requires a 1-2 days to include a site survey and the physical installation of the reader hardware.

• Expected lead time to bring on a new Customer is about 20 working days. This includes site surveys ordering of equipment and installation and testing.

• The reader hardware is small in size and requires a power source from each location. Cellular-based readers allow for quick installations where connectivity through existing networks are not available.

• The information captured from the reader infrastructure is associated to the shipment within the Horizon Lines system and will be viewable to the customer through the existing Horizon Lines NetCaptain interface.

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RFID infrastructure at the Port of Tacoma

RFID infrastructure at the Auburn DC

RFID infrastructure at the Bellevue DC

Washington Reader Deployments

RFID infrastructure located at the Fairbanks Store

RFID infrastructure in the Port of Anchorage and DC

RFID infrastructure within existing Alaska D.O.T. facilities

Alaska Reader Deployments

RFID Reader Locations•Distribution Centers - Bellevue (2) & Auburn (2) Washington, “C” Street Anchorage, AK (1)

•Storefronts in North Pole (1) and Soldotna (1) Alaska

•Alaska D.O.T. Sites in Houston (1), Healy (1), and Summit Lake (1) Alaska

•Horizon Facilities in Port of Tacoma (3) and Port of Anchorage (3)

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Sample RFID Sighting Events for Integration with TOMS

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Event NumbersLine Haul Moves 45

A new portal panel has been provided to display line-haul moves based on an authorized user id. This portal panel displays below the existing ShipStat panel and allows the user to view all of their active line-haul moves which include the captured RFID events. Clicking on the event name links the user to the Line Haul Report detail page

NetCaptain - Line Haul Portal Panel

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NetCaptain – Line Haul Report

NetCaptain – Line Haul Report Event Detail

Line Haul Report

Clicking on the equipment id links the user to the event details associated with that equipment

Disp Gate Out Anchorage, AK 8/31/06 4:00:00 PM TruckRFID Sighting ANC Port Guard Gate – Anchorage, AK 8/31/06 4:15:00 PM TruckRFID Sighting AKDOT Houston – Houston, AK 8/31/06 6:15:00 PM TruckRFID Sighting AKDOT Healy – Healy, AK 8/31/06 8:15:00 PM Truck

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RFID Sighting Events will supplement the existing events

to provide port and inland location information

RFID Sighting Events will supplement the existing events

to provide port and inland location information

Existing NetCaptain ShipStat reports

For regular port-to-port moves, the RFID events are displayed through the trip plan pages within the existing ShipStat report page

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ChallengesVendor Selection: So many vendors, offering a multitude of products, different frequencies, few with large scale implementations. Those with large scale implementations were often tied to fixed facilities. Others were too high end for what we needed.

Site Surveys and Implementations: Took longer than expected. Cellular coverage was spotty in certain locations and we had to move to new locations and deploy high gain antennas.

Security: Implementation created vulnerabilities to the Horizon Network and ultimately the Horizon System. Implemented an encrypted network tunnel using the SSH 2.0 protocol. This is initiated from the Horizon Data Center and connects to the remote device using a public/private key mechanism.

Downtime – lost connectivity: We worked with the product company and built software that caches the data until Network connectivity is available again.

Duplicate reads: There were some scenarios where caches events already reported were uploaded as duplicates. We had to develop logic in our event engine to validate incoming events against events listed to ensure they were not duplicates.

Mind shift for operations: Data comes in real-time, v’s current data that flows as batch jobs. Mind shift for users when evaluating the events. Customer calls CS for hot load, they call port ops, in past, even if discharged in system, may not be operationally, so they give extended time.

Procurement Timelines: We leant that buying the readers/tags was only part of the procurement. Critical to establish the SLA’s early.

Future Challenge - Marketing plan future roll-out: Working with tariff, major shipping partners.

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Benefits

• End-to-end visibility of customer’s shipments with real-time updates from the infrastructure established along the route.

• Real time visibility of new store construction material and initial store stocking merchandise and better detention and demurrage management.

• Horizon Lines is able to monitor the inbound loads en route to Tacoma for accurate vessel stowage.

• Customer availability data at port.• Can monitor turn time efficiencies between the Port of Anchorage and the

new stores.• Enhanced efficiencies result in lower operational costs for customer’s.• In-transit visibility allows customers to plan and react to delays in case of

inclement weather or other delays.• Fewer mistakes by validating that the right shipments reach the right

destination facilities.• Capabilities to receive the information from this infrastructure and direct a feed

into customer’s existing supply chain management solutions.• We expect RFID to proliferate within the shipping industry over the next 18 –

36 months and intends to be first-to-market with an Active RFID solution.

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The Future: Research and Expansion.

• Research expansion of this solution to future trade-lane’s, Hawaii and Puerto Rico. (We have begun this analysis).

• Expansion to customer’s own equipment. (we are doing)• Research implementation onto some key lower 48

highway, i.e. Tacoma, Kent, Seattle areas. • Large traffic volume effect of tags and readings.• More detailed ROI research.• Research potential to feed data back to other parties, i.e.

DOT for hazardous, universities for cargo research.• Expanding tags onto other vehicles, i.e. DOT expressed

interest in tagging their own vehicles in Alaska.

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Horizon Lines – Horizon Services Group�Seattle - Alaska RFID Project Summary�Industry OverviewProject Overview – Objectives & ScopeRFID Primer – Example DeploymentVendor SolutionCurrent Project StatusCustomer implementationBenefitsThe Future: Research and Expansion.