Dive Brief:
- Union Pacific Railroad announced it would consolidate its six Marketing & Sales business units from six to four: Agricultural Products, Energy, Industrial and Premium.
- The railroad will also merge its four logistics subsidiaries — Union Pacific Distribution Services (UPDS), Streamline, ShipCarsNow and Insight Network Logistics (INL) — into one, incorporated as Loup Logistics Company as of Nov. 1, and rename its National Customer Service Center to Customer Care & Support.
- The changes to the company's client-facing business structure reflect a need to adapt to changing consumer needs, according to Union Pacific.
Dive Insight:
When a company restructures, it signals a new vision through the changed divisions.
In Union Pacific's case, the changes are being made to the consumer-facing divisions, or those engaging with shippers, as the railroad reportedly responds to evolving consumer needs. The specific changes show a bid to expand its market share, or at least stay ahead of trends that may pull customers to its competitors.
What was previously the company's coal division, for example, will now also service frac sand, LPG, petroleum and wind markets — a sign of changing times? The railroad also combined its intermodal and automotive sales units into a Premium division, perhaps as a nod to the just-in-time nature of the two markets. Other changes include combining industrial products and chemicals, and agricultural products and fertilizer.
A look at the restructure reveals the railroad is betting on a basic tenet of client relations: improve customer service by providing shippers what they need in as few steps as possible. However, the restructure may not be solely due to a focus on customer service, but also in part to a clearly changing market.
Though hopeful, with continued investment in its own infrastructure, the rail industry hasn't yet made a full recovery from Great Recession lows, though it is on an upswing with improved numbers from a decade ago. Yet efforts to cut costs, both for itself and its shippers still remain, with train lengths of up to nearly three miles becoming more common, despite safety concerns by workers.
While some rail lines, such as CSX, are enduring massive restructuring in an effort to regain pre-recession profits, others, like Union Pacific, are seeking less drastic measures to acquire new business. Outreach has become a priority, with a new logistics division and increased service options now being offered. In other words, Union Pacific is attempting to connect with a new, previously underserved market, in hopes of expansion.
Efforts to reach Union Pacific for comment were unsuccessful.
