Strategic plan drives service, efficiency, growth
In December 2015, Norfolk Southern announced a five-year strategic plan that sets targets for the company’s economic performance through 2020. Developed by Jim Squires, who became CEO June 1, along with the senior management team and board of directors, the plan followed a comprehensive evaluation of the company’s business model.
The plan is based on the core competencies of NS’ business: safety and service; revenue growth; and stewardship of resources through productivity and operating efficiencies. The conservative and flexible plan enables the company to make adjustments to meet performance targets amid changing economic cycles and business markets.
The aim is to achieve ongoing operational efficiencies that result in a faster, more fluid, and lower-cost railroad. Improving network velocity enables NS to deliver superior service, create track capacity for volume growth, and generate cost savings that benefit the bottom line. A key target is to achieve an annual operating ratio below 65 percent. The ratio is a measure of operating expenses as a percentage of total revenue – the lower the ratio, the better.
The plan’s focus areas include:
- Managing the workforce and facilities – including yards, terminals, and rail lines – based on business market demands. Streamlining operations around NS’ coal business, which has declined in volume over the past four years, is a key part of the plan.
- Reducing the size of the locomotive and freight car fleets. The strategy includes replacing older, less reliable locomotives with new units and continuing NS’ innovative locomotive rebuild program to enhance the efficiency and reliability of its road fleet.
- Improving locomotive fuel efficiency through a combination of onboard energy-management technologies, such as LEADER, improved network velocity, and operation of fewer locomotives.