June 29, 2009
Service Update from Jack Koraleski - Executive Vice President, Marketing & Sales
To our Customers:
As the Second Quarter draws to a close, I’d like to give you an update on our efforts to drive further service improvement while adjusting to the realities of the current low-demand environment.
Aligning Resources with Demand, Improving Network Productivity
The economy continues to impact volume levels across our business. While June seven-day carloadings will be slightly stronger than they’ve been the past several months, volume continues to be significantly lower than last year.
Last month, I highlighted for you our ongoing effort to match our working resources – crews, locomotives and freight cars - to our lower volume levels, while ensuring we could respond quickly to restore resources as demand dictates. With our physical plant also capable of handling volumes well above current levels, we’re adjusting terminal operations and train networks to maximize efficiency and provide superior service. By shifting workload from some of our satellite locations to our most efficient, heavier volume locations, we can reduce the time freight cars spend in terminals and speed shipments. We are also combining our Intermodal and Automotive train networks to match volumes and maintain, or enhance, service performance.
As the economy recovers, network operations can be adjusted to respond to higher volume levels.
Service Performance Continues to Strengthen
Our Operating team continues to deliver strong service performance even as they fine-tune resource levels to match demand. Through May, velocity is at 27.4 miles per hour - up 21 percent over last year. Our Service Delivery Index – a composite measure of our customer commitments – is at 93 through May - up almost 11 percent over last year.
Supporting these record service levels are the process improvements and investments made over the past several years. To improve safety, strengthen our infrastructure, and support growth we’ve invested nearly $12 billion since 2005 and, with a commitment to invest for the future, we have an additional $2.6 billion planned for 2009. As the economy recovers and volume strengthens, these investments and process improvements should help sustain our performance.
Customers Taking Note of UP Service and Investment
We are pleased that customers are taking note of our strong service performance, as customer satisfaction continues at record, or near-record, levels. Obviously, we’re also pleased when it leads to new business, as it did with the recent decision by Hub Group to bring significant additional business to Union Pacific. There's been a lot of interest in the industry about this shift, which Hub attributed to UP’s performance, service, and investments, along with a better fit for the Hub Network in services and capabilities.
Given the attention generated by this new business – and because I believe our improved intermodal performance reflects our commitment to innovative products and investment across our businesses - I thought I’d share some highlights of our intermodal performance. Our franchise positions us to offer the most complete coverage of domestic intermodal lanes and the chart below compares the transit time experienced by our customers in key lanes from 2006 through 2009 year-to-date. The significant service gains we’ve made reflect the stronger network that our capital investments, expanded use of distributed power, and process improvements have created. Our service reliability is equally as strong - with over 90 percent on-time performance in most markets and approaching 100 percent in major markets served via our Sunset Corridor.
 Union Pacific Domestic Service Performance |
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Our intermodal products range from convenient one-call, one-bill, door-to-door delivery offered by our Streamline subsidiary to our expedited ramp-to-ramp Blue Streak service for container freight, including refrigerated products, with truck-competitive service and cost. UP’s intermodal network offers customers the added advantage of our EMP equipment program, the industry’s largest rail-owned container program, with 24,000 domestic containers owned and operated jointly by Union Pacific and other North American rail carriers in the east and Canada.
We view our diverse commodity mix as a key strength and are committed to creating value for all our customers – carload, automotive, unit train and intermodal. We will continue our efforts to improve network efficiency while maintaining and improving service performance for customers.
Thanks for your business.
Union Pacific
Executive Vice President, Marketing & Sales