The Magnificent 7: BNSF: first in a series.

Railway Age, Feb, 2004 by William C. Vantuono

Prior to their 1995 merger, the Burlington Northern and the Santa Fe railroads were known for innovation and technological boldness. BN jumped head-first into a.c.-traction locomotives in 1993 with an order for 350 units from EMD; the rest of the industry soon followed. In 1990, Santa Fe jumpstarted the intermodal boom by forging a business relationship with J.B. Hunt, the nation's largest long-haul trucking company, to put trailers on the railroad's steel highway. Today, that same spirit of innovation is what drives the Burlington Northern and Santa Fe Railway Co., North America's second-largest Class I in terms of miles of road operated (32,500), billions of revenue ton-miles (488 *), number of employees (36,500), operating revenue ($8.96 billion *), and net railway operating income ($1.042 billion *).

Burlington Northern and Santa Fe Railway Chairman, President, and CEO Matthew K. Rose is, at 44, the youngest of the Class I chief executives. In many ways, BNSF, though its roots can be traced to the industry's earliest days, is the youngest of the Class I's. Throughout the ranks, there's a willing ness to try new approaches to generations-old railroading practices, embrace new technology where it makes good business sense, and in some cases, impose change that can cause more than a little pain but is necessary for becoming more competitive.

At BNSF, technology is the glue that binds every department together. The rigid boundaries that have traditionally existed at railroads between the mechanical, engineering, communications and signals, and other departments have, to a great extent, been broken down.

"We've haven't yet gotten our fill of technological advancements," says Rose. "We're only beginning to exploit them. There are few things about railroading that can't be improved." Such technologies as fault detection and car monitoring "have attainable returns and a proven business case," he says. Others, like ECP (electronically-controlled pneumatic) braking and PTC (positive train control) "are still out there." With PTC, BNSF has just begun to roll out a version developed for it by Wabtec Railway Electronics--ETMS (Electronic Train Management System). Compared to BN's adoption of a.c. traction a decade ago, implementing ETMS will be a complex undertaking. But if it goes as planned, it will have a significant effect on train operations and safety.

BNSF needs a healthy supply industry to deliver that new technology, says Rose, who has been "frequently misinterpreted" when he's talked publicly about the need for more supplier consolidation in some sectors. "I don't want to determine the structure of the industry," he says. "I want to see strong suppliers with proven technology and services. We're looking for them to come up with a new set of solutions and help us with our business requirements."

But suppliers aren't always in a position to deliver. "We've sometimes had to go offshore if suppliers can't meet our specs," Rose says. "Does their vision match ours? A lot of them are in the same position that railroads were in the late 1980s needing to reinvest in themselves."

BNSF is involved in a plethora of technology initiatives whose common goal is improving reliability and increasing capacity. "As some of our lines begin to reach capacity, reliability becomes a capacity creator," says Rose. "That's why we spend major dollars on a more reliable, resilient infrastructure. It helps flora a capacity as well as a safety standpoint."

Growth, says Rose, will come in large part flora intermodal, which last year became BNSF's largest source of revenue. Intermodal, he says, has the potential to grow at double the rate of U.S. Gross Domestic Product, currently projected to increase, long term, by 3% annually.

"Every company needs a growth engine," says Rose. "Ours is intermodal. It's the best way to reverse the industry's trend of losing revenue market share to trucks." Again, technology is being used to help develop attractive services and improve terminal and line capacity, with the goal of "running trains faster and closer together."

"We think the intermodal network can earn its cost of capital," says Executive Vice President and Chief Operations Officer Carl Ice. "We're focused on getting more value for what we do. We have an efficient network, one of the best. Costs and performance are improving, year over year. We didn't do as well as we'd hoped in some segments (crew starts, for example), but we still offset inflation last year."

Overall, Ice has planned for $200 million in inflation-related cost increases this year. Among the initiatives that will offset them are locomotive remote control rollout, which so far "has gone great," says Ice. "RCL, is fulfilling what we expect in safety and productivity improvements." This year, between 800 and 1,000 RCL jobs will be added to BNSF yard operations; full implementation could come by year-end.

Service design, says Ice, "is a never-ending process." Each major commodity has its own performance measurement, as determined by the customer. For intermodal, it's ontime performance. For coal, car-cycle time. For grain, car availability. For industrial, adhering to car trip plans. Balancing their requirements on a national network is a challenging task.