Rail Industry Strategies: Efficiency and Cost-Cutting

Operational Efficiency and Workforce Management

Rail industry leaders are enhancing leadership teams, restructuring management, and investing in growth projects to boost operational efficiency. Specific actions include modernizing locomotive fleets, improving service reliability, and focusing on productivity to close operational gaps and drive network efficiency.

"We have enhanced our leadership team to accelerate operational improvements and restructured our management workforce to become a more productive organization." --- (NSC, sec filing, 2024/Q2)

"In addition, the plan includes investments in growth-related projects to drive more carloads to the network, certain ramps to efficiently handle volumes from new and existing intermodal customers, continued modernization of our locomotive fleet, and projects intended to improve operational efficiency." --- (UNP, sec filing, 2024/Q2)

"The Company continues to focus on operational improvements and executing the operating plan to deliver safe, reliable and efficient service to customers." --- (CSX, sec filing, 2024/Q1)

"The momentum demonstrated in the second quarter is a testament to the strength of our strategy. I want to thank all 20,000 of my Norfolk Southern teammates for all they have done and are doing every single day to deliver on our shareholder commitments and accelerate our operational improvements. John, Ed, and Mark have identified specific actions and outcomes to deliver improved results in workforce, T&E, fuel, mechanical, purchase services and rents capital productivity as well as smart growth in merchandise, intermodal and coal. We have a clear line of sight on multiple initiatives and a road map for margin gains in several key areas over the next 18 months as we close the OR gap." --- (NSC, earning call, 2024/Q2)

"In addition, as evidenced by our first quarter results, we will continue to generate productivity that improves our network efficiency." --- (UNP, earning call, 2024/Q1)

Technological Advancements in Rail Operations

Rail companies like CSX and Union Pacific are leveraging technological advancements to enhance operational efficiency. Innovations include less carbon-intensive fuels, automated tie placement, and improved locomotive movement and rail yard switching, all aimed at fostering a sustainable and efficient future for the rail industry.

"Through operational excellence and innovation, we improved service performance, piloted less carbon-intensive fuels, and made significant progress toward forging a sustainable future for the rail industry." --- (CSX, press release, 2024/07/30)

"We're implementing technology and how we move locomotives and how we switch in the rail yards, how we do our we're spending money to be able to have machines that automatically, easily put ties out on the ground." --- (UNP, conference, 2024/05/21)

"Rail has powered America’s advancement for centuries. The #ONECSX team understands what’s needed to build upon our rich history and continue the tradition of safety, innovation, and service." --- (CSX, Twitter post, 2024/05/23)

"Union Pacific's Eric Gehringer presented at the 2024 Midwest Association of Rail Shippers (MARS) Summer Meeting, showcasing how UP is utilizing rail innovation to connect shippers with technology. https://t.co/rv6qClskXt" --- (UNP, Twitter, 2024/07/09)

"Her leadership paves the way for future leaders and greater advancement in the rail industry. Read more: https://t.co/bJW8jMJ1ur #CSXWomenInRail https://t.co/4tIqbx9aem" --- (CSX, Twitter post, 2024/06/20)

Fuel and Energy Cost Management

Rail companies are effectively managing fuel and energy costs through decreased fuel expenses, lower diesel prices, and negotiated fuel surcharges. Despite lower fuel surcharge revenues impacting freight revenues, overall guidance remains positive due to cost management strategies.

"Locomotive diesel fuel prices averaged $2.73 and $2.86 per gallon (including taxes and transportation costs) in the second quarter of 2024 and 2023, respectively." --- (UNP, sec filing, 2024/Q2)

"Fuel expense, which includes the cost of locomotive fuel as well as other fuel used in railway operations decreased in both periods." --- (NSC, sec filing, 2024/Q2)

"So that's very, very positive. That will be supportive. Fuel prices are down, so that's obviously a negative in terms of RPU and an offset to the volume growth that seeing in the pricing that we're getting in merchandise, but still feel confident in terms of the overall guidance." --- (CSX, conference, 2024/05/22)

"Freight revenues from bulk shipments decreased in the second quarter and six-month periods of 2024 compared to 2023 due to a 5% decline in volume and lower fuel surcharge revenues, partially offset by a positive mix of traffic from decreased coal shipments and core pricing gains." --- (UNP, sec filing, 2024/Q2)

"First Quarter Merchandise Intermodal Coal Increase (Decrease) Volume $ (6) $ 64 $ (17) Fuel surcharge revenue (61) (41) (13) Rate, mix and other 52 (92) (14) Total $ (15) $ (69) $ (44)   Approximately 95% of our revenue base is covered by contracts that include negotiated fuel surcharges." --- (NSC, sec filing, 2024/Q1)

Maintenance and Infrastructure Investments

Rail companies like Union Pacific, Norfolk Southern, and CSX are prioritizing infrastructure investments to enhance network safety, support economic growth, and address past maintenance shortcomings. These efforts include upgrading terminals, mainline infrastructure, and freight cars, ensuring the rail network meets modern standards and supports customer expansion.

"We plan to continue to make investments to support our growth strategy, harden our infrastructure, replace older assets, and improve the safety and resiliency of the network." --- (UNP, sec filing, 2024/Q1)

"Investing strategic capital to support regions of our network with economic growth is also in motion. The State of Alabama is an example where our investments include terminal and mainline infrastructure projects that support customers as they invest and expand their businesses." --- (NSC, earning call, 2024/Q2)

"There was a lot of work that had to be put in from an infrastructure standpoint, a lot of years of I wouldn't go as far as neglect, but it just wasn't running up to the standard that we would expect." --- (CSX, conference, 2024/05/14)

"Starting with our view on the widely varying merchandise markets, we generally see support for volume from the normalization of auto production and the continued strength in infrastructure projects across our network." --- (NSC, earning call, 2024/Q1)

"We've been investing in freight cars. And we've increased our strategic investment as well." --- (CSX, conference, 2024/05/22)

Strategic Partnerships and Collaborations

Strategic partnerships and collaborations in the rail industry are enhancing efficiency and unlocking new business opportunities. Companies like Norfolk Southern and CSX emphasize the importance of team collaboration, industry partnerships, and community-focused initiatives to optimize networks and improve services.

"Transloading solutions are key to optimizing rail networks. This strategic partnership will maximize efficiency + flexibility for our customers and unlock new business opportunities: https://t.co/GigXMaj1AN" --- (NSC, Twitter post, 2024/04/02)

"I think our ability to go after new opportunities has never been better. The collaboration across the teams is not about Mike and I, it's about our teams working effectively together." --- (CSX, conference, 2024/05/14)

"We welcome our newest directors to the board and look forward to working constructively and collaboratively together to unlock the full potential of our powerful franchise." --- (NSC, Twitter, 2024/05/09)

"Watch for updates as the City Year container moves across our network and we work in partnership to make our communities stronger, safer and more united." --- (CSX, Twitter, 2024/04/05)

"Stefan Loeb, VP of the new team, took the main stage at @FreightWaves' Future of Supply Chain conference to share more about how industry collaboration, along with Norfolk Southern’s balanced strategy to enhance services, forge a better way to do business with rail: https://t.co/JBhE74vGDg" --- (NSC, Twitter, 2024/06/07)

Regulatory and Compliance Strategies

Norfolk Southern Corporation emphasizes building compliance and stability across its network, improving execution and plan compliance, and ensuring on-time arrivals. The company also highlights the importance of independent oversight and involving regulators in its transformation strategy to enhance safety and service, ultimately driving growth and profitability.

"You sweat it out and you can’t drive this alone. So, creating a team of capable railroaders focused on the big rocks and small rocks at the same time, delivering the fundamental of safety, creating stability across the network and then challenging every asset that we have, every standard that we have and building compliance and building momentum around those things is really important." --- (NSC, earning call, 2024/Q1)

"And I would say, as far as capacity is concerned, we’re improving execution and plan compliance and that facilitates blocking deeper into our network, which ultimately increases car velocity, train" --- (NSC, earning call, 2024/Q1)

"And so I would think that as we improve our merchandise delivery, whether it's viewed through compliance on trip plans or on time arrivals, that's going to give us the benefit not only of cost reduction and waste reduction, but also now the case for change for our shippers to come back or to choose rail instead of a truck or whatever mode they're using." --- (NSC, conference, 2024/05/22)

"Independent oversight to ensure the successful execution of our balanced strategy." --- (NSC, press release, 2024/04/11)

"Alan H. Shaw: And Stephanie, that is our strategy, is making sure that we bring along our customers and our employees and our regulators and our shareholders with us as we transform Norfolk Southern into a more profitable organization with a safe and service product that is poised for growth." --- (NSC, earning call, 2024/Q1)

Customer Service and Satisfaction

Rail companies are prioritizing customer satisfaction through regular surveys (CSX), delivering top-tier service (NSC), and strong engagement strategies (UNP). They aim to maintain high service levels while enhancing efficiency (CSX, NSC).

"You look at the customer satisfaction surveys, which we do on a quarterly basis." --- (CSX, conference, 2024/05/22)

"So, they’re encouraged. On the intermodal front, like I said, it’s really the best service in a generation that we’re delivering, and I have a lot of confidence that we’re going to continue to deliver that same level of service, which is only going to deliver more value for our customers." --- (NSC, earning call, 2024/Q1)

"And we're doing that to see how we can grow more business specifically. So strong customer engagement strategy at all levels, and we're going to keep at it. Thanks for the question." --- (UNP, earning call, 2024/Q1)

"Our goal was to maintain our strong customer service levels while looking for ways to run the network more efficiently and we have done so." --- (CSX, earning call, 2024/Q1)

"Alan Shaw: And I think that's why our approach customer service facing is better, and we're still getting productivity, reducing resources, reducing capacity -- creating capacity without impacting service." --- (NSC, earning call, 2024/Q2)

Sustainability Initiatives

Rail industry leaders are focusing on sustainable improvements to drive growth and operational excellence. Norfolk Southern and CSX emphasize achieving targets sustainably, while Union Pacific questions the sustainability of network performance under increased volume. Enhanced service levels and operational metrics are key to long-term, sustainable growth.

"plan into the meet the commercial needs of today. I am highly confident, highly confident that we’ll achieve the targets and we will do it in a way that’s sustainable and we will do it in a way that fosters growth and we are on the path today. We are well underway. So, that increases my confidence." --- (NSC, earning call, 2024/Q1)

"Not step function changes, but again, what we're trying to do is build sustainable improvements that drive ongoing momentum in the earnings." --- (CSX, conference, 2024/05/22)

"And what's your comfort in the sustainability of that when you actually do get a volume tailwind in the network?" --- (UNP, earning call, 2024/Q1)

"Improved Terminal Dwell by 8%Improved Car Miles per Day by 8%Decreased Recrew Rates by 22%Operational excellence is core to the company's balanced strategy that will help close the margin gap with peers and create sustainable, long-term growth." --- (NSC, press release, 2024/04/25)

"And, to be clear, in intermodal, the level of service we’re delivering is the best in a generation, and it’s sustainable and it’s going to continue to be that way, and we’re earning trust from our customers to do that." --- (NSC, earning call, 2024/Q1)