Thoroughbred Quality back on track: The Thoroughbred Operating Plan is the centerpiece of a re-energized Norfolk Southern - Company Profile

Railway Age, March, 2002 by William C. Vantuono

The prancing stallion is back on his feet, and he looks sleeker than ever. Nearly three years after service problems plagued the Northeast following the breakup of Conrail, Norfolk Southern can remove the question mark that many customers and industry observers had tacked onto its "Thoroughbred Quality" slogan. As of Feb. 11, NS was operating a 100% scheduled railroad for merchandise service, and was preparing to roll out its Thoroughbred Operating Plan (TOP) to other commodity groups.

"The beauty of this plan is that costs fall out," Chairman, President, and CEO David Goode told a financial analysts' meeting in late January. "An efficient railroad is a cost-efficient railroad. But what it really does is give us a more valuable product to sell."

"Our goal is to take variation out of trainset movement, and as we go forward, evolve from reporting on train movement performance to movement on a dock-to-dock basis in the process of measuring car from pull to placement, by individual shipper," Chief Operating Officer Steve Tobias added. "In general, we will report our performance against the plan on a car basis rather than a train basis. That is something our customers can clearly identify with."

"We have done some of that manually in the past--a laborious process," said Tobias. "As we go forward, it will be for every shipment that we process."

A clean sheet of paper

NS took a clean-sheet approach with TOP, says Vice President-Transportation Mark Manion. The intent was quite basic: "We wanted to increase revenues and reduce costs. The solution was to take variation out of what we do--to be consistent, and earn a reputation for reliable service."

Beginning in January 2001, a cross-disciplinary group of 14 people sampled three million waybills and took about seven months to build a new, more-efficient car-blocking plan that would reduce the amount of time cars spend in terminals, and reduce car handlings. Those two areas are where most operating costs and inefficiencies accrue. NS called in Multi-Modal Applied Sciences and its Multi-Rail software to assist with developing TOP.

"The biggest part of TOP is the blocking plan," says Manion. "We now have 245 train schedules for general merchandise trains, including multilevels and auto parts. Though TOP doesn't presently include unit trains and intermodal, it does positively affect these other business units because of the greater velocity and enhanced performance it provides. We looked at day-of-week volumes and developed a seven-day system, so we don't have the same schedules every day. The plan takes into account light and heavy volume days. Previously, our field supervisors would have to call the shots. Now, we have a scheduled railroad, and our field people stick to the plan."

TOP, says Manion, has reduced car handlings by 13.8%, mainly by addressing "circuity"--reducing the number of route-miles a car takes from origin to destination. Ontime performance is currently 85%, and the plan is to keep notching that figure up, percentage point by percentage point. Compared to 2000's average ontime performance of 57%, "it's a whale of an improvement," he says.

For 2001 vs. 2000, NS's 4% operating ratio improvement to 83.7, and $11 million revenue increase despite a 220,000-unit carload decline, partly reflects improved service. Revenue yield improved, as NS, like many other Class I's, can charge slightly higher rates in some markets because of better service. Average revenue per car was up 5.8%, some of it attributable to price increases, some to such other factors as decreased length-of-haul. Network velocity has improved about 9%. In the fourth quarter, merchandise train performance improved 29%. "We've reduced car-hire," says Manion. "Also, we don't have to own as many cars and locomotives."

Best of all, says Manion, "Because the operating department is following a plan and our performance is consistent, our sales and marketing people have a service they can sell."

Manion credits NS's field operations people--engineers, conductors, yardmasters, trainmasters--with making TOP work. "Tony Ingram (vice president-train operations) and his people have done a remarkable job sticking with the plan," he says. "They don't make the audible calls on a day-in, day-out basis. They have a set plan to work with, and they like it. Our mechanical people and car inspectors are also enthused about TOP, as is maintenance-of-way, which is responsible for minimizing slow orders that affect train performance."

"Trains leave when they're supposed to," says Manion. "Running a train is not dependent on train length. When we have a situation where we're running lighter than what we like, we look at a new service design and make a change."

Manion cites one week in December 2001, just before the holidays, as a TOP benchmark. Compared to the same week in 2000, with a 1% volume increase, NS operated 221 fewer locomotives, had 9% fewer cars on line and 2% fewer crew starts, reduced terminal dwell time by 12%, and improved train speed by 10%.