NS Revamping Operating Philosophy

Norfolk Southern on Tuesday rolled out yet another service strategy that CEO Alan Shaw said is designed to enable long-term growth while enticing shippers to move freight by rail rather than by highway.

As reported by Trains magazine on its website, the Atlanta-based carrier will still employ the precision scheduled railroading operating model, but Shaw described it as a different form of it that will not focus not so much on reducing the operating ratio, which is the percentage of revenues that NS spends on operating expanses.

Instead, NS will seek balance among service, productivity, and growth.

“These are not competing priorities. They are complimentary,” Shaw said indicating that NS will not focus so much on reducing expenses and profit margin.

“We just can’t cut our way to sustainable growth,” Chief Financial Officer Mark George said during NS’s investor day program.

He said NS will strive to o provide consistent service even during tough economic times.

Shaw said NS management recognizes that the traditional approach of furloughing workers during economic downturns and cutting spending “did not work well.”

It led to a deterioration in service and lack of confidence by shippers.

Shaw acknowledged that NS has yet to reach its desired level of staffing and although its service has improved, it is not yet where shippers expect it to be.

In future traffic downturns, NS will avoid furloughing operating personnel so it can be better prepared for traffic rebounds.

“By serving more volume in the recovery, we generate more revenue, and by avoiding the disruption, we enable customers to trust us and build supply chains around us,” Shaw said.

A key to the new NS plan is running what Floyd Hudson, vice president of transportation, described as a disciplined operation, which he defined as running trains on time, switching cars within six hours, and putting the right car in the right block on the right train.

NS hopes this will enable it to attract business that now moves in trucks. If NS is able to pull off its new strategy its expects freight volume to grow between 2 percent and 4 percent annually while revenue increases by 5 percent a year.

Most of this volume growth is expecte4d to come from intermodal, which NS executives said could grow at twice the rate of the gross domestic product.

In a related development, NS has told the U.S. Surface Transportation Board that its has posted improvements in its service metrics in recent weeks, which it credited in part to improved staffing.

NS now expects to reach its pre-pandemic service levels service metric levels by May 2023. Its eastern counterpart CSX told regulators its goals remain unchanged because its network  resiliency, staffing and hiring levels, and current service metric trends do not yet justify changes to its service recovery plans.

CSX said that since late October it has met or exceeded each of the key performance targets it set last May in its service recovery plan. The ranks of conductors and locomotive engineers are near normal levels.

The Jacksonville-based carrier said it has an active personnel force of 6,918. It’s goal is to reach 7,000 to 7,100 by the end of this year.

NS told the STB that since last May it has exceeded its hiring of new operating workers while also exceeding its target levels for system velocity and on-time performance.

However, terminal dwell time remains elevated and its local service metric fell short of its six-month goal.

Tags: Alan Shaw, CSX, Norfolk Southern, NS CEO Alan Shaw, NS operating plan