Dive Brief:
- Service improved and customers are happy with Norfolk Southern's "flawless" precision-scheduled railroading (PSR) implementation, CMO Alan Shaw said on the railroad's Wednesday earnings call. "What's unique about Norfolk Southern is that as we implemented PSR, our service got better," said Shaw.
- Norfolk Southern met its service quality metric goal two years ahead of schedule, said COO Mike Wheeler. Norfolk Southern uses a customer-facing metric it calls a Service Delivery Index rather than the traditional Trip Plan Compliance KPI. The railroad hasn't released an improvement target for 2020, but Wheeler said tightening delivery windows is on the agenda.
- Norfolk Southern reduced headcount faster than forecasted when executives rolled out the PSR plan in April. The railroad reduced total headcount by 4,200 in 2019 and CFO Mark George said to expect more in 2020. "Frankly, we just have to see how volume shakes out and determine how much further we can go..." said George.
Dive Insight:
"Our network is running fast and on-time," said Wheeler. Though the railroad met the goals it set out for efficiency metrics, reporting an operating ratio of 64.7%, Norfolk Southern like all U.S. Class I's, hasn't had the volume to really test the new strategy.
Total carload decline for the year was 5% year-over-year (revenue declined 1%) across commodity categories. Intermodal volume dipped 8% for the full year 2019 — a long way from the intermodal growth Shaw forecasted in July.
Shaw said that the somewhat meager GDP growth expected in 2020 will create opportunities for the railroad's intermodal franchise since growth will be driven by consumer spending. He also echoed other railroads' assessments that the trucking market won't tighten until the latter half of the year.
The CMO said he expects growth in intermodal revenue and volume this year while forecasting flat total revenue for 2020 — still more optimistic than rival CSX's flat to 2% down predictions two weeks ago.
