Norfolk Southern COO John Orr sat down with UBS on Monday to share the operational enhancements underway across our network, and our work to close the margin gap with peers and create long-term value for our customers, shareholders, and other stakeholders. Core to that is direct feedback from railroaders, successfully executing our operating plan every day, and enhancing our culture.

Feedback from the field is critical

When it comes to effecting operational changes, John says it comes down to spending time in the field listening to workers’ perspectives and understanding their feedback. “I want to learn and respect what they do,” Orr said. “Their feedback is important to me because that is how we change more rapidly with more accuracy.”

The importance of that feedback loop extends to all stakeholders, John said, and is a key element of John’s PSR 2.0 concept: “I think that is the most important aspect of creating collaboration and value for shareholders because that allows us to be responsive.”

Change is underway and the results have been promising

By understanding the views of our workers and other stakeholders, Norfolk Southern has been able to make meaningful improvements in short order. Since joining the company in March, Orr and the Operations team have successfully:

• Improved Terminal Dwell by 8%
• Improved Car Miles per Day by 8%
• Decreased Recrew Rates by 22%

“System redesign is in flight…Our local and yard assignment assessment is underway, and we’re creating a new playbook for how we work in our terminals to create more fluidity, tighter standards and tighter connections, and it’s proving itself out. Our training yield is coming up, our overtime is coming down, our recruits are coming down, so our accuracy is elevating, and our cars and assets are being rightsized in their fleets,” said Orr. “And you need to have those measurable milestones so that I have confidence that what we’re doing is driving change that will manifest into a better OR (operating ratio), reduce costs or reliability of our fleets, and more work-life balance for our people.”

Looking ahead, John sees a lot of opportunity for improvement and is optimistic that Norfolk can capture these opportunities. Norfolk Southern is expecting an OR of 64% to 65% in the second half of 2024, which translates to a 400+ basis point improvement over the OR in the second half of 2023.

When asked what the key elements are for achieving this OR improvement, John called out a few areas in particular: “I think the value we’re deriving from running on time, getting better yield on our cars and less handling. That’s a big issue for me to reduce the waste and rework. That will see itself in the costs for our crews in the form of overtime and recruits – that is rework that can be eliminated. We’re going to see big buckets coming out of fuel and fuel consumption and fuel efficiencies as we move out the less efficient locomotives and allow the better performing locomotives.”

It starts with culture

While there are a lot of changes John can make, he stresses that it’s an undertaking that cannot be accomplished or sustained without the positive corporate culture he believes is already at NS. “It’s not something you can buy off the shelf,” John says. “When people are confident that they've got the commitment of the organization, they're willing to step up and do amazing things.”

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