2015 SUSTAINABILITY REPORT

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COMMERCE

SERVING CUSTOMERS

Unified Train Control System and Movement Planner

Advanced Technologies for Improved Service

Norfolk Southern in early 2015 completed rollout of the railroad’s “next- generation” train-dispatching system to optimize train movements across the network and enhance customer service.

In a significant milestone, every division on the railroad as of March 2015 was using the RailEdge Movement Planner, a computer software program that is the rail equivalent of an automated air traffic control system. Movement Planner analyzes hundreds of daily train schedules and voluminous amounts of operating data to generate the most efficient plan for moving trains across the network.

Since rollout began in 2010, divisions using the RailEdge system for more than a year have seen average train velocity improve on their territory by 10 percent, or about 2 mph. The benefit for customers is more consistent, on-time service.

In 2013, Norfolk Southern completed systemwide rollout of the Unified Train Control System, the base train dispatching system that is the operating foundation for Movement Planner. UTCS replaced a variety of legacy systems with a single, integrated system that gives dispatchers and other railroad employees a shared network view. The primary benefits of UTCS are enhanced train safety, improved customer service, and increased operating resiliency - train dispatching can continue remotely for any division that loses dispatch capabilities due to severe weather or other disasters.

Norfolk Southern worked with industry partner GE Transportation to develop and implement UTCS and Movement Planner. The RailEdge technology incorporates data such as Norfolk Southern business priorities, locomotive horsepower, track topography, and train tonnage to develop train movement plans. The system includes a train performance calculator that estimates a train’s arrival at a location within five minutes per 100-mile stretch of rail line.

When 1 MPH Means Millions

With Movement Planner, Norfolk Southern hopes to improve network velocity by at least 10 percent, or about 2 mph. A 2 mph increase might seem insignificant, but with hundreds of trains moving daily, each 1 mph improvement translates into an estimated $30 million to $50 million in annual savings on railroad capital costs and operating expenses.

The reason? Increasing train velocity - or moving trains more quickly from Point A to Point B - creates track space for more freight capacity without adding new track. It also means fewer locomotives and rail cars are needed because turnaround time is quicker. Keeping trains on schedule also reduces operating expenses and makes work schedules more predictable for train and engine crews.

With UTCS and RailEdge, Norfolk Southern can track the time it takes a train to move over specific sections of track, traffic signals used, and where delays occur. Employees in information technology, transportation, strategic planning, and other operations departments analyze the data for ways to improve operating efficiencies and customer service.

Environmental benefits derive from reduced train delays and congestion, contributing to locomotive fuel efficiency and reduced greenhouse gas emissions.

Responding to Service Challenges

Norfolk Southern’s first priority is to keep trains operating safely and on schedule for customers. To boost customer service during 2014, Norfolk Southern hired 1,344 train and engine employees and placed into service an additional 164 locomotives, including new, used, and rebuilt units.

The company took these steps to help address operating and service challenges that the rail industry faced for much of 2014 as a result of severe winter weather and an unexpected surge in business volumes.

Snow, ice, and extended periods of frigid weather during the first three months caused delays, congestion, and more resource requirements over most of Norfolk Southern’s operating territory. In domino fashion, the weather slowed traffic across North America’s interconnected rail network. Then, as snows began to melt, rail traffic surged to levels significantly greater than expected, particularly on the railroad’s high-volume corridor between Chicago and New Jersey/Philadelphia. The surge continued through the third quarter of the year, creating ongoing service challenges.

During the year, Norfolk Southern temporarily shifted existing employees and equipment to areas of the network experiencing the most significant service challenges. The company also communicated regularly with customers to ensure that shipments were delivered as promised.

By year’s end, Norfolk Southern was seeing gains in network velocity. The goal in 2015 is to return customer service to levels achieved in 2012 and 2013, the railroad’s best year for service based on operating metrics used to gauge train performance.

Meeting Customer Expectations

Norfolk Southern sets internal goals for railroad operations to ensure the company achieves the highest levels of customer service. The company publicly releases operating results of three of the railroad’s key performance metrics: composite service performance, train speed, and terminal dwell.

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Composite Service
Performance

Composite service is made up of three measures: train performance, adherence to operating plans, and connection performance. Train performance is the percentage of scheduled trains arriving on time. Plan adherence is the percentage of customer carload pick-ups and set-outs executed as scheduled. Connection performance is the percentage of customer carloads making scheduled connections for delivery.

Train Speed
(Average MPH)

Train speed relates to network velocity - how smoothly and efficiently trains move from origin to destination - as measured by the average speed of trains. In addition to enhancing customer service, a higher-velocity network means the company needs fewer locomotives and rail cars to move the same amount of freight, reducing asset costs. In addition, it reduces labor costs and improves working conditions for employees.

Terminal Dwell
(Average Hours)

Terminal dwell refers to how long a rail car remains in a terminal during transport from origin to destination. Rail terminals function as huge package-sorting facilities, where freight cars are assembled, classified, and built into trains for delivery to customers. The aim is to move rail cars through the terminal and onto outbound trains as safely and as quickly as possible to achieve on-time performance.

2014 Performance Numbers

The railroad over the past five years achieved the highest service levels in 2012 and 2013. Norfolk Southern recognizes that service performance in 2014 fell below expectations. The company has moved aggressively to return service to levels that customers have come to expect.

Surveying Customers on How We’re Doing

Every spring, Norfolk Southern sends electronic surveys to customers across the railroad’s markets to gauge customer satisfaction. Typically, these surveys go to 800 to 900 people at 200 to 250 of the railroad’s top business customers.

On a variety of measures, customers rate service on a scale of 1 to 5, with 5 being the highest level. For items scored 3 or less, the railroad assembles a team of marketing and operations employees to meet with the customer and develop a plan to resolve service issues. In the fall, Norfolk Southern follows up with a “pulse” survey to ensure the company has met expectations of improved service.

Norfolk Southern does not publicly share results of the customer survey. Results are used as an internal tool for problem-solving and continuous improvement of individual customer service. The company uses a third-party vendor to compile the survey results to ensure the process is independent and impartial.

Norfolk Southern employees recognize that customer service is essential to long-term business success. Glenn D. Smith, a locomotive engineer, demonstrates how employees connect with customers. His efforts earned a 2014 company SPIRIT Award, which recognizes employees who exemplify our core values of Safety, Performance, Integrity, Respect, Innovation, and Teamwork.

LOOKING OUT FOR THE CUSTOMER

Glenn D. Smith, locomotive engineer at Portsmouth, Ohio, likes getting to know the customers on his territory. So when he learned that an agricultural customer was upset about delayed freight deliveries, Smith made it his business to look into the matter.

The customer, an animal and poultry feed company, is located near Columbus, Ohio, about 90 miles north of Portsmouth. Norfolk Southern delivers syrup that the company uses as an additive in feed products. At the end of the last grain season, when rail business dropped off, Norfolk Southern shifted Columbus-bound traffic from a local train to a road train running between Portsmouth and Bellevue Yard, about 100 miles north of Columbus.

Moving the freight to Bellevue, where it was then switched to a train traveling to Columbus, added about two days to the delivery time. Smith became involved after learning that the customer had run out of syrup needed to process the feed because of the delayed delivery.

Smith, local chairman of the Brotherhood of Locomotive Engineers and Trainmen union, heard about the situation at a meeting of Portsmouth’s employee safety and service committee. Smith volunteered to contact Gary Shepard, the division superintendent, about the matter. Shepard and his staff later worked with the company’s Operations Service and Support group in Atlanta to change the routing of the cars to prevent the delay from recurring.

“We know our paychecks are brought to us by our customers,” Smith said. “I knew this was a relatively small customer, but I felt they deserved the same level of service as a large customer. What’s a small customer today could be a big one tomorrow.”

Shepard, impressed by Smith’s initiative, nominated him for a company SPIRIT Award.

“We ask our employees to get involved in service, and I think it’s pretty good for an employee out there in the field to figure out a solution that saves transit time for the customer,” Shepard said. “I wanted to give him some recognition for that. He brought this issue to our attention, and it got resolved.”