NS Watching CSX Changes, But Also Working With its Customers to Improve its Service Metrics

When it was his turn to speak at the Bank of America Merrill Lynch 2017 Transportation Conference, Norfolk Southern CEO James Squires did not shy from acknowledging the elephant in the room.

Squires said NS is closely watching how chief competitor CSX is reshaping its operating plans. At the same time, NS has its own operating changes to make and it feels good about its performance thus far.

“We’re extremely focused on industry developments right now and watching what’s going on carefully, all the while focused on executing our plan,” Squires said.

He spoke to the conference shortly after CSX Chief Financial Officer Frank Lonegro raved about the improvements CSX has made in its operating metrics nearly two months since its new CEO, E. Hunter Harrison, came aboard and began implementing his precision scheduled railroading philosophy.

Squires said there is a difference between network performance and customer service.

The former measures such things as train speeds and terminal dwell time, which Squires said may be important to railroad managers.

“But our real focus these days is on customer-facing metrics,” he said, adding that NS is working with its customers to define joint service metrics.

He said this would include such things as getting containers off intermodal trains when promised and providing shipment consistency for merchandise shippers.

“What we’re trying to do with our customers is measure performance in the entire supply chain,” Squires said. “That’s different than merely measuring terminal-to-terminal train performance.”

Squires said NS might borrow some operating ideas from CSX if they makes sense.

“Operations best practices are operations best practices and we all operate out in the open,” he said. “I’ve been very clear with our operations team that if they see the other guy doing something smart, then don’t let your pride get in the way of the right thing for the customer. And by smart, I mean better use of the assets and good for the customer and the business long term. If those two things are present, then we’re all over it.”

One area where NS might follow CSX’s lead is with hump yards. NS has 10 hump yards and has closed three humps during the past two years.

“And others are under review. That may make sense, it may not,” Squires said.

NS is seeking to reduce its operating ratio below 65 percent by 2020, but the railroad’s board of directors has sought an acceleration of that plan by offering management incentives to hit operating ratio and earnings per share targets by 2018.

“We’re pushing as hard as we can,” Squires said.


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