Railroads say reinvestment will improve service

09/07/2011 01:11:00 PM
Coral Beach

SUN VALLEY, Idaho — Representatives from three railroads had a similar message when they spoke at the Idaho Grower Shipper Association’s convention: Improving customer service is their goal and reinvesting profit is crucial to meeting that goal.

The Union Pacific, Norfolk Southern and CSX railroads were all on the agenda for a workshop at the 83rd annual IGSA convention. The workshop attracted about half of the 285 convention attendees.

In addition to their common goal of improving service, all three railroads share a common cost issue. The federal government’s mandate regarding “positive train control” will require an industry-wide investment of $5.8 billion, said Paul Hammes, vice president and general manager for agricultural products for Union Pacific.

Union Pacific Corp.

With its 150th anniversary coming up in 2012, Hammes said Union Pacific is in constant upkeep mode. He said the railroad replaces three miles of track and 10,000 ties every day. That ongoing expense is just part of the railroad’s reinvestment budget.

The railroad is scheduled to spend $3.3 billion this year on capital expenditures, including 100 new locomotives. Hammes said some Union Pacific managers have requested the railroad invest in 1,250 new 64-foot reefer cars, but there is no final word yet on that purchase.

Then there is the investment in customer service, which Hammes said has been ongoing n recent years.

“We modeled our customer satisfaction program on Toyota’s,” Hammes said “They said a score in the mid 80s is good. We are at 91 overall and our potato shipper score is 100.”

CSX Corp. Inc.

Customer service for CSX railroad comes down to three elements, said Kyle Hancock, vice president for sales and marketing: resources, operating philosophy and “putting our money where our mouth is.”

In the way of resource commitment, CSX is adding locomotives, which cost more than $2 million each, and hiring a “significant number” of employees, Hancock said. The railroad has budgeted $2.2 billion this year for capital improvements. It has added more than 500 locomotives since January.

“For the long-term we are looking at total service integration to address problems our customers have in the first and last mile,” Hancock said, explaining that three pilot projects are under way.

Hancock declined to reveal where the pilot projects are being conducted because the company does not want to contaminate the results by having customers know they are in a pilot area.

“In 12 months we hope to know what we need to change,” Hancock said. “It probably won’t be as much in the capital expenditures as it will be in how we do our jobs.”

Norfolk Southern Corp.

The implementation of the “Pacesetter” program at Norfolk Southern in 2008 has improved customer service as far as inventory and demurrage — delays in loading or unloading or a fee/fine charged in relation to such delays — management, but there is still room for improvement said Alan Julian, director of marketing for agriculture.

The railroad is reinvesting profits to improve operations. In 2010 Norfolk Southern spent 15% of its revenue on capital expenditures. For 2011 the railroad has budgeted $2.1 billion in capital outlays with an eye toward improving customer service.

In terms of its potato shipping customers, Julian said Norfolk Southern has 183 temperature-controlled facilities along its routes. He said he believes access to those facilities helped the railroad log a 38% increase in potato shipments in the southeast so far this year and a 21% increase in the Northeast.



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