Retailers and wholesalers are adopting a tougher tone in their year-2000 communications with suppliers and trading partners.
At least two retailers have threatened to seek an alternate supplier, if their current one cannot guarantee an uninterrupted flow of product after Jan. 1, 2000.
On a wider scale, what had been requests for information about progress toward year-2000 compliance have become increasingly specific demands to know precisely what trading partners are doing to deal with the Millennium Bug computer problem.
Like everything else about this issue, however, the process of ensuring other companies' compliance is complex. Warnings of the year-2000 problem's gravity have many companies -- including retailers and wholesalers -- responding cautiously to queries because they fear exposing themselves to liability.
Form letters and questionnaires about year-2000 compliance have begun circulating in earnest in the supermarket industry. Spartan Stores, Grand Rapids, Mich., has notified vendors about its progress, but the wholesaler will wait about a month to get similar information from its numerous vendors.
"We've been waiting, because it's not a very successful campaign any way you look at it. People are being advised by their legal staff not to answer questions," said Pat Cox, Year 2000 project manager for the wholesaler.
When he receives questionnaires on Spartan's progress on the problem, Cox answers questions broadly. He expects the same reaction when he sends letters to vendors, because everyone is concerned about legal liability.
"It would be ideal to have a letter, signed by a company officer, that guarantees they're going to be ready. But the chances are 10 to 1 against it," Cox said.
Whatever their value in finding real information, letters can protect the sender to a certain degree. Attorneys have advised retailers to send letters so that, in the case of lawsuits against them, they can prove "due diligence" -- that they did everything possible to contact vendors and ward off potential problems.
But some lawyers warn that the letters may not hold up in court.
"Letters would not supersede contracts," said Steven Brower, an attorney with the firm of Ginsburg Stephan Orringher & Richman, Costa Mesa, Calif., which specializes in computer-related issues. Instead of letters, firms should focus on contract renegotiations, with detailed warranties and requirements in the case of mishaps, he added.
Brower and others suggest in-person meetings with critical vendors. "If you have five vendors who supply 80% of your merchandise, you really need to concentrate on those vendors," Brower said.
"Anybody can sign a letter. You need to sit down face-to-face with major vendors," said James Crouch, director of information technology at Topco Associates, Skokie, Ill.
One food manufacturer is already feeling the potential business consequences of noncompliance.
Two major retailers warned the company that "if we were not done by 1999, they would change our current status away from 'preferred vendor,' " said the information systems director for a the company, who spoke on condition of anonymity. The retailers also reserved the right to send in an auditor to review the manufacturer's handling of the problem.
"The pace of inquiries is picking up and now they're more specific. [They're asking] 'When can we test electronic data interchange?' 'When will you have all your computer-related systems ready?' " the manufacturer added. Retailers have also noticed more detailed questionnaires on specific systems.
Some retailers require vendors to sign letters guaranteeing uninterrupted supply come Jan. 1, 2000. However, both retailers and vendors expressed concern about signing such letters. "I avoid signing anything I'm uncomfortable with," the food manufacturer said. He simply fills out a company form letter and sends it back to the retailer.
At the same time, these "threats" may not be realistic, according to one consultant, because of unforeseen complications and a lack of vendors in some categories. "In some cases, you only have one or two alternatives, and it's real tough to know in advance what the problems will be," said Peter de Jager, a consultant on the year-2000 problem.
The year-2000 problem is caused by computers' inability to distinguish between the years 1900 and 2000, because most programs identify years only by their final two digits. Dealing with its ramifications, which could affect not only computer software and hardware but products containing embedded computer chips such as clocks and refrigeration units, demands especially open communications among different companies.
While a combative stance may help wake up a company that has not made significant moves to deal with its computer systems, cooperation is even more important as the year 2000 approaches, said de Jager, president of de Jager & Co., Brampton, Ontario.
One method of dealing with the problem, for example, involves the use of "pivot" dates. If a company does not want to recode its computers to recognize all four digits of a year, it can establish a pivot date of 50, meaning that any number below 50 would represent a year in the 21st century, while any number above 50 would represent a year in the 20th century.
A computer with a pivot date of 50 would read the digits "50" as the year 2050, but would read "51" as the year 1951.
"But a company must use the same pivot date as the companies they communicate with," said de Jager. "If one company's pivot date is 50 but the other's is 20, one computer will read 35 as 1935 and the other will read it as 2035."
De Jager spoke at the Supermarket Industry .... and Convention in Chicago last month, sponsored by the Food Marketing Institute, Washington.
The size of the year-2000 problem is forcing many companies to acknowledge that they will not be able to fix all their systems in time, de Jager added. The process of "triage," or identifying and working on only the most vital systems, has already begun at many companies.
In the supermarket industry, mission-critical systems fall into three broad areas, he said. They are the processes of taking money from customers, getting products into the stores, and communicating with vendors.
Accepting that not all systems will be compliant by Jan. 1, 2000, means making and implementing a series of tough calls. "The person who should be in charge of year 2000 at a company should not be an information technology professional," said de Jager. "He should be a business person who understands the business consequences of the decisions that are made."
Many retailers and wholesalers have started making contingency plans if the Millennium Bug proves hard to kill.
"Although we'll be ready, our company and everyone else needs to have contingency plans. There may have to be additional inventories put in place until systems are functional," Crouch said.
As Topco completes its work on internal systems, it will start making contingency plans and doing test runs on systems such as EDI with vendors in June. If vendors are not ready to handle EDI transactions, Topco will be set up to convert their orders to its system.
Meanwhile, manufacturers' contingency plans include having inventories ready to ship to competitors' customers. "The certainty of having selected problems is there. If we heard anything about our competitors not getting product on the shelf, we have contingency plans," one manufacturer said.
"Companies may need to stockpile products," said de Jager. "They may need to relax their just-in-time inventory requirements," to deal with year-2000 induced shortages.