QUESTIONING COMPLIANCE

DENISE POWER

Retailers are finally heeding the call to address the year-2000 issue as it affects their internal systems, but far too few have taken the next step, to confirm the systems their suppliers rely upon are also compliant.

While technology developments and Efficient Consumer Response projects have helped retailers and manufacturers streamline supply chain business practices, those same advances have also created new interdependencies as one company's system feeds the processes of another. Glitches originating at one end -- a retailer's product-ordering system performing miscalculations, for example -- can trigger a series of missteps at the manufacturer's side.

A handful of manufacturers and retailers are visualizing such scenarios and beginning to talk to each other to avert the problems caused when a computer fails to process dates correctly due to the year-2000 snag, or "Millennium Bug." Most companies, however, have not reached that point.

Seaway Food Town, Maumee, Ohio, is among the retailers set to press the issue by requesting its trade partners to reply to a series of questions about their own year-2000 initiatives. That letter has not yet been drafted but the company's intention to do so indicates Seaway Food Town recognizes the potential consequences of partnering with a vendor whose systems are not year-2000 compliant.

"We are beginning to work on that," Bill Borer, director of information systems at Seaway Food Town, told SN last month. "The emphasis will be to identify how well they are doing on their year-2000 efforts. We'll approach it from a priority standpoint, to identify the 20% with whom we are doing 80% of our business and to make sure they are compliant."

Save Mart Supermarkets, Modesto, Calif., has established a year-2000 task force charged with assessing, planning and helping to implement necessary system modifications, and while the company has made progress on bringing its own core systems into compliance, there are no formal plans to ensure its business partners are taking the same measures.

Don Flint, manager of electronic commerce at Nabisco Biscuit Co., East Hanover, N.J., said his company has had "some conversations" with retailers and their year-2000 projects "but nowhere near enough."

Another manufacturer, a national packaged-goods company with more than $2 billion in annual sales, is trying to assess the readiness of its partners by sending out a highly detailed questionnaire asking about various year-2000 initiatives.

"My questionnaire tends to be more probing than most," said the company's director of year-2000 compliance, who requested anonymity. "It's not just a 'warm-fuzzy' [way of asking] 'Are you doing something on year 2000?' Rather, the kinds of questions we ask are, 'Have you established a year-2000 coordinator? Please identify the individual. Have you completed the assessment phase? When will you install the enhanced version of electronic data interchange that is year-2000 compliant?' "

The executive said responses received so far have provided insight into retailers' state of readiness for year 2000. Respondents providing one-word answers to each of his questions are not actively working on the problem, he concludes. "Or, if they have not identified a year-2000 coordinator, I pretty much know they are not doing anything. My view is there is a lot of procrastination, still."

The packaged-goods manufacturer has received similar questionnaires from about 30 of its retail customers, an encouraging sign that they are actively addressing the issue, he added.

"Organizations as a whole need to be more proactive in trying to confirm [year-2000] status and plans with external agents, whoever they may be," said Laura Koballa, a senior manager at Ernst & Young, Cleveland. "When I go in and talk to clients, the first thing they want to tell me is what they are focusing on in the information-technology area. When you finally talk to them about vendor management, they really haven't done a whole lot."

One reason that may be the case, she noted, is the liability issues that arise when specific plans are put on paper.

"We are encouraging both sides to be very careful about what they are committing to, and that they are going through their legal counsel before preparing a response," she said. "They should have some sort of response prepared, when they get these requests for information, but also, they should not be committing their organizations as far as dates and other specifics. The legal profession is waiting to pounce on this."

Homeland Stores, Oklahoma City, has enjoyed a little more success with responses to its inquiries that request written documentation regarding year-2000 compliancy. David LaCaze, director of management information systems, said the company sent out letters to all its business partners -- from the vendor that provided the time-clock technology to its wholesaler -- and most companies have responded.

This month, the chain plans to launch a pilot program for electronic data interchange, and LaCaze said year-2000 compliance is not a issue with that project -- compliancy was factored into the planning from the start. "We are just getting into it [EDI] at this point, so we just have to be careful going forward," he said.

Other retailers who have not moved as aggressively with technology may be at a similar advantage when it comes to year-2000 issues in that they don't have to "fix" problems that don't yet exist.

"We are not as technologically advanced as others, so this is an opportunity for us to get everything right the first time," said Sally Sanborn, director of marketing at Save Mart. She said the company has studied the year-2000 matter for several years and "our approach is to keep perspective -- sort of a cross between Chicken Little and Pollyanna."

At Furr's Supermarkets, Albuquerque, N.M., which, like Homeland, is ramping up EDI, the year-2000 issue has been brought very much to the forefront. "That will require us to have all our trading partners be year-2000 compliant," said John Granger, vice president for management information systems.

This represents a shift in responsibility for Furr's, which until recently relied upon its wholesaler, Fleming Cos., Oklahoma City, to ensure manufacturer partners were compliant. The October settlement of a lawsuit filed by Furr's against Fleming, however, resulted in the severance of the retailer's supply contract.

Furr's now will have to see to it that its EDI partners' compliance plans are sound. "Now we are dealing with [manufacturers] directly, where originally we were dealing through Fleming and Fleming had their trading partners so it was not our concern. Now it is our concern," Granger said.