UP: On the 'value proposition' path

During Union Pacific Railroad’s fourth-quarter earnings conference held the morning of Jan. 21, senior executives talked about the Class I’s ongoing efforts to provide shippers an optimal “value proposition” by improving operational performance.

Vice Chairman-Operations Dennis Duffy provided evidence that those efforts paid off in 2009. Safety performance metrics show that from 2006 to 2009, personal injuries per 200,000 manhours dropped 24 percent, grade crossing accidents per million train miles fell 26 percent and customer incidents per million train miles decreased 26 percent. UP achieved record levels in all safety metrics for the second-straight year in 2009, said Duffy.

In terms of full-year service metrics, velocity increased to a record 27.3 mph — an increase of nearly 2 mph from the previous record set in 2002 — average terminal dwell time decreased slightly to 24.8 hours, freight-car utilization improved to 8.6 cycle days and the service delivery index reached a robust 92 mark.

UP is excelling at managing volume variability, said Duffy. As of Jan. 16, the Class I had 4,200 furloughed train and engine-service workers available, and still had 1,600 locomotives and 44,000 rail cars in storage. The railroad had adjusted its resources in 2009, when gross ton miles dropped 17 percent and train starts decreased 20 percent.

UP also continues to manage train capacity, primarily by operating longer trains, enhance its surge capabilities, instill process discipline and upgrade infrastructure condition, said Duffy. Of $2.5 billion spent on capital improvements in 2009, $1.7 billion went toward “engineering replacement” work, $375 million toward capacity and commercial facility projects, and $375 million toward locomotives and equipment.

Slow orders on the network declined 30 percent last year because of several key projects, including the Boone High Bridge and increased tunnel clearances on the Donner Pass. Opening the Donner Pass route to double-stack containers “saves us 75 miles and up to three hours for our customers, making our route the shortest and fastest from Oakland to Chicago,” said Duffy.

UP is driving toward “best in class” safety performance, service excellence, “strong” infrastructure, and the ability to handle more carloads with fewer assets, said Duffy. The ultimate aim: to be resilient, agile and a volume-variable operation, he said.

“Above all, we will be ready for whatever demand comes our way, up or down,” said Duffy. “Cyclical demand changes, seasonal variations and hopefully a strengthening economy, all require that we stay agile and resilient.”

  • I would have to question Donner improvements making Oakland to Chicago the fastest route.  Shorter than Tehachapi's yes.  But until they double track the former SP/DRGW line I can't imagine the climb up Donner, then the climb up the Wasatch, then the climb over the Rockies with a wicked drop into Denver is faster than other routes.

    I'd think they just trimmed 3 hrs off the run that way versus going through Keddie.

    Still kudos to UP for the refreshing change in the approach to customers compared to former operation.  That's what having a marketing type running the show can/will do for you.  Going after BNSF's grip on intermodal is a smart plan.

  • This is not a criticism of Union Pacific, so much as criticism of the manner in which statistics are bantered about in our industry.  I notice that the UP Network Velocity reached 27.3 miles per hour.  As I recall, the Network Velocity is the total distance run by all the trains on the system divided by the time all trains take from the time that the equipment is ready  to leave the initial terminal until the time the train is tie-up at the end of its run.  

    Later in the article, they cover the operating improvements including finally getting full double stack clearances "over the hill" on the old Central Pacific line between Sacremento and Reno over Donner Summit.  The article mentions saving "up to" 3 hours and 75 miles.  Because "up to" means "less than" in most cases, let us suppose that the average running time saved is 2 hours 40 minutes.  That represents 28.125 mph average speed over the 75 miles that are not travelled by the trains.  Applying this to the "network velocity" computation would mean that the overall network velocity for UP would DECREASE by some miniscule amount for every train that is diverted from the Feather River Route to Donner Summit!

    Wasn't it Mark Twain who wrote that there are "Lies, Damned Lies, and then there are Statistics."

    Good work to improve operations does not always show in the statistics that we choose to collect.  I have often wondered what the average speed would be for transportation if the statistic that we computed was the crow-fly distance from the loading dock of origin to the loading dock of destination divied by the dock to dock time.  (I suspect that it would be in the single digits.)  But that is really what the customer is paying for.  Of course I have seen colleagues waste the money to send packages "Next Day Air - Priority" between New York and Philadelphia (less than 100 miles) when a surface carrier could have delivered it in the same or less time at half the cost.  

  • ARailroaderWhoRemembersThings makes a number of interesting points.  His last point about Next Day Air vs surface carriage is particularly significant.  In most cases, I believe you'll find that packages sent over that route and distance never see an airplane and are moved by truck.  The customer is paying for the quality of service and doesn't know how the package actually moved.  As for "velocity," I question using system average train speed in the first place.  Velocity is the measure at which a railroad's assets are being utilized.  Train speed is just one element.  If a railroad is operating efficiently and cars are being placed in the right train, they may be held longer in a yard than is required, but the customers still is getting better service and the assets are being turned faster.  Depending on the traffic mix and other factors, a railroad with system average train speed of 25 mph may be considerably more efficient and profitable than a railroad with a higher system average trains speed.

    For BacktotheFuture, are you sure the UP intermodal traffic between Oakland and Chicago is routed over all those mountains and then into Denver?  I would expect it to operate over the UP main across Wyoming and Nebraska, a considerably faster route than the old D&RGW route.  Can you even put double-stacks through Moffett Tunnel?

  • Good call Larry...I forgot about the split near SLC.  Guess my missing fallen flag DRGW made me think it was still an important line.

    Donner, Wasatch, and Sherman Hill instead of Donner, Wasatch, Rockies.

  • You've got it now, BacktotheFuture.  Do you realize there are people participating here who are approaching middle age and don't know what the DRGW was - or even what a fallen flag is?

  • I think out of all the states in this nation Colorado had the most diverse and colorful group of railroads.  Of course I'm including all of the narrow gauge lines that were in the mountains.  All 4x4 roads now so if you're a history buff you can always imagine being the engineer climbing through the mountains 100+ years ago.

  • A great history.  The "war" between Santa Fe and DRGW for Raton Pass is the stuff of legend.  Narrow gauge allowed access to the mountainous areas what standard gauge simply could not traverse.

  • You are correct Larry. The UP routing from Oakland to Chicago goes through Reno / Ogden NV - SLC UT - Cheyenne WY - North Platt NE - Omaha NE then the old CNW into Chicago. It is a very consistint transit lane for them.

  • Some of you have good memories for railroadiana, and may remember that UP, which always coveted its own route between Omaha and Chicago, originally chose the Rock Island to fulfill that dream.  By the time the ICC got around to approving the deal, subject to numerous conditions, CRIP had deteriorated so much that UP walked away from it.  It then turned to C&NW and it is the former CNW line that is UP's route to Chicago.

  • By the time the ICC got around to approving the deal, subject to numerous conditions, CRIP had deteriorated so much...

    So, you saying the Rock Island was CRIPpled?

  • Crippled, Hell.  It was amputated.

  • Yeah, but what kinda bad pun does that leave you with?

    On the serious side, the whole way Americans view and teach history is, to my mind, dangerous as Hell.  Outside of railfans and railroaders, the only thing most people below 30 years know about the Rock Island is that it's a mighty good road.   A big part of the reason why kids don't learn about recent history is many public schools are so scared of saying anything controversial that they stick to current events and ancient history.

  • anmccaff, I also know that "Ya can talk, ya can talk, ya can bicker ya can talk, ya can bicker, bicker bicker ya can talk all ya want but is different than it was."

  • DaveB>"anmccaff, I also know that "Ya can talk, ya can talk, ya can bicker ya can talk, ya can bicker, bicker bicker ya can talk all ya want but is different than it was.""

    Oh, yeah, that's a fact, too.  The past deserves some respect, not blind worship.

    "Why it's the Model T Ford made the trouble,"

    Sounds like Railroadist, don't it?

    Sometimes, though, it's worth reverting to old ways of doing things because times change and make them suitable again, and a lot of shippers and consignees might be finding themselves in that position as the price of oil, and the price of highways, continues going up.

  • Thanks for a couple of good laughs, Anmccaff and DaveB.  That said, consider this.  In my AAR days more than 35 years ago, we used to get furious at the way the land grants of the 19th Century were dealth with in schools.  We produced pamphlets and monographs on the subject and sent them along with polite letters to text-book publishers.  The standard response was that texts were produced every couple of years, always with a new author or group of authors and the publishers were not in the business of censoring their authors.  I think the translation of the lawyer-written letters was: Go pound sand.

    More recently, the railroads have done a lousy job of telling their story to the world.  Basically, they are not willing to spend the money to reach the general public, and in fairness, they may be justified in that, so the focus on dealing with legislators and major customers, where they just might see some positive results.  Maybe.