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In Union Pacific, there is strength, and depth. North America's largest railroad, fighting its way out of a capacity crunch, is drawing upon all its resources to restore fluidity, balance, and power, both man and motive, to its 33,000-mile network. That network handles one-third of all U.S. rail freight volume. That means $300 billion worth of raw materials and finished goods annually.
"We're seeing a sea change in demand for rail transportation," says UP Chairman and CEO Dick Davidson. "From Staggers forward until the last year or so, we were living out of the cupboard. We had more people and assets than we needed. Now, all of a sudden, that's gone. We have more demand than supply. We're running like hell to try to keep up with volume, and our business is growing. We've had ten months of record volume. The gratifying part is the strength of the economy and the huge demand for our service. But the fact that we've disappointed a number of our customers puts a little cold water on our euphoria. The lack of resources and qualified personnel has offset strong revenues, and we haven't put the results on the bottom line."
To deal with the crunch, UP has had to make several adjustments to its operating scheme. For example, it created an allocation system for certain shipments to protect critical terminals from overload. It is temporarily limiting the number of rock and aggregate materials carloads handled in Texas, and is consolidating selected automobile and chemical trains. It is also regulating the volume of selected agricultural commodities and capping the number of incremental train starts. "If demand for freight transportation continues to surge into 2005 and we approach the limits of our physical capacity in key corridors, we will refine our methods to manage the flow into our network," UP Executive Vice President-Marketing and Sales Jack Koraleski recently told shippers.
"We're starting to put some performance numbers up that approach pre-stress levels," says Executive Vice President-Operations Dennis Duffy. "We're going to make sure that Christmas is an enjoyable season, despite what you may have read in other places." (A recent article in the Wall Street Journal said that UP "has become a major business constraint that could create shortages for retailers...
