KILL THE 'MILLENNIUM BUG' IN '98, INDUSTRY URGED

JEANETTE HYE

Food retailers should make a New Year's resolution to fix the so-called "Millennium Bug" next year, advise technology experts.

The bug, or problem, is that many computers are designed to recognize only the last two digits in the current year, rather than all four -- and those systems will be unable to differentiate between the years 1900 and 2000 at the turn of the century.

The problem threatens to wreak havoc Jan. 1, 2000, or, in cases of forward-looking systems, even sooner, and at least one retailer has initiated legal action because its point-of-sale equipment was unable to process credit cards with expiration dates past 1999.

Kroger Co., Cincinnati, began addressing year-2000 issues two years ago, said spokesman Paul Bernish. "We're on schedule to have all our systems compliant by the end of 1998," he said.

For many other industry players, however, the task of rewriting computer code, updating systems or otherwise striving to achieve year-2000 compliance is much less far along -- and time is quickly running out.

"My biggest concern for the supermarket industry is that some of the smaller independents don't have the right sense of urgency," said H.S. "Skip" Smith, senior vice president of information technology at Supervalu, Minneapolis. "My sense is that most of the larger companies -- manufacturers, wholesalers and retailers -- have either recently started looking at the year-2000 problem or their efforts have already matured.

"Companies need to assess where they are immediately in order to have an adequate planning horizon to deal with the problem," Smith added.

Fred Meyer Inc., Portland, Ore., for example, has spent the last five years overhauling its entire internal management information systems architecture, resulting in almost total year-2000 compliance.

Yet the company believes working with vendors to ensure their partners' electronic data interchange systems will be functional in the next century is essential to Fred Meyer's own growth and survival.

"As we have more and more products delivered directly to the stores, it is a big challenge for us to identify and resolve year-2000 problems with our vendors," said Rob Boley, a spokesman for the 435-unit chain.

It is estimated that it will cost between $300 billion and $600 billion worldwide, at a rate of between $1.50 and $3 per line of code, to crush the Millennium Bug.

The stakes involved extend beyond the need to update core systems, such as point of sale, order processing and electronic data interchange. Assessing the overall risks associated with the year-2000 bug also means determining whether even the most fundamental equipment, such as elevators, escalators, heating and air conditioning, time clocks and security systems, will function when the clock strikes midnight Dec. 31, 1999.

There are also growing concerns about the legal and financial ramifications of year-2000 compliance, some of which are beginning to surface publicly.

A recent lawsuit filed against a technology vendor by a Michigan retailer, whose cash registers shut down every time the company tried to process a credit card containing an expiration date of "00," is being hailed as a watershed case that could help delineate the boundaries of retailers' responsibility for fixing the problem.

Publicly held companies are also struggling with questions about obligations to share year-2000 compliance information with shareholders. Legislation proposed in Congress in November would require public firms to disclose information regarding progress in fixing the problem and potential risks and liabilities related to it.

While retailers are combating the problem on many fronts, ensuring year-2000 compliance for EDI systems is a prime concern.

For companies that haven't yet launched full-fledged programs, solving the year-2000 problem will prove increasingly difficult and costly, as available resources, including skilled personnel, become scarce.

"As we get closer to the millennial change, the demand curve becomes sharper," said Supervalu's Smith. "The cost in terms of human resources, whether it's contract programmers or a company's own employees, goes up. The last people in the door will pay the most."

"Retailers are now taking a triage approach," in dealing with this problem, said Cathy Hotka, vice president of information technology at the National Retail Federation, Washington. "Many know they can't be finished in time, so the best chance of success is to determine which systems are most important to fix. Some systems are just not going to make it."