THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Monday, March 18, 1996 TAG: 9603160262
SECTION: BUSINESS WEEKLY PAGE: 04 EDITION: FINAL
TYPE: Opinion
SOURCE: TRAFFIC WORLD
LENGTH: Medium: 85 lines
If railroads are to continue to thrive into the 21st century they must keep their attention sharply focused ``where it belongs: on service to the customer,'' according to Norfolk Southern Corp. chairman David R. Goode.
Speaking at a recent conference, Goode emphasized railroads role as ``an integral part of a global production network.''
``We will only do as well as our customers,'' said the head of the Norfolk-based railroad. ``We must never forget that we are in the same business as that customer whose freight we're moving. If we're moving automobiles or parts, we're in the auto-making business. If we're moving coal, we're in the mining business or power business. If we're moving grain, we're in the farming or food business.''
Keeping this focus, he said, requires adhering to four basic principles: safety, efficiency, service quality and flexibility.
Safety leads his list because ``faster transit, more reliable schedules, lower rates, even a string of Harriman (safety) awards - all count for nothing if we lose the confidence of shippers and the general public.''
Achieving consistently safe operations is becoming more difficult, he said, because the market craves increasingly complex services -``more trains, more often, on more demanding schedules, on the highest density corridors.''
While this creates challenges to safe operations, he stressed that safety is not a balancing act. ``It's a one-sided issue. There are no compromises. Period.''
One critical safety issue that Goode said needs to be resolved at the policy level is the problem of running passenger trains on increasingly dense freight lines. ``The growing needs of the shipping public plus the growing sentiment for high-speed passenger service present some serious challenges that must be addressed.''
The railroad industry has done a good job of improving efficiency, Goode said, an accomplishment borne out by better returns on investment and a decline in freight rates relative to inflation. ``But more can and must be done, and this drive must continue.''
Technology is helping railroads with the third principle on his list: service quality. Making necessary investments in technology is neither easy nor cheap, he pointed out, but it is the cost of doing business. ``Our customers can't be competitive without it, and therefore neither can we.''
Norfolk Southern's commitment to that principle led it to accept customer reliability requirements from United Parcel Service that exceeded anything it had previously achieved.
``We do whatever is necessary, accepting inefficiency in a narrow sense and spending money that does not do much for our operating ratio'' to meet those commitments, he said, noting that last holiday season NS shared with Santa Fe and Florida East Coast the distinction of having zero service failures on UPS traffic.
``The drive for operating efficiency will continue to be tempered by the requirement that we also provide high-quality service,'' Goode observed. ``Our challenge now is to find the right operating strategy for each market segment and customer - the right blend of efficiency and service.''
That requires knowing the customer better, he said. As an example, he cited a paper manufacturer for which NS had been delivering shortwood fiber, a material that is costly to cut and deliver.
``As we got to know their business, we learned that we could help them compete by enabling them to use an alternative to shortwood fiber. We worked closely with them to develop a proposal for converting their process to use wood chips, which can be delivered more efficiently and which we could provide economically from new facilities on our line.
``Our involvement went so far as to offer capital participation in a rotary dump. As a result, we secured the customers continued business, located two new wood chip facilities and grew both their business and ours.''
Goode's fourth and closely related principle, flexibility, is not one that comes naturally to the railroad business. ``Railroad technology is not very flexible,'' he noted. ``The network of tracks is limited in terms of access and the basic production unit, the train, always means we must collect and hold cargo to accumulate even a small trainload - and do the reverse at the other end.''
Railroads have to learn how to change this so that they retain most of their line-haul efficiency while adding the flexibility customers require, he said.
``If we aren't careful, rail technology won't even have a role in many future distribution designs,'' he said. by CNB