NS Progress Report Shows Improving Metrics

Several key operating metrics have shown marked improvement since John Orr’s appointment as COO March 20, NS reported.

With a proxy vote initiated by an activist-led investor group rapidly approaching, Norfolk Southern provided an update on April 4 highlighting recent operational changes and near-term priorities that are producing “tangible results.” NS is giving credit to newly installed Executive Vice President and Chief Operating Officer John Orr (video below), appointed on March 20 following his recruitment from Canadian Pacific Kansas City.

Operational performance improvements are “accelerating,” NS said, reporting 8% improvements in three key metrics: terminal dwell time, merchandise train speed and active train count “in just two weeks.” These are due to several changes. Intermodal and Automotive Operations (previously under Marketing) and Car Management are now reporting directly to Orr, a change that “will instill additional operational rigor, enhance opportunity for further productivity, and improve alignment and coordination across the business, including in Merchandise and Bulk.”

Orr has also adjusted near-term operating priorities, “streamlining processes and enhancing safety, productivity and service,” NS, by “executing a ‘Safety Blitz’ to reinforce best practices; assembling a task force and ‘war room’ in the Network Operations Center to assess network-wide asset utilization; developing a network ‘heat map’ to identify blockages and increase speed; and classifying two hump yards—Conway Yard in Pittsburgh, Pa. (above), and DeButts Yard in Chattanooga, Tenn. (below)—as ‘High Performance Terminals’ where he anticipates achieving 33% improvement in dwell time over the next 60 days at those locations.”

“Together, these changes are helping to increase the speed of the Merchandise network and open the door for broader network fluidity and efficiency,” NS noted.

Intermodal lane rationalization is another initiative. “A comprehensive review and optimization of the Intermodal network has eliminated lanes that do not have the density to meet productivity targets,” NS said. “To date, this has removed 53 low-volume lanes with limited growth prospects, comprising 15% of all our Intermodal lanes. This effort reduces network complexity, supporting our efforts to drive fluidity and productivity. It frees resources to improve service in lanes that are of greater strategic value to customers, driving growth and accelerating profitability improvement, while reducing conflict to the speed and efficiency of the Merchandise network.”

A new driver appointment system has been deployed at the Memphis Regional Intermodal Facility (Memphis, Tenn.) and Austell Whitaker Intermodal Facility (Atlanta, Ga.) international terminals. “With drayage arriving at scheduled times, terminals are prepared to quickly hand off freight, reducing driver dwell and increasing fluidity,” NS said. “We have has also launched new stack optimization technology at the terminals that manage containers, allowing the overall facility to operate cohesively. The combination enables crews to handle additional volumes and reduce ground traffic, creating the opportunity for further growth.”

The NS Board of Directors Human Capital Management and Compensation Committee approved changes to the company’s 2024 annual incentive compensation plan. The changes include adding Operating Ratio (OR) as a performance metric to replace the “margin modifier” as part of the 2024 plan. “This will further align management incentives with the company’s financial and operational goals and strategy, which include safety, service, productivity and growth,” NS noted. “The 2024 OR targets also align with the improvements needed to achieve the long-term objectives of achieving a sub-60% OR in three to four years and delivering an industry-competitive OR.”

“These initiatives will help us progress toward our strategic goals and close the margin gap with our peers,” said President and CEO Alan Shaw, who recently appeared on CNBC’s “Mad Money” with host Jim Cramer (video below). “Our network enhancements and improvements to our reporting structure will empower John Orr with the scope to implement his scheduled railroading plans and accelerate our operational improvements. This positions Norfolk Southern to become a more productive, resilient and efficient railroad, and drive long-term value creation.”