Efforts to deal with the year 2000 computer problem are producing a good news-bad news scenario. The good news is that many companies, including some of the nation's largest wholesalers, are already taking active steps to bring their various automated systems into year-2000 compliance.
And the bad news? In mapping the issue's size and scope, information technology executives are noting that the problem extends beyond the boundaries of individual companies. With so many industry interrelationships mediated by computer technology, failures in even a small number of trading partners could cause big problems.
"I'm sure most retailers are aware of the issue, because the major accounting firms are making sure their clients understand it at the highest level," said Bob Drury, vice president of management information systems at Schnuck Markets, St. Louis. "The education process is probably out of the way.
"The issue most retailers face is the enterprise-to-enterprise relationships," he added. "Even though we have our act together, we can never be absolutely certain that the whole supply chain does."
The year-2000 problem, caused by computer operating systems designed to recognize only the final two digits of a year, will leave systems unable to differentiate between the years 1900 and 2000. If left unchecked, the Millennium Bug could cause computers to provide inaccurate information or shut down completely.
A few of the implications for the supermarket industry include being unable to communicate via electronic data interchange with partners who are not year-2000 compliant, and difficulties forecasting or placing orders for dates beyond Dec. 31, 1999. A few retailers have already experienced point-of-sale lockups in trying to process credit cards with post-1999 expiration dates.
Continuous replenishment and other vendor-managed inventory programs, which rely on EDI for data communication, are both vulnerable to the Millennium Bug, said Schnuck's Drury.
"The whole process could break down if the EDI systems don't work properly. For a retailer to instantly take on that responsibility, without a lot of notice, would be unbelievably unpleasant," he said.
On the positive side, a large percentage of the industry's IT professionals have already taken action. According to SN's fourth annual State of the Industry Survey, nearly two-thirds of all respondents -- 63.1% -- are in the process of rewriting code or replacing systems to deal with the year-2000 issue.
Another 23.8% of respondents have a plan in place and are preparing to implement it, while only 13.1% are still in the early discussion stage.
Supervalu, Minneapolis, the nation's largest wholesaler, has corrected "well in excess of 50% of its computer applications," said Fred Knotek, director of program management for the year-2000 program at Supervalu. "The plan is to have all applications and technology in compliance by late 1998," he added.
Supervalu completed the assessment phase of its year-2000 effort in March 1997, determining at that time that it would have to correct the problem in more than half of its existing systems. Another group of systems were already scheduled for upgrades that would bring them into compliance, and a third group was already compliant, according to Knotek.
Pilot tests in three areas -- corporate finance, buying and food systems/logistics -- were conducted from May to July 1997, he added. These pilots tested tools designed to bring computer systems into year-2000 compliance, as well as establishing the number of man-hours required to do so.
Refinements and analysis of the test results actually showed that the process would take "a little less time than had been anticipated," said Knotek. Indeed, the wholesaler's concern is currently focused outside, at the brokers and independent retailers it deals with.
"If the independents are not year-2000 compliant, pricing information could be interpreted incorrectly," said Knotek. In addition, problems relating to buying, projection and forecasting with noncompliant systems "could start showing up in 1998," he added.
Spartan Stores, Grand Rapids, Mich., has budgeted $6 million during its next two fiscal years to deal with the problem, according to a Nov. 26, 1997 in-house newsletter. The wholesaler's target date for compliance is Jan. 1, 1999, according to the document.
The newsletter details just how complex the year-2000 compliance process can be. For example, the wholesaler uses more than 500 software packages. Of these, approximately 40 would be eliminated or retired in the normal course of events; about 86 are already compliant.
For the remaining 374 programs, Spartan is in contact with the various software vendors for confirmation and certification that the products are or will be year-2000 compliant, according to the document. Spartan had completed approximately 18% of its year-2000 compliance work as of last November.
There have been some industrywide efforts to address the year-2000 issue. "There was a proposal by the Efficient Consumer Response Operating Committee to set up a certification process for EDI," said Schnuck's Drury. "That might make a lot of sense, to have a third party find out if supplier XYZ or retailer ABC has shown that they can handle the transaction sets in a year-2000 compliant way."
Drury noted that the proposal was still in an early phase. "I don't know how far it will go because there's not a whole lot of time left to do this. We have more than 100 partners in EDI, and even if we certified two per week, we'd be out of time," he said.
Other companies recognize that year-2000 compliance involves both internal and external work. "We're in the process of getting all our legacy computer applications compliant," said Byron Goodwin, director of information systems at Associated Food Stores, Salt Lake City. "We're also going to be sending out letters to [technology] vendors asking them for year-2000 certification."
While Associated is seeking vendors' assurances that their systems are year-2000 compliant, the wholesaler is also planning to test systems itself. The variety of systems that will be affected is challenging, however.
"There are so many things that have a computer chip in them, like cooling systems, compressors and ovens," said Goodwin. "We're trying to get a handle on all those. Another issue is that since we're a cooperative and deal with independent retailers, there isn't one standard that's followed by everyone."
United Grocers, Portland, Ore., is also focused on ensuring that its variety of clients and trading partners are up to speed. "Our project for the last six months has been identifying the technologies that won't be year-2000 compliant and publishing that matrix for our stores so they can make a decision," said Mike Brown, manager of retail systems for United Grocers.
"We're saying, 'These technologies won't be year-2000 compliant, but this is where you can move, so please contact us and we'll get you going,' " he added. The wholesaler is planning mailings to the retailers it serves as well as posting year-2000 information on its web site.
"It's been very difficult to get the information" about compliance, said Brown. "A lot of these companies are running as frantically as we are. And the problem is across the board, not concentrated in any one particular system."
Some IT executives are more confident they have a handle on the situation. "I don't think year 2000 will impact our business in terms of computer interruptions or functionality," said John Sarno, vice president of information systems at Big Y Foods, Springfield, Mass.
The relative newness of many of Big Y's computer systems means a large percentage are already compliant. "Most of our computer systems have relational databases, and most of our legacy systems are not more than 10 years old," said Sarno. "We have some work to do, but I think we're going to get it done."