The decision, announced today, comes a month after Union Pacific said it, too, would implement an operating plan based on the philosophy of the late E. Hunter Harrison, who used Precision Scheduled Railroading to transform Canadian National, Canadian Pacific, and CSX Transportation.
And, like UP, Norfolk Southern says it will depart from the Harrison approach by rolling out the changes gradually, with minimal disruption, and by working in collaboration with customers.
“We will implement PSR principes where they can allow us to better serve customers and shareholders,” CEO Jim Squires said on the railroad’s earnings call on Wednesday.
“We will endeavor to implement a new operating plan while minimizing service disruption,” Squires says. “And we’re not going to sit out growth while we do so. This remains an environment very conducive to growth and we are determined to capitalize on it.”
Squires was asked if this meant NS was not fully embracing Precision Scheduled Railroading.
“We’re looking at everything out there, including elements of PSR, that are complementary to our strategy,” Squires says, noting that the railroad will blend its own ideas with best practices from other railroads as well as elements of Precision Scheduled Railroading.
Squires declined to say whether NS has any targets in mind for layoffs, reductions in the size of its locomotive and car fleets, or whether it would streamline its network of classification yards.
“But suffice it to say that our goal is to produce a railroad that provides a more consistent service product at a lower cost,” Squires says.
NS expects to see productivity improvements as it reduces the number of cars online and runs a higher-velocity railroad. And Squires says NS will continue its D.C.-to-A.C. locomotive conversion program as well as buy new locomotives as required.
NS will release full details about its new operating plan during an investor day scheduled for Feb. 11 in Atlanta.
Chief Operating Officer Mike Wheeler says NS for several months has been taking a “clean sheet” approach to operations at local yards and terminals. The goal of the process, he says, is to increase car velocity and reduce the number of cars online.
NS is creating more blocks of traffic in local yards, which allows the cars to bypass major classification yards, Wheeler says. NS is working with customers and short lines on improving blocking, as well.
To date, the clean sheeting approach to first- and last-mile service has reduced re-handling of cars by 80 percent, improved train performance to the mid 90-percent range from the low 80-percent range, and decreased terminal dwell by up to 4 hours.
The new operating plan will be built from the local level up to the network level, Wheeler says.
The overall plan will include blending unit-train traffic into the merchandise network. By pushing more volume into the merchandise network, NS will be able to operate longer trains on a daily basis, up from several days per week currently.
NS also will encourage faster loading and unloading of freight cars by increasing demurrage charges, something Harrison-led railroads have done with success.
NS has brought in people with Precision Scheduled Railroading experience and will continue to do so.
“We don’t have a monopoly on good ideas,” Squires says.
Harrison’s operating model is sweeping the industry.
After delivering record second-quarter results this summer, both UP and NS executives found themselves facing Wall Street analyst questions about why they couldn’t move as far and as fast as CSX.
Harrison took the helm in Jacksonville in March 2017 and rapidly rolled out operational changes prior to his death in December 2017. The changes were accompanied by a summer and fall of service problems last year. Service has recovered and CSX is now dramatically more profitable, with an operating ratio that is among the industry leaders and will likely be below 60 percent this year.
Last week, Kansas City Southern executives said they would adopt some elements of Precision Scheduled Railroading as UP — a major interchange partner for Mexico traffic — changes its operations.
