Union Pacific Railroad Future Car Accounting Process Linda Newell - Gen Dir ECommerce, Mike Carmichael - Sr Mgr Car Acctg, Lori Wies - Mgr Car Acctg May 8, 2008

2 Car Accounting is not known for moving at breakneck speed

3 Car Accounting is known for setting plenty of rules to follow In LCS We Trust

4 Following them to the letter Well Maybe Not

5 Then looking back and saying “What” went wrong How do I Fix This?

6 Well, we’ve kind of done that with LCS Use LCS to Validate Claims LCS Interchange Times Take Precedence Apply TOL’s Pay Car Hire Receive Payment Partially Based on LCS Send out Claims Apply LCS to Operating System Receive LCS Messages

7 Future Car Accounting Process UPRR problems with car accounting system Development of new system based on LCS liability file from Railinc System Implementation – Interim results Potential enhancements

8 Union Pacific – Problems with LCS Union Pacific’s old system applied LCS messages to internal car cycles –Messages not applied to correct cycles –No cycle found –Received LCS changes only LCS messages queued for manual processing Caused both over and under payments Overpayments were never recovered Underpayments resulted in claims worked manually

9 Union Pacific – Problems with Rule 5 TOL messages UPRR created Rule 5 TOLs from internal car cycles Interchange times on internal car cycles only updated with LCS change messages Received a daily average of 51 Train 58 messages that were worked manually (rejected TOLs) Resulted in car hire claims

10 Solution: Equipment Liability System (ELS) ELS Objectives –Create accurate payments for foreign equipment Payments based on exact LCS liability Eliminate all claims from foreign roads –Accurate claims for UPRR owned equipment Increase receivables Eliminate inaccurate claims Decrease manual effort to resolve disputed claims

11 ELS Phase 1 - January 2007 Collaborated with Railinc to create an equipment liability file based on LCS messages –Received online events and hours for foreign and TTX equipment –Received online and offline events for UPRR owned equipment Created database to house equipment liability file

12 ELS Phase 1 – Interim Process Compared equipment liability file with internal event and payment data to identify differences –Analyzed differences during system development –Identified specific data issues/requirements –Identified Internal / external LCS issues –Presented LCS issues to the LCS TAG Adjusted car cycles to mimic Railinc file for both foreign and UPRR owned equipment –45% reduction in foreign claims received –Reduced system claims created by 55% (claims that were not supported by LCS)

13 ELS Phase September 2007 Rule 5 TOL messages UPRR created daily switch bill file to send to Railinc Railinc created and sent out Rule 5 TOL messages based on LCS validated interchange times Results –Significant reduction in Train 58 rejection messages –Accurate Rule 5 TOLs –Eliminate TOL claims

14 ELS Phase 2 - February 2008 (December account month) Created foreign payment based on Railinc liability file –Tied miles from cycles in old system to liability units –Created exchange file based on Railinc liability and mile file –Defined and implemented web screens to process claims and adjustments Expected results –Reduced foreign claims received –Reduction of 3 full-time equivalents

15 ELS Phase 3 – April 2008 (December account month) Generated system claims from Railinc liability file – claims to recipients –Enhanced claim accuracy –Added additional detail to user records –Defined and implemented web screens to view offline liability and make adjustments on system claims –Reduced manual work for declined claims

16 ELS – Potential Enhancements Allow foreign railroads to access ELS to retrieve copies of claims Ability for foreign roads to dispute/decline claims online Electronic exchange of claim information for systematic match of data

17 Questions?