Just-in-time systems said Y2k ready (The wild card)

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Just-in-Time Systems Said Y2K Ready

Story Filed: Thursday, December 23, 1999 12:21 AM EST

DETROIT (AP) -- ``Just-in-time'' manufacturing has become one of the bedrock techniques of American industry -- a system where plants keep as few spare parts as possible in stock, instead ordering them just as they're needed, like a bucket brigade fighting a fire.

But with the year 2000 on the horizon, some experts are concerned about the weakness of just-in-time systems: Problems at one small supplier can ripple through the chain, creating tie-ups for dozens of other businesses.

Officials with several large manufacturers say they're fairly confident all such bugs have been found and fixed, and that any problems that do pop up will be minor. But some large companies may sock away a few spare parts in case of emergency. Other forecasters say it might not be enough.

``Most manufacturers in the United States are saying they are ready and they feel fairly comfortable with their supply chain,'' said Ed Yardeni, chief economist for Deutsche Bank Securities in New York and a Y2K commentator. ``I still have my concerns ... Many manufacturing supply chains are extremely long and may still have some weak links.''

Just-in-time manufacturing, developed in Japan, came into vogue as a way for companies to save money by not keeping large inventories. The National Association of Manufacturers estimates that 75 percent of the nation's factories used the system in 1994, and the share has grown since.

Inventories in some plants are growing closer and closer to zero. For example, some parts for the average Dell Computer Corp. desktop machine spend little more than eight hours at the company's Texas manufacturing plant before they are assembled and shipped off to the buyer. One auto factory uses radio transmitters to automatically order seats for a vehicle as the frame enters a paint shop. Two hours later, the seats arrive from a nearby plant.

Several large manufacturers say they've made massive efforts over the past few years to ensure their suppliers would get through Jan. 1, 2000 without a hitch. Perhaps the largest effort has been among automakers, who have the most complex supply chains: General Motors Corp. has about 70,000 suppliers around the world, including 25,000 direct suppliers.

GM, Ford Motor Co. and the Chrysler division of DaimlerChrysler AG began working in 1997 to make sure their suppliers were Y2K-ready. GM says under its Y2K program, started in 1996, it visited some 4,800 supplier sites, working in 50 countries and 12 languages.

``The just-in-time suppliers were on top of the list,'' said Don Costantino, GM's corporate Y2K program director. ``But we have very carefully watched all of our suppliers for compliance.''

Costantino and his counterpart at Ford said they believe their North American suppliers are ready for Y2K. The companies are less certain about foreign suppliers' ability to make it without a Y2K glitch due to power outages or other infrastructure problems, but say they've taken steps to minimize any snags, such as keeping a few extra days' supply on hand for a small number of essential parts.

``I've been at this for three and a half years and I'm not losing sleep any longer,'' said George Surdu, the director of technology services for Ford.

Other major manufacturers say they've taken similar steps. About 30 technology companies -- including Intel Corp., Dell Computer Corp., Hewlett Packard and others -- formed the High-Tech Consortium to perform Y2K checks on their suppliers.

Peter de Jager, a spokesman for the consortium and a Y2K expert, said the companies had surveyed about 200 suppliers worldwide. He said while the companies felt good about their efforts and most were loathe to mess with just-in-time systems, a few were adding inventory of crucial parts.

``The bottom line is where it was appropriate, everyone has made some adjustments'' de Jager said.

Boeing Co. started surveying its 32,000 suppliers in 1998 for Y2K readiness; only about three dozen had not been deemed acceptable by July. By Nov. 1, all had made the grade.

``We knew if we were ready but we couldn't get parts from our suppliers it wouldn't help,'' said Boeing spokesman Bob Jorgensen. ``While we can't guarantee nothing will happen, we can guarantee we checked them out.''

Jorgensen said Boeing would pay special attention during the first part of the new year to about 10 critical suppliers ``where we don't have any options.''

``If we have any hesitation at all, primarily because of just-in-time, we have brought in a couple extra parts in those situations,'' he said. ``When you're building planes with millions of pieces, they're all interdependent. You don't have the luxury of sliding the schedule.''

Still, there doesn't appear to be any trend by manufacturers toward stocking up for Y2K; federal data show inventory levels at factories have remained essentially flat all year.

Yardeni said he would like to believe predictions that Y2K will cause no serious problems, but worries that one or two weak spots in supply chains that stretch around the globe could create trouble.

``It's the second and third level where they have no good accounting (for Y2K readiness), other than to assume the first-line vendors have done their homework,'' he said. ``No one knows for sure how interdependent we are, but we may find out in a few weeks.''

-- Homer Beanfang (Bats@inbellfry.com), December 23, 1999


It's ludicrous to say that a JIT system is ready. Old-style warehousing is like a wirewalker's net - lots of slack, oversized, takes a heck of an impact no problem. JIT is a guitar string, taut as it can be strung, no give at all.

When I've given y2k talks for the last couple years, I tell people not to expect a single new car to be built in the country next year. If they DO manage to build them, look for real quick re-engineering, while they design simple basic parts to sidestep complex ones. Think Russian hardware in WWII - simple and robust components that could be cranked out by one guy with a lathe. And emission controls? Forget 'em.

-- bw (home@puget.sound), December 23, 1999.

This country is full of millions of junk or semi-running vehicles. It might ironically be a boon to recycling and the environment to cannibalise the wrecks for a few years.

-- Forrest Covington (theforrest@mindspring.com), December 23, 1999.

http://www.slt rib.com/12231999/business/9136.htm Businesses Fear Y2K Domino Effect Thursday, December 23, 1999


TOKYO -- Leading manufacturers in Asia express confidence they are prepared for the Year 2000 computer problem (Y2K). But when asked about their suppliers, they are far less certain. Corporations otherwise amply prepared could be crippled by Y2K disruptions of their suppliers. It's an unsettling scenario for such technology-dependent nations as Japan, South Korea, Taiwan, Singapore -- and the United States. For big industries like auto and consumer electronics makers, falling just one part short could shut down entire assembly lines. Especially susceptible are companies with "just-in-time manufacturing" systems, a technique pioneered by the Japanese -- and widely used by Detroit -- in which parts are obtained only as needed to keep inventories low and profit margins high. Mindful of Y2K's potential for disruption, many big manufacturers have broken the mold for this one-time event, stockpiling anywhere from a few days to a few weeks' supplies prior to Dec. 31. But many smaller manufacturers have not. That means any Y2K problems upstream in the supply chain might not be felt for weeks -- but could then cause assembly lines from Osaka, Japan, to Detroit to grind to a halt. Worldwide, only 26 percent of all companies have arranged alternate supply or distribution channels. Companies with more than 500 employees are doing somewhat better, with 45 percent having alternate suppliers, according to the Massachusetts-based technology research group International Data Corporation. The research group forecasts $22.8 billion in losses to businesses worldwide from Y2K-related failures and predicts a ripple effect: for every dollar lost by one company, business partners will suffer 70 cents in losses. Reflecting a global trend, larger Japanese corporations are better prepared than smaller ones for Y2K, the legacy of a programming flaw in which years were expressed with just two digits, meaning 2000 could be misread as 1900, causing crashes and scrambled data in computers and the microchips prevalent in so many assembly lines. At the end of October, only 75 percent of small- and medium-sized companies in Japan had completed Y2K repairs -- far lower than the nearly 100 percent for banks and 92 percent for companies in general, government studies show. Kazuo Sato, a Tokyo city official who counsels small and medium-sized companies on Y2K, says many smaller companies couldn't afford to invest in remedies even if they wanted to. "I'm worried," Sato said. "Fixing a Y2K problem isn't an investment that a business sees as returning a profit anytime soon." Dennis Grabow, an investment banker with Millennium Investment Corp. in Chicago believes supply-chain disruptions are likely -- and capable of setting off recessions in some nations. Suppliers in industries like aviation or computers can't be replaced easily -- and stocking up is unrealistic for industries that require thousands of parts, he said. The danger could hit practically anywhere. A power failure could stymie a supplier, even if it had fixed its computers. Or a ship transporting parts could be disabled by Y2K troubles and prevented from making a delivery. And some suppliers are in nations like Indonesia and China, where the millennium bug is expected to cause at least moderate though unpredictable disruptions. "There are potential problems at the supply chain that we cannot possibly control," said Peng Nai-chueh, spokesman for Gigabyte Technology, a major Taiwanese maker of motherboards, the main circuit board on computers. Peng, whose company's clients include Compaq and Fujitsu, says it is impossible to monitor all the company's more than 100 suppliers. Some parts are already in short supply in Taiwan because of booming electronics sales and the Sept. 21 earthquake that damaged some plants. Japanese government officials insist plants will be humming along, more or less just-in-time, with no major trouble after New Year's. Yet the government has not independently checked the private sector's Y2K readiness, and millennium-bug analysts like Ed Yardeni, chief economist for Deutsche Bank Securities in New York, are skeptical. "It defies the laws of human nature and probability that all these systems are going to be working perfectly well around the world," said Yardeni. "There's certainly a lot of complacency and that means that these systems better work because most companies are not going to have very much in the way of inventory buffers or serious contingency plans."

-- Homer Beanfang (Bats@inbellfry.com), December 23, 1999.

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