Norfolk Southern's process-improving initiatives pay dividends (8/7/2001)


More than six months into its restructuring program, Norfolk Southern Corp. is beginning to experience positive belt-tightening results — right down to its bottom line.

The results are coming from initiatives implemented through "NS 21," the Class I's ongoing program designed to improve business processes to boost customer service and reduce costs.

An NS 21 car-management team to date has realigned NS' car management department, standardized car metrics and reduced the railroad's rail-car fleet by 10 percent. The team has sold 9,000 surplus cars — with plans to sell 3,000 more — yielding $33.3 million, and returned 1,000 surplus leased cars to help lower depreciation costs and ease track congestion.

NS also has reduced equipment rentals $16 million compared with mid-2000 rental totals by more quickly returning other railroads' cars.

Another NS 21 team is monitoring the railroad's Internet Bill of Lading (iBOL), which was launched May 1. NS receives 70 percent of its bills of lading electronically — with 107 iBOL customers accounting for 2,500 weekly Internet bills — and the team plans to increase that percentage.

NS 21 also is concentrating on bill collection: By focusing on a targeted group of customers, the railroad to date has collected about $800,000. NS also reduced by four to five days the length of time required to receive payment, resulting in monthly savings of between $500,000 and $600,000.

Another NS 21 team is targeting more timely and accurate tracing and tracking reports. NS is providing additional training to yardmasters and train crews — 4,476 crews in 179 locations so far — to improve communication and documentation. As a result, trained employees work-order error rate declined from a 72 percent baseline to 7 percent.

On the purchasing side, an NS 21 team has been trying to reduce the railroad's vehicle fleet by 1,000 to save about $10 million annually; to date, the Class I has disposed of 500 vehicles — selling 278 vehicles for $740,000 — and plans to dispose another 500 by year-end. The team also is developing a new vehicle policy aimed at ensuring standards and equal vehicle treatment across NS' departments.

Meanwhile, a Facility Transactions team might have the most difficult task — determining which NS facilities to sell or close by year-end.

"Closing or selling facilities is not a popular decision, nor one to be considered lightly," said Kathryn McQuade, NS senior vice president financial planning and co-chair of the NS 21 steering committee, in a prepared statement. "We're exercising sound business judgement made on careful analysis, even when doing so requires difficult and unpopular decisions."

Perhaps the teams' most unpopular decision so far is a plan to close NS' Hollidaysburg, Pa., car shop Sept. 1.

Surface Transportation Board May 21 directed NS to justify its plan to close the shop or the board would order NS to keep the shop open at present capacity well beyond Sept. 1.

STB based its decision on assurances NS gave the board in 1997-1998 within its Conrail acquisition application. NS indicated its intent — in filings, news releases and Senate testimony — to retain and continue operating Conrail’s car shops.

To date, no formal announcement has been made by NS or STB as to the shop's current fate.

Meanwhile, the facilities team helped close a Roanoke, Va., foundry and mechanical reclamation area, and plans to close NS' Birmingham Frog Shop and Coster Wheel Shop by year-end.

"At the end of the day, these efforts, along with other NS 21 initiatives, will strengthen our financial and operational positions," said McQuade. "As we move forward, we'll continue to identify and address ways to improve customer service and reduce costs."

Source: Progressive Railroading Daily News