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Rail News: Rail Industry Trends

NS leans on new operating plan, process-improving initiative to continue lowering costs, raising revenue


Norfolk Southern Railway officials believe the railroad's efforts last year to improve its operating ratio and service reliability provide the Class I an opportunity in 2002 to increase its revenue yield.
And operating efficiency and service should continue to improve this year because of "NS 21," the railroad's process-improving initiative, and Thoroughbred Operating Plan (TOP), NS' soon-to-be fully implemented redesigned merchandise network, said David Goode, chairman, president and chief executive officer at the Class I's Jan. 23 analyst meeting in New York City, according to a statement prepared Feb. 19.
TOP, which is more than 95 percent implemented (full implementation is expected in early March), so far has helped NS achieve 85 percent on-time departures and arrivals (plus or minus two hours).
"The ultimate goal of TOP is to improve reliability and reduce variation," said Goode. "But at the same time, it helps asset utilization, train velocity, terminal dwell time, and on-time train performance, and reduces routing across our commodity network."
Through NS 21, the railroad last year sold, leased or abandoned 412 track miles — part of its plan to rationalize 3,000 to 4,000 track miles — saving the railroad $5.2 million in maintenance and $1.5 million in property taxes. The Class I also eliminated 650 grade crossings.
However, a 485-mile eastern North Carolina segment, which NS planned to rationalize, will be retained and operated as a separate internal business unit.
"This unit will be managed and operated under a business plan to generate incremental business on that line and enhance the profitability of the business unit," said Goode. "[It's a] shift in our strategy from one of just eliminating lines to one where we are intensively studying these lines, and, where appropriate, retaining them with improved profitability, where the business tells us to do that."
Meanwhile, NS last year closed its Roanoke, Va., foundry and reclamation facility; Birmingham, Ala., frog shop; and Knoxville, Tenn., wheel shop, adding $6.3 million to the railroad's coffers with another $2.2 million expected in annual savings. NS' plan to close its Holidaysburg, Pa., car shop has been delayed by a legal challenge, said Goode.
"On the other hand, our review of system facilities led us to conclude that … Charlotte Roadway Shop should not be closed since the work performed there was the most efficient and least costly alternative for roadway machine maintenance," he said. "Instead, we're turning it into a profit center, bringing new business in from outside commercial accounts."
The Class I plans to continue implementing NS 21 to reduce costs and improve customer relations.
"The next round of NS 21 projects will be focused on improving the efficiency of our track maintenance forces; better managing our material inventory levels; improving the condition of our railcars; and reviewing our coal transportation infrastructure and processes," said Goode.
Along with nurturing NS 21 and TOP, NS plans this year to continue taking a more disciplined pricing approach. The railroad is negotiating rates with customers to better reflect the market value of its service and associated costs.
"More than half our business is under contract with terms of one year or longer, so this is an ongoing process," said Goode.

Contact Progressive Railroading editorial staff.

More News from 2/26/2002