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NS teams ponder purchases to control costs

Since summer 2001, Norfolk Southern Railway's strategic sourcing group has identified $36 million in money-saving opportunities, according to the Class I's monthly newsletter released Nov. 1.

To cut purchasing costs, the group created cross-functional teams that analyze corporate spending in several categories, consider financial, operational and market-related factors, and develop sourcing strategies.

For example, a team comprising engineering and material-management employees is devising a more reliable and efficient distribution network for buying track materials.

Other teams are developing sourcing strategies for program ballast distribution, intermodal terminal operations, corporate purchasing cards, employee lodging and travel, and energy that would save NS about $26 million annually.

The sourcing group also assigned teams to analyze diesel fuel, locomotive materials and telecommunication costs.

"Strategic sourcing examines the total cost of ownership for purchased goods and services, including purchase price, internal costs and costs shared with suppliers," said Jake Allison, NS assistant vice president of strategic sourcing. "When we analyze our costs this way, we have a much clearer picture of where we can reduce costs."

Contact Progressive Railroading editorial staff.

More News from 11/6/2002