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Rail News Home Canadian National Railway - CN

November 2016

Rail News: Canadian National Railway - CN

Railroad Innovator Award: As CEO, Claude Mongeau helped bolster CN's supply chain relationships

— By Daniel Niepow, Associate Editor

Supply chain collaboration was one of the hallmarks of Claude Mongeau's more-than-six-year stint as president and chief executive officer of CN. Under his direction, the railroad placed a strong focus on improving relationships with supply chain partners to boost overall efficiency.

With Mongeau at the helm, CN also invested in the railroad for the long term in order to "raise the bar on efficiency and customer service," as he put it earlier this year. In all, Mongeau's efforts helped transform CN into a more customer-friendly organization while still maintaining the railroad’s high levels of operational execution.

"The supply chain focus is a natural evolution from where CN has been," Mongeau told Progressive Railroading in 2011.

CN certainly evolved under Mongeau’s watch. In first-quarter 2016, the Class I reported an operating ratio of 58.9, an improvement of more than 10 points from 1Q 2011. At the same time, first-quarter revenue totaled nearly 3 billion Canadian dollars, up from CA$2 billion in the same quarter in 2011.

In June, Mongeau stepped down from his post for health reasons, but his impact is still being felt. And it'll continue to be.

"[Mongeau] has been instrumental in helping us raise our game by evolving our strategic agenda to one of operational and service excellence while positioning CN as a true supply chain enabler," said Luc Jobin, CN's current president and CEO, during a second-quarter earnings call. "That agenda still resonates today with our customers and helps us gain traction in the marketplace even in difficult economic circumstances."

Mongeau joined CN in 1994 shortly before the formerly government-operated railroad became privatized. He then helped the Class I navigate a series of acquisitions, including the Illinois Central Corp., the Joliet and Eastern Railway Co. and Wisconsin Central Ltd. He was named executive vice president and chief financial officer in 2000. Mongeau took the top leadership post in 2010.

To honor his accomplishments during his more than two decades at CN, Progressive Railroading and RailTrends® in May named Mongeau the 2016 recipient of the Railroad Innovator Award, which recognizes an individual's outstanding achievements in the rail industry. Mongeau will receive the award in person at the RailTrends conference, which will be held Nov. 17-18 at the W New York Hotel in New York City.

Below, Mongeau reflects on his time at CN, and shares his thoughts on innovation, customer service and the future of railroading.

Q: What drew you to the rail industry? And once you got there, what made you want to stay?

A: When I came to CN in 1994, I was initially drawn to the company and its rapidly changing prospects for the future. At that time, CN was still a government-owned railway, but the bold new management team, led by Paul M. Tellier and Michael Sabia, was pushing an exciting agenda for change. Being part of that type of historical shift at a corporation attracted me more than any particular interest in the railway industry. Even then I could see the underlying and untapped strength of CN's franchise despite, at the time, its position as a railway industry laggard. I sensed I could contribute to the fundamental transformation Paul and Michael envisioned for CN. I am grateful to have played a leadership role in what proved to be a remarkable transformative journey over the last 22 years, a journey that continues to this day. Coming to CN was absolutely the right decision. I became a proud railroader and have never looked back. I will always wish I could have stayed longer as CN's leader to continue the journey and carry the agenda forward.

Q: What would you say are your most important accomplishments over the past two decades?

A: From my first day as CEO at CN, I stressed the valuable role teamwork plays in the success of any company. Delivering such a fundamental and historic business transformation at a company as large and complex as CN can only be the result of a true team effort. Throughout my career at CN, I was fortunate to lead great teams on so many important, game-changing initiatives. The last 22 years have been filled with so many achievements of which I am extremely proud, such as:
• CN's sizeable fixed cost-reduction effort in the early phases of restructuring;
• the company's successful privatization;
• completing five value-creating acquisitions to expand our footprint across North America;
• achieving much higher asset utilization levels with our precision railroad model; and
• executing our bold customer-centric agenda to become a true supply-chain enabler and to fully play our role as a backbone of the economy.

I believe a culture of solid teamwork combined with a bold and clear vision, a passion to drive change in a positive way and highly disciplined execution were the key drivers of CN's success. I worked hard to embed those values in the culture at CN and in everything I did as the company's leader.

Q: What does innovation mean to you, particularly in an industry that isn't often characterized as being a hotbed of innovation?

A: I truly believe the railroad industry innovates more than people realize, and certainly more than the industry gets credit for today. For too many people, the railroad may look locked in the same old ways of doing the same old things; but take a closer look at CN, and it is easy to see innovation driving success in all facets of railway operations and at every touchpoint with its customers and stakeholders. CN has transformed itself through innovation and continues to lead the way by striving to find new ways to deploy resources more efficiently and reliably. Adding value for our customers by improving our services, and using technology to do so in a safer and more sustainable way, are the underpinnings of innovation in a mature industry like ours. We've used innovation to lower our carbon footprint, improve efficiency in the supply chain and drive improvements in safety, just to highlight a few. There is still a lot more to do along those lines, but the rail industry is on the right path.

Q: What do you think railroads need to do to better serve customers?

A: The railroad industry today operates on a solid footing, recovering these last 30 years after decades of decline in the second half of the 20th century. That industry-wide turnaround can be credited to government deregulation, strong investments in infrastructure and equipment, a more consolidated operating structure and sound business innovation. To sustain the recent success, I also believe the industry has to broaden its core efficiency focus to advance a more customer-centric agenda. That means embracing a true supply chain mindset.

Our customers need reliable end-to-end transportation services to succeed. Very few goods are delivered in isolation by only one railroad or by one mode. In many instances, more than one railroad with a range of supply chain partners, such as steamships or trucking companies, are involved in safely delivering goods to end markets.

I continue to see significant potential for meaningful improvements in service quality through the pursuit of an even more seamless supply chain. That means more supply chain integration, both from an information and execution stand-point. In the last six years, CN has embraced this new mindset to deliver significant benefits, notably through increased customer satisfaction and profitable growth.

More industry players need to adopt this mindset and embark on this journey in order to accelerate the potential for positive change throughout key supply chains. It can be done by:
• breaking down silos between supply chain segments;
• leveraging technology to address customer touch points in a more holistic fashion;
• adopting the right service performance mindset; and
• continuing to invest ahead of the curve despite the current uncertain economic environment.

I believe these elements are all critical to future success for the railroad industry, its customers and all their supply chain partners.

Q: What do you hope your legacy at CN will be?

A: I think I'll leave defining a "legacy" to others, but I do know what I hope for CN's future. I know CN will carry forward with the end-to-end supply-chain partnership approach I championed during these last six years leading the company. I also know CN will relentlessly continue to find new ways to innovate and add value for its customers.

More than half of our current employees have joined CN during my tenure as CEO, an obvious workforce renewal challenge but one I continue to see as a rare opportunity. I'm confident that with the right customer-centric agenda firmly in place, this new generation of railroaders and leaders will be able to bring a fresh perspective and keep CN positively leading the way in the rail industry for many years to come.

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