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.
Make that three…
Roger:
As a shipper; I have experienced the rollout of PSR on CN, CP and last year on CSX. Of the three, CN’s was the smoothest we experienced, largely because our CN contacts actively engaged with us and working together we were able to turn things such as reduced switching frequency from a negative into a positive.
With switching specifically, we sat down with CN operations and network design people to create a directional loading plan that enabled us to select the best days of the week to be switched and then load our shipments in such a manner that we were able to hit the “sweet spots” in CN’s train schedules. The result was better cycle time on our private fleet which reduced our car costs.
With CP and CSX, on the other hand, changes were made without discussion or involvement of customers and the result was the chaos everyone is now familiar with and the attendant higher cost for shippers.
I applaud Jim Squires, Pat Ottensmeyer and Lance Fritz for deciding to brush away the “do it now” mentality of Wall Street and rollout their versions of PSR in a more measured way that is less disruptive to customers. I expect all three will see better results by making it a cooperative process as opposed to shoving it down everyone’s throats.
EHH was the railroader who realized the world of transportation had changed. Competition required new ways of doing things and he developed them. More important, he was in a position to implement the changes. EHH can, perhaps, be criticized for the speed of change and the resulting disruption but not for the results. CN and CP are better railroads today and gaining traffic. CN has invested heavily in more double track, sidings and other capacity projects to handle the volume. PSR is a successful operating model and deserves to be copied.
A bit off topic…had a look around Bellevue, Ohio 2 days ago. A functioning hump yard, a derelict roundhouse, and a NKP themed museum. Still quite the RR town, PSR aside.
There goes railroading – right into oblivion.
David:
I believe you have “nailed” it. Jim Squires, Lance Fritz and Pat Ottensmeyer all have to play “carnival monkey” and bang the PSR tambourine to make the Wall Street folks clap their hands and laugh delightedly like children.
It just goes to show more and more industries, are beholden to Hedge Funds and Institutional Share Holders, with little focus of customer, product function, or delivery.
Sounds like the Emperor’s new clothes. Lets all get together on the same idea so if it goes south, it will not look bad for any of us!!
Redoing yard and local service to reduce motion and get more pre-blocking done is a good thing. It will only help the planned network car velocity increase. Problem is there is still a pretty good gap between plan and actual velocity at present. NS hasn’t gotten their railroad operation out of the ditch since things went south in 2016. Oct 2016 train speed was 23.2. System dwell 22.7 hrs.
Last week: 19.4 mph, 25.7 hrs.
Maybe they are just keeping investors happy . You call just about any change “watered down PSR “. It always seems to pop up in “Earnings call”.
Which begs the question: If PSR has been the way to go, why have we been paying bonuses to all of the industry execs for all of these years? Rewards for ineffiency?
More PSR-lite.
Charles amen, brother. When all you are concerned with is profit you loose the focus of your business and that is railroading. Sad that the RRs think that lunatics plan will actually work. Should be interesting to watch the “service disruptions”.
GREG and WARREN – Kudos to you for sticking up for what you believe is right and just. Just know you’re the only two.
Ditto!!! Industry Leaders, and Wall Streeters consider him the greatest Railroader of the last Century. Companies, ( bureaucracies), become Entrenched and don’t “see the Forest for the Trees”. EHH didn’t follow the bureaucratic mindset. Perhaps his methods ruffled many feathers…but he got results to the benefit of investors. I left the RR industry because of CSX’s poor management in ’88 and haven’t looked back. EHH was the right person at the right time…although earlier would have been better! Class One RRs have forgotten how to compete!!
Imagine that, EHH was right after all.
NS to implement PSR? There goes any chance of the Cresent ever being on time.
I will give you one more Railworker (actually I could give you a few), not on the NS though.
Pull lite power past the “First OS” trigger point, then back it down and tie it on to the train. Train shows “on time departure” and now the delay can be put on something else.
Intermodal symbol running hours late. Train is “terminated” at an outlying point, and beyond that point a new symbol magically appears. Low and behold the “new train” is on time!
Call crew for a phantom train symbol. Crew goes on duty and is told they are going to do hog relief. Since the crew has their own “symbol” all of the trains they dogcatch do not show as recrews.
In all fairness to NS, it may be a watered-down version of that functioning lunatic EHH envisioned but at some point you have to ask yourself if everybody is jumping off a cliff, should I necessarily follow suit?
More shrink-mode railroading to build volumes, huh? More executive Lemmings headed for the cliff.
My paper boy recently implemented “Precision Scheduled Bike Delivery.” He eliminated half his route and half his customers and is providing a “more consistent service product at a lower cost,”
I’ve worked in 3 different yards throughout the system. It’s all smoke and mirrors.
Dwell time is down because trains are held out on the mainline keeping the receiving yards almost empty.
The forwarding yard will be full of trains of the same symbol which will change to a train symbol of that date after sitting in the yard for days.
Clean sheet was adopted for about a week before it was abandoned.
Eventually the lies catch up to everyone. Especially if you base your entire existence on it.
The problem with PSR is that it has evolved from a set of principles (fundamental truths or a doctrine) to a set of commandments (commands). It doesn’t have to “look the same way” on each railroad. It’s the end results that matter.
When EHH was implementing on the Illinois Central what would become PSR, he spoke of the changes in ways that unions and customers could support them. In single-tracking the famous “Main Line of Mid-America” with CTC, EHH said local service was “butchered” on IC’s ABS-protected directional double track. Locals would switch customers on the south-bound side one one day and customers on the north-bound side the next. With single track and CTC, locals could switch any customer any day. Running the same number of trains each way, crews could swap trains at mid-point and be home more often rather than spending nights at a distant terminal.
Of course, the changes EHH made improved service, enhanced quality of life, cut costs, and ultimately improved the financial bottom line. Now all that seems to matter are the financial results.
I guess this means very few to no steam or other special excursions on class 1 railroads moving forward, with Amtrak’s excursion ban, PTC, and now this which will leave little room in the schedule for extra trains. So much for 611 having a long excursion career again.