NS gets on target for double zeros

Nearly 400 Norfolk Southern employees gathered in Norfolk last month for the company's annual Safety Awards luncheon. It was a time to recognize those who were injury-free in 2000, learn about new safety initiatives and renew commitments to being injury- and incident-free in 2001.

"We must be on target for double zeros in 2001," said Chuck Wehrmeister, vice president Safety and Environmental, as he opened the meeting. "We're all in this together, as one safety family. We must look out for ourselves and others if we're to reach our goal. I know we can, and we will."

Wehrmeister kicked off a new safety campaign for 2001: "I'm the one in 2001 who can make a difference."

Steve Tobias, vice chairman and chief operating officer, emphasized how one person can make a difference.

"I'm speaking to each of you personally today," he said. "It's as if you and I are standing in a yard, sitting in a locomotive cab or eating in the lunchroom. We have an obligation to ourselves, to our co-workers and, most importantly, to our families to be an advocate for safety and to work safely every day."

"The human side of injury takes so much from us, and we must remain committed to eliminating it altogether," he said. "We have the commitment, the desire and the support to achieve double zeros."

"Double zeros is also the goal of Operation Lifesaver (OL)," said guest speaker Gerri Hall, executive director of the organization. "We're working to eliminate all fatalities and injuries caused by highway-rail crossing incidents and trespassing." She said that trespassing is the cause of 95 percent of fatalities on railroad property.

Hall explained the ways in which OL works with advertisers, film companies and television networks to educate them about showing dangerous behavior on or near railroad property.

"We were very successful in having a large percent of ads that show dangerous behavior taken off the air and out of print," she said.

Hall said that railroad employees and their families are the most powerful advocates for rail safety, and she encouraged all to step up their efforts. "We need more and more of you to help us spread the word," she said.

Fifty-four groups received awards for being best or most improved in safety in 2000. Eileen Roth, locomotive engineer, Georgia Division, Dave Young, a carman from the Harrisburg Mechanical Territory, and Pete Miles, laborer, Maintenance of Way & Structures, Engineering department, Alabama Division, all gave testimonials of the work of their colleagues to prevent injuries. Miles noted that his department has been injury-free for more than 4,000 days. David Goode, chairman, president and chief executive officer, offered his congratulations to all those who were injury-free in 2000.

"I want to take my hat off to you and the thousands of other dedicated people who, in a time of big distractions and challenge for the company, still held to our vision to be the safest transportation company in the world."

He said that example was proof of how each person can make a difference in safety. "When you think about it, all of us will have the opportunity to be injury-free because of our individual, personal dedication to safety. That's the real impact of safety, and even though we've done well, our challenge is to do better. We can, and we will achieve double zeros when we take individual responsibility for ourselves and our co-workers when it comes to safety."

Dear Fellow Thoroughbred,

Steve Tobias,
vice chairman and chief operating officer

Changing markets call
for new strategies

"We made a lot of promises about what the new Norfolk Southern will deliver, and we simply have to make good. We don't have a minute to waste," said David Goode, Norfolk Southern chairman, president and chief executive officer, to the company's top managers gathered in Norfolk last month for the company's General Management Meeting.

"The stakes are higher and so are the hurdles, which include fundamental changes in our markets," he said. The changes include a slowing economy, rising fuel prices and downturns in some lines of business.

Goode said three elements are critical to living up to earlier promises: real revenue growth, executing operationally in the way that only NS can, and implementing restructuring plans quickly to capture the cost savings.

Initiatives are under way to move the company closer to improving those critical elements.

Goode said revenue growth will come from a number of sources. A rise in utility coal tonnage and double-digit growth in intermodal traffic are promising. The company's investment in new intermodal facilities in Harrisburg, Pa., and Austell, Ga., gives NS the ability to increase business even more. Rate increases also will improve revenues.

Other initiatives expected to improve operations and bring more revenues include combining Coal Marketing and Coal Transportation into the Coal Business Group and putting Equipment Marketing under the company's Car Distribution Unit. ModalGistics, a new supply chain services group, brings NS' distribution and warehousing network of 174 rail transfer facilities, 124 lumber reload centers, 71 metals distribution centers and four just-in-time rail auto parts centers under one group.

Measures to improve operations and customer service include a network redesign resulting in the development of a new operating plan. A team headed by Tony Ingram, vice president Transportation Operations, and Mark Manion, vice president Transportation Service and Mechanical, is working with MultiModal Associates to develop the plan that will enable NS to run a scheduled railroad.

"We must have a solid plan and run to that plan every day," said Ingram. "When we do that, we get the best use of our assets and provide consistent and reliable service to our customers. All of that adds up to better customer service, and, ultimately, increased revenues."

As a result of NS 21, a business process analysis in key areas of NS business to improve customer service and reduce costs, the company has 40 projects being tracked. More are on the way as analysis continues in other areas.

"We are under pressure to meet truly historic challenges this year," Goode said. "Our collective futures are tied to achieving these plans. But more than that, it's a matter of pride. I'm proud of this team and this company. We simply cannot allow ourselves to falter. I know we can move forward to be the best in customer service and in returns to our investors."

'Strategic sourcing' brings new
approach to purchasing

Norfolk Southern is revamping the way it thinks about purchasing. The company recently launched its strategic sourcing initiative in an effort to create a world-class sourcing organization.

"Norfolk Southern buys approximately $2.2 billion in materials and services each year," said Jim Hixon, senior vice president Administration and sponsor of the initiative. "We have to make sure each dollar spent is spent wisely."

Jake Allison, director Internal Auditing, and Maqui Parkerson, assistant general attorney, are working closely with the Material Management Department on implementation of the initiative. Assisting them is management consultant McKinsey & Company, which has successfully led similar programs at several leading transportation organizations, including a Class I railroad.

Strategic sourcing is a process that enables an organization to understand better the total cost of ownership associated with the goods and services that it acquires. It calls for building to build cross-functional teams that look at all aspects of the goods and services the company purchases to identify potential cost saving opportunities.

"Purchase price is only one part of the total cost equation," said Parkerson. "Internal compliance, administrative processing and inventory carrying costs all affect the total cost of ownership for any particular good or service. Also, improving supplier efficiency can create value that can benefit both NS and its suppliers."

"Material Management successfully fulfills its role as the company's purchasing expert," said Allison. "However, our purchasing professionals need a seat at the table alongside operating departments to formulate the best short- and long-term decisions for the company. When we employ strategic sourcing, we're able to understand more thoroughly internal and external cost factors and to design effective supply market approaches. It also allows us to develop processes throughout the organization to apply this approach to all our expenditures."

Two or three pilot projects are planned to demonstrate the effectiveness of this approach. After the end of the initial projects in July, NS will assemble sourcing teams to conduct a series of additional commodity sourcing projects.

Along with the pilot projects, the company will conduct a series of "just do it" or JDI initiatives. These are smaller, quick-hit opportunities that are often caused by rapidly changing market conditions for certain commodities and services, or by inconsistent local purchasing practices.

"Some of these opportunities are in the technology sector," said Allison. "For example, recent competitive declines in prices for long-distance phone service, pagers, cell phones and computers have created short-term opportunities to negotiate lower prices on the fly."

"This new approach affords us the opportunity to identify and achieve significant savings over time," said Rick White, assistant vice president Material Management. "As we evaluate our pilots, we'll be able to broaden our application of the strategic sourcing methodology to areas where it's not yet in place. When we accomplish that, we will have a process that adds value to the work of Material Management."

Study brings more efficient
facility management process

The management of Norfolk Southern's facilities will change as a result of an NS 21 team study. NS 21 is the ongoing study of the company's business processes to improve customer service and reduce costs as the company enters the 21st century.

Management of NS facilities such as the NS headquarters building, below, will be handled by a single department.

In analyzing the company's real estate processes and benchmarking them against transportation companies and others, team members Mark Owens, director Joint Facilities/Passenger Operations, and Joe Kain, senior economic analyst, determined that NS has a number of limitations to effectively manage its facilities.

"We found that facility-related costs are dispersed among many departments in the company," said Owens. "That means there's no clear way to account for actual facility management costs."

"One of the recommendations the team made was to put the management of all our facilities under one department," said Dick Parker, vice president Real Estate.

Parker said at many NS sites, day-to-day management responsibilities fall to local supervision, robbing them of time and energy.

He added that NS will create a new group within the company to oversee the management of NS facilities.

"Once again, our NS 21 teams have come up with a winner," said David Goode, chairman, president and chief executive officer. "A more centralized approach to managing our facilities will help us reduce costs, but perhaps more importantly, it will remove a great burden from our local managers so we can better serve our customers."

Partnership brings benefits
to power plant, energy companies

A coal sourcing change by Consol Energy led to a partnership with Norfolk Southern and Midwest Generation that brought rail-originated coal to Homer City (Pa.) power plant for the first time.

The plant sits atop a high plateau, with Consol's Helvetia Mine located nearby. The plant received coal from Helvetia Mine by conveyor belt and by truck from other mines. Consol closed Helvetia when its resources were depleted and decided to supply coal from its Pittsburgh Seam mines, all of which are rail-served.

"We saw this as a great opportunity to generate new business for NS by making the efficiencies of rail transportation available to a nonrail-served customer," said Ron Listwak, assistant vice president Utility Coal North.

Chuck Fike, manager Utility Coal, worked with NS' Operating and Real Estate departments to locate potential sites for a rail-to-truck transload facility. A site near Blairsville, Pa., about eight miles from the power plant, was selected.

"This location brings many benefits to our customer," said Doug Evans, director Utility Coal. "It's a retired coal loadout on our Blairsville secondary line that is permitted to handle coal. Plus, its close proximity to the plant means a relatively short truck haul."

The facility features a covered, bottom-dump pit, where coal is discharged from rail cars directly onto an underground conveyor system. An overhead conveyor carries coal to a truck loading area. Both empty and loaded trucks are weighed at the same location. Coal also may be stockpiled at the facility.

NS has dedicated one train set of 128 rapid-discharge coal cars. Each set can carry more than 14,000 tons of coal and can be unloaded in less than eight hours.

"By working together, we were able to allow Consol to meet the challenge of providing coal to the Homer City power plant from a more distant coal mine," said Listwak. "The plant can expand its market reach to regions where it is not economically feasible to transport coal by truck. It gains flexibility in times of tight coal supply or coal production problems."

Fike said the coal now being provided is of better that offers more efficient operation and compliance with tighter air quality requirements.

"This is the kind of partnership where everyone involved wins," Listwak said. "We expect to provide nearly 1.3 million tons of coal to the plant this year, which is good for everyone - Consol Energy, Midwest Generation and NS."

The partnership has been nominated for the Rail Business Magazine "Win-Win" award.

Retirement bill introduced

The Railroad Retirement and Survivors' Improvement Act of 2001 was introduced in the House of Representatives on March 21. HR 1140 is identical to last year's bill and contains all the benefit improvements originally agreed to by rail management and labor. Key provisions include improvements to surviving spouse benefits, full retirement annuity at age 60 with 30 years of service, elimination of artificial caps on benefits, vesting after five years instead of 10 and requiring carriers to ensure future fund solvency with tax increases if necessary. Associated with the bill, but not part of it, is a provision to allow some private investment of Railroad Retirement funds.

"This bill brings much-needed retirement benefit relief to railroad employees and employers," said Jim Hixon, senior vice president Administration. "Labor and management worked together to bring the most benefit to the most people in this bill, and we'll continue to work together to get it passed."

Hixon said with the new Congress came new committee assignments, and much work has been done to educate new committee members about the urgency of passing the bill this session.

"We need everyone's help to make sure members of Congress understand how this bill benefits working people," he said. "NS employees can show their support by contacting their elected representatives."