Motivation to begin swatting the Millennium Bug, the computer problem where systems cannot correctly recognize dates past Jan. 1, 2000, has been increasing in the supermarket industry. Tests of credit cards that expire in the new millennium have already revealed problems in point-of-sale systems, and in one case, an actual front-end "lockup" has already led to legal action.
Beyond the POS and electronic payment systems, areas of most immediate concern to the industry include direct-store-delivery, payroll and attendance software. But retailers and wholesalers are recognizing that reliance on information systems means the year-2000 problem affects virtually all operations.
"Companies not addressing the risks associated with the upcoming millennium will not be able to operate or deliver product come Jan. 1, 2000," said Edwin Gropp, senior vice president of Ahold Information Services, Ahold U.S.A., Atlanta.
Even those companies that ensure their own systems' compliance may find difficulties if suppliers and other trading partners have failed to address year-2000 issues.
The Millennium Bug problem resides in computer hardware and operating systems that only recognize the last two digits in a date. If a system assumes the first two digits are always "19," the year 2000 is misread as 1900. Computers either lock up or, more insidiously, continue operating with incorrect information.
Many retailers have already taken steps to test which systems are affected by the Millennium Bug, and to ensure their systems are year-2000 compliant. A few are demanding year-2000 compliance clauses in their vendor contracts.
Bristol Farms, El Segundo, Calif., a member of Certified Grocers of California, Los Angeles, has assessed conversion costs into its current information systems budget.
"We have melded these upgrades into our current IS projects, and expect to see up to a 15% increase in costs to deal with these issues," said James Villela, director of information systems. "On the bright side, because we are a young organization technologically, we do not have a lot of legacy systems and we expect our costs to be less than other companies."
Though he did not specify which areas needed attention, Gropp told SN that Ahold U.S.A. is "out of the woods since correcting those instances where there would be immediate problems."
Other retailers are only beginning to assess where problems lie. "We are just getting into the depth of testing our systems for lock-ups," said James Reach, information systems director, Food Giant, Bessemer, Ala. The retailer is investigating POS technology, direct-store-delivery systems, and payroll and attendance software.
These are among the top areas that retailers should be focusing on, according to industry expert Terry Morgan, senior practitioner in retail systems for Deloitte & Touche, New York. "My rule of thumb is to focus on systems that control ordering, pricing, payroll, purchasing and POS. Then the next focus should be on the applications that these systems run," he said.
Food Giant's electronic payment system was the first area where tests revealed a problem. "Thanks to a test card for our credit transactions, we were able to detect a problem with our POS and electronic payment system," he said. "The front end is a good place to begin getting year-2000 compliant. We rely on our POS and cannot afford for it to lock up. That is where our business starts."
Bristol Farms is also concerned about its EPS. "We tested our new electronic payment system with a year-2000 test card," said Villela. "It was this test that alerted us we may have a bigger problem than we thought in processing credit cards."
One retailer that has suffered an actual front-end shutdown is Produce Palace International, Warren, Mich. The retailer claims it is losing 10% of its sales because 10 registers installed in 1995 lock up while processing credit cards with expiration dates past 1999.
As a result, the retailer has filed a lawsuit against the company that developed the POS technology, and the supplier that sold and services the system at Produce Palace.
Information systems professionals noted that, ultimately, responsibility will fall on them if equipment is not year-2000 compliant. "This kind of situation is scary," said Gil Russell, chief information officer for Fiesta Mart, Houston. "All I would need is for our registers to lock up, and my head would be on someone's platter."
"If we cannot process a customer's transaction or even a credit card due to a '00' expiration date, it will not only be embarrassing, we will lose customers left and right," said Bristol Farms' Villela.
"The other problem is that our gross margins will be affected," he added. "Price changes are electronically transferred to our POS systems for a future week's sales. If those changes are not updated, our margins will be affected -- and that will become very visible to our board of directors."
According to Ahold's Gropp, the company is currently relying on vendor promises that they will assist with necessary changes.
"We have vendors that promised to provide us with necessary upgrades or changes to their products by June 1999. I expect that to be the case as a majority," says Gropp.
Rather than relying on vendor promises, some retailers plan to demand clauses guaranteeing compliance.
"We did ask vendors to sign agreements stating that their products would be compliant and that they would solve any problems that may occur," said Bristol's Villela.
While most vendors did sign, "those that didn't left us to decide if we should continue working with them based on faith alone," he explained. "Retailers need to put the pressure on [vendors] so they know the key to stay in business is to be actively involved in maintenance of their products."
"Though I have never seen any clauses in contracts, it is something I will start thinking about requesting," said Food Giant's Reach. "I think too many [retailers] are too quick to assume the problem falls back to the people we are doing business with. We need to be sure about that."