COUNTDOWN TO MELTDOWN

DENISE ZIMMERMAN

Information systems executives have found themselves in the unenviable role of the messenger with unpleasant news: "Year 2000" is coming and it's not time to celebrate.

The bad news is most systems, left to operate with file structures containing only two digits to represent a given year, will malfunction when computer clocks flip to Jan. 1, 2000.

Experts say the steps necessary to overcome the problem will consume massive resources in time, people and dollars, on the order of $300 billion to $600 billion worldwide, according to the Gartner Group, Stamford, Conn.

Adding insult to injury, the conversion to Year 2000-compliant systems has no tangible return on investment and, unlike most projects, the deadline for completion is not negotiable. Time is ticking.

"If there are companies out there not dealing with this, they must be financially independent or don't care if their systems run or not," said Al van Luvender, vice president, management information systems at Riser Foods, Bedford Heights, Ohio.

Or, as many retailers told SN, companies may not be fiscally or mentally prepared to confront the cost issue.

"The scary part about it is the dollars involved. Everybody's afraid of being the first one to bring up the fact that it might cost $10 million" to bring all applications into compliance, said Pat Cox, Year 2000 project manager, Spartan Stores, Grand Rapids, Mich.

"It's enough to give people sleepless nights," he added.

Fortunately, food retailers are beginning to wake up. Many companies that have addressed the problem are in the assessment phase, which is examining all systems and trying to determine how many lines of code will be affected.

Far fewer companies are in the planning stage, in which they determine what applications to rewrite and which to replace.

Only a handful of companies -- such as Sutton Place Gourmet, Rockville, Md., and Abco Foods, Phoenix -- say they are 100% Year 2000 compliant because their systems were built in anticipation of the millennium problem.

"I looked at that issue a long time ago, when I started my data center in 1986 and have been very careful to make sure my applications will take care of the Year 2000," said Jerry Johnson, Abco's chief information officer and vice president, management information systems. "I am very fortunate to have started from scratch with all new data."

The reason computer systems will fail on Jan. 1, 2000, is fairly simple, experts say, and the solutions are not technically complex. The sheer magnitude of fixing millions of lines of code, however, is what has so many worried.

Most programs in use today were written with two-digit date fields and computer logic that assumes the first two digits are "19." When the year changes to 2000, and computers only recognize the final zeros, the date will be misread as "1900" rather than "2000."

The potential ramifications are limited only by one's imagination and Year 2000 symptoms are already becoming evident in stores today. For example, front-end card readers are rejecting credit cards with expiration dates of "00" and some products on shelves carry manually applied expiration date labels because the automated printing systems have not been converted to print four digits for the year 2000.

At least one food retailer speculated that her automated replenishment system, left uncorrected, would reorder 99 years' worth of product on the first day of the millennium because it would calculate the order based on movement recorded between Dec. 31, 1999, and Jan. 1, 1900 -- rather than the correct date: Jan. 1, 2000.

The good news in all of this is retailers have a better reason than ever to replace older systems with new software that is already Year-2000 compliant.

"For us it's an opportunity to upgrade and improve our systems," Riser's van Luvender said.

Other retailers, too, told SN they plan to completely replace some applications rather than attempt to rewrite what could be millions of lines of code in their existing systems.

"We know how many lines of code we have and the question becomes: Do you throw them away or do you rewrite them. We have estimated the costs and it usually turns out it's better to buy a [new software] package," said Bob Drury, vice president, management information systems, Schnuck Markets, St. Louis.

Warehouse systems and financial applications are likely to be replaced -- not rebuilt -- at Schnuck, he said.

Schnuck's has developed a three-year strategic plan to ensure all systems will operate correctly, but many questions still remain.

"We are building timetables now. We know we have to prioritize what gets done before the year 2000. We are trying to figure out if we should do the ledger system first, before the payables system, or do we do human resources" applications, Drury said.

Retailers aggressively tackling this problem are targeting the year 1998 to have most, if not all, of their systems modified or replaced to operate correctly in the millennium.

Riser Foods aims to have 75% of all applications converted or replaced by mid-1998 while Supervalu, Minneapolis; Harry's Farmers Markets, Roswell, Ga.; and Seaway Food Town, Maumee, Ohio, hope to be finished no later than December 1998. Kroger Co., Cincinnati, was unwilling to specify a deadline for total systems compliance, but spokesman Paul Bernish did say, "We feel confident that we'll have the changes accomplished well before the change to the new century.

"We've had a team of information services people study this challenge for over a year and we have identified the parameters in terms of changes that need to be made," he said.

"We understand the breadth of the problem and we have a plan, which has the backing of senior management," Bernish added. "We are now testing that plan and if that plan works, we will go ahead and pursue it."

Not all retailers have the support of senior management, however, industry observers said.

"It's coming on like a freight train and unfortunately too few people are aware of how big an issue it will be," said Peter Harding, vice president, Kurt Salmon & Associates, Atlanta.

"Among the leading companies in the industry, there is already awareness and action plans are in place, but there are still too many companies that do not understand the magnitude of what's involved, especially at the CEO level," he said.

Many IS executives are anxious to get started on Year 2000 compliance projects now, so that plenty of time will remain for testing and debugging that may be necessary.

At this point, the great majority of retailers who are involved in Year 2000 projects are still evaluating the scope involved.

"We've begun looking into the ramifications of the different programs and systems we have, but we have not started changing anything," said Gil Russell, chief information officer, Fiesta Mart, Houston. "Right now we are taking inventory of the programs and systems that will be affected by the Year 2000 -- and most everything we've got is affected one way or the other."

Other companies involved in the assessment stage include Giant Food, Landover, Md.; National Grocers, Ontario, Canada; and Spartan Stores, which hired an offshore contractor in India to evaluate its systems and identify every line of code that might be affected by the Year 2000 problem.

"We off-loaded all our program libraries and they ran it through their tools to pick out every date reference possible, every date synonym and date linkage," said Spartan's Cox.

The first evaluation found about 11 million lines of code affected, he said, and at an estimated cost of $1.50 per line of code to convert, the project could cost $15 million to $16 million.

Instead, Spartan determined that replacing existing systems -- such as that for warehouse management which alone could account for 3 million lines of code -- would be far less costly than rewriting code.

"We're now looking at [rewriting] 6 million lines of code," Cox said, and by implementing what he called a "prudent" strategy, the wholesaler believes it can reduce conversion cost to perhaps $1 per line of code.

Cost estimates to convert computer code vary widely depending upon the approach taken, but generally range from about 85 cents to $1.65 per line of code. Midsize companies, with 8,000 programs could be looking at a total project cost of about $10 million to $15 million, according to the Gartner Group.

Cox said Spartan's assessment process took about three months to complete and now the planning stage is scheduled to get under way. "Both those phases are a drop in the bucket compared to the whole project," he noted. "The consensus is that testing is going to be the biggest part of the burden on your in-house staff.

"We've got requisitions out for several programmers and we're not getting any response. Part of that is because this new industry within the industry is taking them off the market -- gobbling up programmers."

Supervalu's Skip Smith, senior vice president, information services, echoed Cox's concern: "People have to start planning for it now because there will be a resource availability issue -- both in terms of their own internal staff and the use of outside contract firms."

Smith told SN the Year 2000 issue presents food retailers a unique opportunity that ought not be passed by: When looking at replacing systems, he urged retailers to update front-end systems to scan 14-digit Universal Product Codes.

"If people are going to go through all of their software to look for a Year 2000 issue, they should go all the way to a 14-digit UPC code at the same time in their software," added Smith, who also serves on the Board of Governors for the Uniform Code Council, Dayton, Ohio. The 14-digit UPC code affords greater distinction in product packaging and is compatible with the global numbering system.

Seaway Food Town is making moves to update and replace systems, said Bill Borer, director, information systems.

"We kicked off a project a few months back to assess our vulnerability to the [Year 2000] problem and we've been able to clean out several directories, libraries of programs, and do some housekeeping to help us understand what remains to be addressed for the Year 2000," he said.

National Grocers, also in the assessment stage, is hopeful its migration to client-server systems will ease the pain.

"It's our belief that our move into client-server systems, which is still in progress, is going to protect us from a lot of the year 2000 problems -- but certainly not all of them," said Brad Brown, manager of technical development, information systems.

"It's the move away from old file structures that will save us from a lot of the problems," he added.

Ensuring that all systems operate correctly companywide is a sizable task indeed, retailers agree, but no company is immune to computer failures because trading partners' systems can inadvertently introduce problems to an otherwise Year 2000 compliant company.

"Every organization is part of an overall group of organizations that have to work together. If one organization's systems fail, it could be disastrous for everybody involved," said Schnuck's Drury.

Electronic data interchange, for example, will be an especially ticklish area to address, said Peter de Jager, a professional speaker on the Year 2000 Issue and former programmer/analyst at National Grocers.

"If you're linked in on EDI with your suppliers, either upstream or downstream, then you are at the mercy of your suppliers because you have to trust that the data they are sending you has not been hardcoded at '19' " for the century portion of the date information, he said.

"The entire supply chain has shifted, meaning you're running around with just-in-time inventories. You cannot afford for deliveries to be delayed," de Jager said.

"That's the real risk: Even if you solve all your problems, but your suppliers have those problems and can't ship you the goods, you're out of business.

"I don't know how to make it any simpler: If the computer programs upon which your business rests begin to fail, you are out of business. End of story."