Union Pacific could control traffic flows to address network congestion

Union Pacific could temporarily meter traffic beginning next week if service issues don’t abate. 

Additional inventory on UP’s (NYSE: UNP) network “has led to more congestion in yards, an imbalance of our resources and further slowdown of our operational performance,” said Kenny Rocker, executive vice president for marketing and sales, in a service update Monday.

With inventory levels rising on a daily basis, UP is working with customers to manage network congestion by reducing the number of active railcars on the network. But if not enough operating inventory has been reduced voluntarily, UP will begin metering traffic after next Monday, according to Rocker.

Metering trains means to limit the number of trains on the network per unit of time. A similar example of metering is when a motorist waits for a signal before going onto an entry ramp for a highway. 

“This action, along with our other ongoing initiatives, will give us the ability to work through our backlog and improve the service for all our customers,” Rocker said. “We are actively monitoring the progress of our operating inventory levels and will remain in close contact with you to keep you updated.”

Rocker acknowledged that UP’s network “has experienced some setbacks” over the last several weeks, including service interruptions, delays and crew shortages in select areas. 

UP is taking several steps to address the service disruptions, including bumping up its active fleet of locomotives, “aggressively” hiring more employees while relocating 80 crew members to specific locations and removing some railcars to improve network fluidity.

UP’s actions outlined in Monday’s service update are similar to those that BNSF is undertaking, according to a late March letter to the Surface Transportation Board.

Since January, UP has added 50 locomotives to its active fleet, with plans to add 100 more locomotives, Rocker said. 

UP is also “recruiting heavily to alleviate crew shortages in certain locations and have modified our recruiting strategies to attract more applicants. We are aggressively hiring and streamlined our onboarding process to get new hires on the job faster.” So far, 450 employees are in training and are poised to graduate in the early summer.

UP is removing 2% to 3% of UP-controlled cars from the network across multiple commodity groups as a means to maintain fluidity and reduce inventories on the system. For intermodal customers, that also means monitoring inland ramps to make sure supply chain partners are able to dray their shipments off the ramps, Rocker said.

“By working together, we will restore service to the level that you expect and deliver a more reliable service product to all our customers,” Rocker said.

Other Class I railroads, such as BNSF (NYSE: BRK.BRK) and Norfolk Southern (NYSE: NSC) have resorted to metering temporarily as a means to address network congestion. Meanwhile, UP suspended eastbound service from the West Coast ports to Chicago for international containers for a week last July to address Midwest congestion.

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