Union Pacific's customer conversations 'haven't been easy' amid PSR transition

Dive Brief:

Union Pacific (UP) is ahead of schedule on its Unified Plan 2020 transition to precision scheduled railroading (PSR), according to executives on the railroad's fourth-quarter earnings call held Jan. 24.
Analysts expressed some trepidation with UP's more gradual transition to PSR compared to the thunder-clap approaches taken by Canadian National and Canadian Pacific — the implementations often held up as the prototype, orchestrated by the inventor of the method himself, the late Hunter Harrison. But UP executives said the railroad is committed to fully implementing PSR, even though conversations with customers "haven't been easy," CEO Lance Fritz said.
"We've had quite a bit of a decrease in our rail inventory," said Kenyatta Rocker, former VP and general manager of industrial products. "A significant part of that is on the private cars fleet, and a lot of that is because our commercial team has been proactive in working with the customer to let them know how to run an efficient rail service with us."

Dive Insight:

There's some irony to the fact that observers seem to see customer rancor as evidence of a successful transition to PSR, but with just a handful of cases, most run by the same guiding hand, comparisons are inevitable.

In terms of UP's implementation of PSR, Fritz said the railroad would be keeping its eyes on its own paper.

"We have benchmarked other railroads that implemented Precision Scheduled Railroading," said Fritz. "And ... we understand what they're achieving, and some of them are setting up some pretty strong benchmarks for us to pursue. But our focus is getting the efficiencies and the improvement here."

UP is implementing PSR in three phases, streamlining routes and lengthening trains gradually. The first phase will finish mid-2019, but Fritz explained the transition will never truly end since PSR is a guiding principle more than a task to be completed.

"This is a relentless pursuit of efficiency and enhanced reliability on our service product to customers. And we're never done," said Fritz.

So far, operating ratio for the railroad is down 1.1%, and trip plan compliance is up 14% since September.

Analysts asked UP to offer more specificity on the $500 million in savings the railroad announced it would recoup from implementing PSR.

"I can just tell you that we're not sitting around waiting for the back half of the year to come. We're going after it," CFO Robert Knight said.