As part of a special series in Railway Age’s March 2022 issue, 11 North American railroad CEOs address what must be done to grow and gain market share from competing freight transportation modes. Alan Shaw, President of Norfolk Southern, is the 6th to share his perspective.
The recipe for sustained top-line growth in the North American rail industry is simple and powerful: Offer our customers the efficiency and sustainability of rail, with the ease and reliability of truck.
It starts with improving service levels that have suffered from global supply chain disruptions. At Norfolk Southern (NS), we are committed to restoring service as quickly as possible. When we serve our customers well and operate efficiency, we earn the opportunity to grow.
Market forces are working in our favor for highway-to-rail conversions. We saw extraordinary economic growth last year. Consumer spending is strong, inventory-to-sales levels remain low, and industrial production continues to improve. Onshoring has become a significant trend.
The pandemic also accelerated the consumer shift toward e-commerce, which grew by 14.2% in 2021, according to the U.S. Department of Commerce. Consumers now spend approximately one of every five dollars online. A recent report by CBRE projected the U.S. will need to construct an additional 330 million square feet of warehouse space for online fulfillment by 2025 simply to keep pace with demand.
These macroeconomic trends play to the strengths of rail. E-commerce is intermodal-intensive. The superior capacity of rail offers a faster means of rebuilding inventory. Many businesses are unwinding just-in-time supply chains, which will bolster rail demand. Onshoring creates new opportunities for industrial development.
NS is particularly well positioned. Our robust franchise serves a majority of consumption and manufacturing in the U.S. Led by the best industrial development team in the industry, we have a pipeline of projects that represent potential investment greater than the last 10 years combined.
As businesses move supplies closer to manufacturing and inventories closer to the customer, we are making it even easier for them to find industrial sites with access to rail. Our new NSites portal is a first-of-its-kind search engine that aggregates information about industrial sites and transload facilities across our 22-state network into an easy-to-use, map-based web application. With roughly 800 industrial sites and 250 rail-to-truck transload facilities searchable on NSites, rail shippers can quickly find options to expand into new markets.
NSites is only one example of a larger imperative: making it easier for our customers to do business with us. Continued investments in technologies that create a B2C customer experience will be essential to our prospects for long-term growth. Industry initiatives such as RailPulse, which aims to accelerate the adoption of telematics to improve customer visibility into their rail shipments, are the kind of forward-thinking investments we need to pursue.
Another important and favorable trend is the broad societal shift toward sustainability. More than 25% of our customers have announced public goals for carbon reduction, and many more have elevated sustainability to a corporate priority.
Shifting their shipping from highway to railway is one of the most powerful tools our customers can use to reduce their carbon footprint—while also reducing highway congestion and reducing wear on the nation’s publicly funded infrastructure. Last year, our customers eliminated 15 million metric tons of carbon emissions by shipping their goods and materials with us. Reducing these “Scope 3” emissions will become even more urgent in the years ahead as our customers achieve success improving the sustainability of their own operations.
At NS, our goal is to be customer-centric and operations-focused in everything we do, driven by talented employees who are leading the way with their dedication in a dynamic landscape, providing innovative logistics solutions to our customers.
Delivering reliable and predictable service with competitive pricing, helping our customers achieve their sustainability goals, and making it easier for our customers to ship by rail will enable us to capitalize on favorable market conditions and the inherent advantages of our franchise. The resulting growth will be good for customers, shareholders, and the communities we are privileged to serve.
Read more of Railway Age’s special CEO Perspectives series:
• Katie Farmer, BNSF: Sustain a Growth Mindset
• Keith Creel, Canadian Pacific: Supply Chain, Market Reach and Sustainability
• JJ Ruest, CN: Railroads Must Lean Into Their Natural Strengths
• Jim Foote, CSX: Performance, Sustainability, Innovation Are Keys to Growing Market Share
• Pat Ottensmeyer, Kansas City Southern: Competing on a Global Scale
• Lance Fritz, Union Pacific: Solving Customer Problems at the Heart of Innovation
• Peter Gilbertson, Anacostia Rail Holdings: Growing With People
• Dan Smith, Watco: Stay Close to Your Customer
• Ian Jefferies, Association of American Railroads: A Growing Rail Industry Needs Policy Sanity
• Chuck Baker, American Short Line and Regional Railroad Association: Four Parallel Paths to Growth