Cynthia M. "Cindy" Sanborn
Executive Vice President and Chief Operating Officer at Norfolk Southern
Thanks, Jim, and good morning. In the quarter, we continued to successfully drive productivity improvement throughout the network. We worked to be as efficient as possible as we adjusted to accommodate demand shifts in many of our markets. This quarter shows continued progress as we attack our cost structure while positioning ourselves for further improvement in both cost and service levels. The quarterly operating metrics on slide six clearly show that, once again, we generated positive operating leverage on flat unit volumes and GTMs that were up 5%. While we are proactively hiring train crews, efficiency in all areas of our operations, including engineering, mechanical and communications and signals, enabled us to run the network with 7% fewer people in the quarter compared to a year ago. Because assets drive activity, reducing the number of active locomotives was an important lever in managing the size of the workforce. Both train weight and train length continue to improve, driven by a focus on improving the productivity in our bulk network. Coal, grain and other single commodity unit trains offer real opportunity for gains through collaborating with our customers on operating trains with more cars per set and by doubling up existing trains over portions of their route. I expect we will show continued progress in the fourth quarter as we see the fruits of our efforts. While strong coal traffic helped drive train weight more than length, train length continued to improve and set another quarterly record. After seven consecutive quarters of fuel efficiency improvements, we saw a modest deterioration this quarter despite the increase in train size as our horsepower leverage was challenged at times due to volatile traffic flows and we had modestly fewer of the very heavy, highly fuel-efficient trains.
I am pushing the team to respond more quickly in the face of change, and we are committed to closing the gap with our peers over time and are redoubling our efforts in this critical area. As you can see on slide seven, train speed and terminal dwell were generally flat versus second quarter and do not reflect performance at desired levels. While there were some effects from Hurricane Ida, those impacts were localized, and I'm extremely proud of how the team, especially engineering and our signal forces, helped us return our routes in Louisiana to operation and reopen the New Orleans Gateway very quickly. As I mentioned last quarter, we are experiencing hiring and retention conditions that are increasingly challenging, especially in some of our more critical locations, and it is having an impact on our network. Despite hiring all year long, attrition has been accelerating in each of the last two quarters in several of those critical areas. In many of these locations, we've been able to absorb the impact by executing upon productivity initiatives, and this will be very much a part of the equation going forward as we grow capacity, which I'll talk about more in a moment. Some of the things we are doing to create relief: we've more than tripled our conductor trainee rank since the first quarter so that we can effectively backfill in critical areas; we've implemented tools such as perfect attendance bonuses, referral bonuses and signing incentives to improve the stickiness of our current and future workforce; and we continue to leverage the valuable Go Teams to quickly respond to business opportunities where needed. People are the backbone of the railroad, and we need to make progress on these initiatives to better manage the effects of a tight labor market. We are committed to having the right amount of resources in the right place at the right time, which will drive both cost control and service quality.
As our business mix continues to evolve, creating capacity across our market segments has become an even more significant area of focus as highlighted on slide eight. Some shippers are looking to take advantage of unexpected market opportunities by shipping extra volume. Others are looking for us to help them adjust to volatility coming from other parts of their supply chains, and of course, all place a high value and service predictability. We're adjusting our network and operations to generate the various types of capacity that customers are looking for. For example, increases in both train sizes give shippers extra lift without further demands on our crew base. Train size increases often require connecting railroads, customers and Norfolk Southern to change processes, and we have found those process changes are worth the effort because they improve asset turns and capacity. We also continue to focus on terminal efficiency, whether helping to drive dwell at our biggest hump yard, Elkhart, to very low levels or tactically redirecting trains to intermodal terminals that have the capacity to unload quickly. Moving to slide nine. I want to show how we can use these capacity efforts to drive productivity. We've had great success over the past two years driving train size and, in doing so, have addressed a handful of infrastructure bottlenecks. We're fast-tracking a set of siding improvements, the first of which went into service at the end of the third quarter so we can keep making progress. Bigger trains unlocked by siding extensions helped drive locomotive utilization because it allows us to fully match train size to available pulling power. And because locomotives are at their most efficient when pulling hard, this is a key lever to our fuel efficiency improvement.
While I've used locomotives and fuel as my primary example, capacity additions have a similar effect on our crew productivity: more cars per crew, asset turns, keeping trains moving with greater train capacity, and also helps our customers with improved train and car performance. On slide 10, we are complementing our investment in physical capacity with a comprehensive technology strategy that makes our crews more efficient and our assets more productive. Virtually all of our routine signal and track maintenance is now scheduled via the mobile track authority app, a process that used to be measured in minutes can now be accomplished in seconds. It is inherently more efficient than the radio process of the past, and most importantly, safer because it reduces transcription errors. In the words of our chief engineer, the app has been a game changer for the productivity of his forces. We're doing the same with our mobile train reporting app, which enables our train crews to quickly report completed work and to receive updated customer work requests while in route. This takes a lot of hands out of the process, including significant retyping and delay and enables our crews to be more productive. We're still early in the deployment of this application with rollout to the local trains that do the preponderance of pickups and setoffs just beginning. The use cases for this technology in the field are numerous, and driving adoption and innovation around this platform is a focal point that will allow us to capture additional benefit. The common use thread in these apps is that better information allows people to plan. Our track supervisors can better plan their schedule knowing the availability of track time, and our customers can better plan their plant operations and product pipeline with up-to-date shipment information.
Now I will turn it over to Alan.
