Norfolk Southern in 2002 continued to develop business opportunities that go beyond traditional rail services and provide transportation options for customers.

MODALGISTICS, a business unit that provides supply chain management services, demonstrated its strong position in the logistics marketplace by growing its customer base, opening new facilities, introducing new technology and taking an active role in managing various customers’ supply chains.

TransWorks, an NS subsidiary that provides information technology, shipment monitoring, accounting services, software development and process consulting, began generating revenue from sources outside NS and its subsidiaries.

Thoroughbred Direct Intermodal Services, a postal and intermodal logistics subsidiary, launched a ground-breaking program that manages door-to-door intermodal less-than-truckload freight on all four of the major U.S. railroads.

Delivering Higher-Value Service

The Thoroughbred Operating Plan, augmented by newly developed computer systems that monitor performance in unprecedented detail and make it easier to do business with NS, enabled NS to increase the value of its services to customers.

Along with a scheduled railroad, NS provided service reliability and improved visibility of operations and ease of doing business. This has attracted new business from the highways and has reduced costs through better utilization of assets.

TOP restructured the railroad’s network from the local level up to transcontinental shipments. By minimizing the complexity of merchandise train blocking, reducing car handlings and avoiding circuitous routes, the plan improved transit times and predictability. TOP produced 240 new train schedules that were phased in over an eight-month period, reaching full implementation in February 2002.

Transit time variability was reduced by up to 50 percent, and transit times improved in key merchandise traffic lanes. For example, in the Chicago-Piedmont lane, transit time improved by36 percent westbound and 49 percent eastbound. Transit time on the Gulf States-Northeast lane improved 40 percent in each direction. About 75 percent of NS’ merchandise customers benefited from reduced transit times.

TOP-driven performance improvement became a powerful marketing tool, enabling the NS sales force to move traffic off the highway and onto the rails. Truck-to-carload diversions reached $33 million for merchandise traffic and $38 million for intermodal.

Faster, more reliable performance also enables NS to offer premium services for which shippers are willing to pay more, an important factor in improving the company’s revenues.

Interline service also has improved. Traffic is being handed off faster and more reliably with other rail carriers, making possible the creation of new premium services in partnership with other railroads. For example, in a joint venture with Burlington Northern Santa Fe, NS offers coast-to-coast premium carload service for perishable products. Interline service is important for intermodal business as well. More than 60 percent of NS’ total intermodal volume involves interline shipments.

Integral to TOP are investments NS made in computer and communications technologies that give customers the tools to plan, monitor and make adjustments to shipments.

AccessNS is a Web-based suite of applications that gives customers immediate access to a wide range of real-time data about shipments, from estimating the number of empty cars needed, to waybill submission, to final delivery. Detailed monitoring of shipments improves the accuracy of delivery estimates and enables quick identification and resolution of problems. The railroad can use this information to improve transit time, on-time delivery and overall service quality. Customer service representatives can focus more on helping shippers resolve problems.

Coal and unit grain train customers have access to the Web-based Commodity Transportation Management System, which generates customized reports, facilitates shipment planning and improves total asset management for the company as well as car owners and receivers.

The Thoroughbred Yard Enterprise System, another important element of system visibility, helps yard managers see what cars are coming into their terminals and plan how to handle them efficiently and effectively.

Service reliability plus visibility equal ease of doing business. The entire process is simpler, from rendering a bill of lading, to getting a rate, to final payment. It reduces opportunities for errors and lowers back-office costs for both carrier and shipper. Providing ready access to real-time information and support enables NS to address concerns before they become problems.

Six Sigma Adds Service Value

In only their second year of using Six Sigma problem-solving methodology, Norfolk Southern employee teams managed several efforts to improve operations and service.

Here are some examples:

A change in freight car suspension design led to smoother ride quality and eliminated a source of freight damage for customers.

Ride quality detectors on rail cars improve ride quality for customers’ freight and reduce safety risks. Customer benefits include fewer service disruptions, greater equipment availability and reduced lading damage.

A locomotive-mounted track lubrication system reduces friction between wheels and rail. Expected benefits include reduced fuel consumption, less equipment and track wear and fewer track-related service disruptions.

“It’s nice to have some predictability on shipments. That’s been a real winner. Not only does it give you guys turn times on your cars, but we also can pretty much figure when we’re going to get our ingredients in.”

— Brad Fairbairn
Fieldale Farms

     Fieldale Farms processes 2.9 million birds every week. For Fairbairn, director of ingredient procurement, that adds up to a lot of chicken feed. He counts on the systematic cycle of a 75-car unit grain train operated by Norfolk Southern to serve Fieldale’s two feed mills at Baldwin, Ga.

     “We really like the 75 cars,” says Fairbairn. “They pretty much run like clockwork. I can figure they will make a complete turn from Baldwin, Ga., up to the Midwest to pick up corn and come back to me in seven to eight days.

     “There’s a lot of predictability in shipments. Running these trains, we can manage our inventories pretty efficiently, which helps us manage our money flow.”

     Fieldale receives mostly corn, and “our local switch crew does a great job,” Fairbairn says. “We work very closely with them and the trainmaster. He does a phenomenal job, but I don’t want to say too many good things about him ‘cause we don’t want to lose him to someone else.”

“We’ve found the Norfolk Southern coal export marketing group to be very supportive and creative in fashioning not only rate structures but also in achieving operating efficiencies that allow us to maintain AMCI’s presence in the international market.”

— Ernie Thrasher
AMCI Export Corporation

     AMCI mines coal and markets it worldwide. Much of AMCI’s coal comes from West Virginia coal reserves owned by Norfolk Southern subsidiary Pocahontas Land Corp. NS trains haul AMCI-mined coal to customers in North America, including Norfolk, where the NS Lamberts Point coal transload facility handles it for export.

     Thrasher, company president, said NS has been a key to AMCI’s growth. “‘Pokey’ Land was very instrumental in AMCI’s efforts to develop coal reserves that allowed us to mine specialized coals in the most efficient manner possible. The railroad did its part to make sure we were competitive on a delivered-cost basis to our customers. Obviously, that’s driven not only by rate structures but by the efficiencies they’ve been able to offer in moving traffic and in handling coal at Lamberts Point,” Thrasher said.

     “NS has worked with us from an operating and blending standpoint at Lamberts Point. These efforts allow AMCI to blend coals that are specifically tailored to our customers’ needs. It’s one of the unique benefits that Lamberts Point offers to a company like AMCI.

     “The railroad’s been a critical part of our success. We’re happy to be their partner.”

“In the 43 years I’ve been in the business, intermodal service has never been better, and NS has been a major part of this improvement.”

— Phillip C. Yeager
Hub Group, Inc.

     Hub Group, based in Lombard, Ill., provides transportation logistics services for customers throughout North America. The company depends on strong relationships with transportation carriers to coordinate intermodal services as well as truckload and less-than-truckload shipments.

     “There are so many Norfolk Southern people who I have known over the past 50 years in transportation,” said Yeager, Hub’s chairman. “Our company has faced problems over these years, and what we have found is that our NS representatives, on all levels, have always worked with us to solve these problems. We here at Hub appreciate all of their efforts, because we cannot provide our customers great service without a great railroad assisting us.”