Norfolk Southern rebrands its strategy for long-term success

By Julie Sneider, Assistant Editor

In fall 2007, Norfolk Southern Corp. Chairman and Chief Executive Officer Wick Moorman called a meeting with Executive Vice President of Planning and Chief Information Officer Deb Butler and other VPs to develop several ambitious, five-year goals that would improve the company’s safety, service and bottom line.

Moorman also wanted the VPs to develop a rigorous process for how the company would achieve those goals. What ultimately evolved was "Track 2012," a long-range strategy that identified large-scale, cross-functional projects geared toward achieving broad company goals: improving asset utilization, fuel efficiency, customer service, workforce productivity and safety. A steering committee, chaired by Butler, was established to ensure the projects were on track and received the necessary resources.

But a funny thing happened between 2007 and the end of 2012: the Great Recession.

"While the goals we set were certainly correct directionally, the numbers themselves became unrealistic after the economy suffered so much in the 2008-2009 period," says Butler.

With the Class I focused on getting through the recession and on the recovery track, Butler's committee realized NS wasn't going to meet all the Track 2012 goals under the original timeframe. So, Butler and her fellow committee members regrouped. The result? A "rebranded" strategy of multiyear, interdepartmental initiatives all geared toward making NS safer, more efficient, more productive and more profitable, Butler says.

"We didn't want a 'Track 2013' and 'Track 2014' — we wanted a process that was much more sustainable and aligned with the one-year and three-year goals of the company," she says.

Now branded "Future Track," the strategic process remains flexible so NS can update the plan annually to address unexpected challenges (like the recession) or new trends (like crude-by-rail growth). The initiatives are aimed at transforming how the railroad operates, ultimately affecting every NS employee, Butler says.

With Butler at the helm, the committee — which comprises VPs representing all NS departments — is focused on getting results.

"It’'s important that we don't all get together and just nod our heads and agree that we’re all doing a great job," she says. "We need to challenge each other on what [the railroad] can do differently, what we can do better."

The group meets monthly at NS headquarters in Norfolk, Va., to discuss those long-term initiatives that will require the company's "sustained commitment" of capital and human resources, but that also will have the biggest payback for the entire organization, says Butler.

Future Track initiatives drive the company's investment priorities for infrastructure, equipment and technology. Proposed projects aren’t likely to be a priority if they don’t advance Future Track goals, she adds

"To determine where the resources will go, you have to ask the questions: Does [the investment] improve efficiency? Does it improve workforce productivity? Does it improve safety?  Does it improve service performance? If you can answer 'yes,' then it will rise
to the top of the list," says Butler.

As described in the NS "2013 Sustainability Report,”" Future Track is putting new technology into the hands of frontline workers so they can do their jobs better; targeting capital investment in equipment, infrastructure and technology based on business and operational priorities; and providing "new insights" into NS business operations, including sponsoring studies of customer service levels, network velocity or other issues that have an impact on operating costs.

"It's very simple: Future Track is a mechanism to ensure management attention to a small number of high-priority, cross-function initiatives," says John Friedmann, NS' VP strategic planning and a member of the Future Track Steering Committee.

One of those ongoing initiatives is a major expansion and redesign of Bellevue Yard in northern Ohio, one of NS' most important yards for classifying and switching rail cars. Located between Toledo and Cleveland, the community of Bellevue is situated at the intersection of five NS lines, Friedmann says.

When the Norfolk and Western Railway built the yard in Bellevue, railroad leaders set aside enough land to be able to double its size when business growth demanded it.

Built in 1967, the yard now is being doubled in size to accommodate more traffic. The $160 million project includes building about 38.5 miles of additional track, installing 145 miles of underground cable for the communications and signaling system, and building a second hump.

When completed, the Bellevue facility will be NS' largest hump yard, its only one with dual-humping capabilities, and one of the largest hump yards in North America, NS officials say. It's also the railroad's largest yard project in 40 years.

"Bellevue has always been oversubscribed in terms of traffic wanting to go through there," Friedmann explains. "Coming out of the recession, we were finally able to put together a business case to go ahead and make an investment that, frankly, had been envisioned back when the yard had been envisioned as a hump yard."

Construction began in 2012 and continues while the yard remains open for business. Track construction is well under way, and new buildings have been completed and are occupied. Project completion is scheduled for 2015, but NS officials hope to accelerate the work so the expanded yard is ready for service by the end of the 2014 construction season, says Friedmann.

In the context of Future Track initiatives, the Bellevue project constitutes what Friedmann describes as a "triple play."

"It will bring improvements in efficiency, improvements in service and it gives us the capacity for future growth," he says. "We don’t know exactly where that growth will be coming from or when it's coming. But being at the critical crossroads in our system, [an expanded] Bellevue will give us the ability to respond and handle that growth quickly and efficiently."

And that will be good news for NS customers.

"It will reduce unnecessary miles and cut out handling," Friedmann says. "We'll be able to send cars on shorter paths through the network, and we'll be able to move them faster because we're going to handle them fewer times."

Technology is a key component in the other Future Track initiatives under way. Among them: Remote Intelligent Terminal (RIT), Unified Train Control System (UTCS) with Movement Planner, and Locomotive Engineer Assistant Display Event Recorder (LEADER®).

RIT allows conductors and operations employees to use a wireless, handheld device to send and receive work assignments in near real time, says John Irwin, NS' assistant vice president of transportation network.

In the past, a conductor would fill out paper forms to update the status of rail cars and fax the information to NS' Operations Service and Support Center in Atlanta, which would process the information. Instead of faxing that paperwork, RIT allows the conductor to update the status of cars when he or she is in the field, says Irwin.

"It's pretty much point-and-click with a stylus to review track lists and identify which cars they're taking out of the yard, or which cars they've added to the yard and where they've put them," he says. "RIT offers our customers a more timely look at where their cars are located."

NS began developing RIT in 2009 for a test group of 30 conductors and completed the rollout across NS’ 22-state network during third-quarter 2013.

Also being rolled out under Future Track is the UTCS, which has been enhanced with Movement Planner: a computer-based system that helps dispatchers plot train plans to avoid conflicts, reduce delays and improve on-time performance. Developed by GE Transportation in partnership with NS, Movement Planner provides a "real-time plan" for up to 12 hours that predicts train trips based on real-time calculations.

"Movement Planner is cutting edge," says Irwin. "It uses a very complex algorithm to see what the trains are supposed to do, and the algorithm bases its decisions on the cost of delay."

The software evaluates thousands of pieces of data — such as topography, train length, tonnage, track characteristics and potential conflicts that could cause delays — to determine the fastest way to get a train to its destination. For the dispatcher, the system calculates the circumstances or conditions in territories beyond his or her own that could cause a train's delay, and then adjusts the plan accordingly to avoid a bottleneck, Irwin says.

Producing results

The new system has been implemented on five of the railroad's 11 divisions and will be rolled out to remaining divisions next year. It already has helped the Class I improve performance in some key areas, Irwin says.

"We did an in-depth study on our Georgia division, one of the first to have Movement Planner, and we saw substantial improvements in velocity," he adds. "Our re-crew rate went down substantially, and we also saw improvement in the train's ability to adhere to its schedule."

The railroad also has started using Movement Planner to more effectively schedule maintenance-of-way work. And toward the end of next year, Irwin anticipates the system will be applied for use in the railroad’s non-signaled territories. About 50 percent of NS' network is non-signaled.

Saving fuel with LEADER

Another Future Track initiative designed to improve efficiency is LEADER, a locomotive computer system developed by New York Air Brake Corp. Designed to improve fuel efficiency and boost safe handling for long-haul trains, LEADER provides locomotive engineers with real-time information about a train’s operating conditions. NS first began testing LEADER in 2003.

"Typically, engineers will run a locomotive up a grade and stay at maximum throttle until they crest the grade. With LEADER, we found if you start to throttle back before you crest the grade, you're going to reduce your fuel consumption," Irwin says. "You may lose a small amount of time en route, but the amount of fuel you save is huge."

LEADER has been installed on 1,100 locomotives, and the company plans to have all NS' core routes mapped by the end of November. LEADER has huge potential to reduce NS' fuel costs, one of the railroad’s highest operating expenses.

The railroad's efforts, whether formally part of Future Track or other projects aimed at becoming more efficient, appear to be paying off. During the Class I's third-quarter earnings conference call on Oct. 23, NS executives attributed the company’s "excellent" bottom-line results partly to improving trends in operating efficiency.

"Productivity improvements have come about through improved network velocity, technology applications, strategic investments in infrastructure, better use of existing train capacity through improved network planning and other individual projects implemented by employee teams," said NS Chief Operating Officer and EVP Mark Manion during the conference call. "We ...  are on target to exceed our $100 million in productivity gains this year alone. And these and other initiatives will continue to drive further productivity gains as we move into next year."

As Future Track initiatives have developed, they've generated new improvement efforts. One project leads to another.

"For example, the Bellevue project started just as a process to design an optimal yard in Ohio," says Butler. "We have now changed that to an overall terminal strategy for the entire company. … By the end of this year, we will have completed installing new process control systems in our hump yards."

Butler hopes the Future Track strategy will continue to prompt new and better ways of doing business at NS.

"By calling this effort 'Future Track,' we hope that this process will continue to evolve," she says.

Email comments or questions to Julie Sneider.