Y2K Preparing For A Period Of Uncertainty

Sydneysiders are hoarding up to six months worth of food, water and batteries as millennium bug panic builds, according to yesterday's Sydney Sunday Telegraph. John Howard looks at Y2K.

The paper says that dozens of stores throughout Sydney report increased demand for canned food, bottled water, candles, batteries and solar powered equipment with some selling up to ten times more than their usual trade.

Food processing giant Heinz-Watties has increased production of popular canned goods and many retailers report they are battling to keep up their stocks. They fear they will not be able to fill their shelves quickly enough to meet demand.

85% of New Zealanders are aware of the y2k computer date rollover problem and plan to make some preparations. That's good, because every person who is individually prepared takes the pressure off emergency services should "the bug" create more problems than are anticipated.

In an emergency - natural disaster or man-made - we cannot reasonably expect the government to immediately help us. So being unprepared is, in a way, selfish.

In isolation, we know how to deal with emergencies such as cyclones, floods, earthquakes and so on.

But y2k is essentially a simultaneous global slam dunk event - for how long, we don't know.

For example we could have a number of unprepared countries from whom we import a wide range of goods, where their computers have crashed and there's civil unrest because government's cannot provide basic services.

The real question is, could we expect our authorities to have the capacity and the resources to deal with all of our problems simultaneously? - it's doubtful.

For those who consider y2k is no big problem, many of the large multinational companies manufacturing anything from soap, to food, to cars can have in excess of 10,000 individual suppliers. If just 1% of those suppliers are not compliant the supply chain can fail with disastrous results.

1% of 10,000 is 100, so a car manufacturer could be left with parts from 100 different non-compliant companies not arriving. Unless they have stock-piled parts the production of the car stops.

Moreover, if a large number of New Zealanders, or people worldwide, change anything they do in their normal purchasing behaviour, such as showing up at their petrol station on 31 December to fill up their tanks, that will create unprecedented problems.

As we all learned during the 1973 oil crisis, there's simply not enough petrol in the pipelines to fill up everybody's tank at the same time. And if there isn't enough petrol, or there isn't enough canned food or there aren't enough medicines available, we can imagine the panic which will result when people say " See, there isn't going to be enough of everything and there's a great problem here." Panic then starts to run.

So sophisticated are computer systems - and so widespread - that producers and manufacturers have developed just-in-time manufacturing and delivery systems. Economic forecasting allows business to predict with great accuracy what large numbers of people will be buying months or even years in advance.

Even so, every year some toy becomes a "must have item" for millions of children worldwide. Nobody can forecast this, including the manufacturer. And so the rush is on as parents just have to locate one. Overseas, there has been violence in stores between seemingly rational people and trucks transporting the product have been hijacked.

We are about to face a phenomenon the world has not seen before. The whole world will want to stock up on certain items - tinned food or toilet paper for example - that will not be in the production pipeline in quantities required to meet the demand under new conditions.

The problem is the global market, relying on computers and labour saving embedded chips which run automated production lines, has lowered production costs by a universal process of inventory reduction. Retailers, manufacturers and distributors widely use computers to send and receive re-ordering/manufacturing information.

Consequently, over a whole range of goods there are no large inventories anymore, because the whole process of the global market relies on computer technology for just-in-time as against just-in-case inventory.

Ordinarily, this makes sound economic sense.

But if computers or microprocessors, all around the same date, are disrupted worldwide in production, transport, (sea/air/land) distribution telecommunications, electricity, or any of the other technology required to serve a modern society, it will mean that un-forecasted shifts in global consumer demand will leave many buyers without the items they want. Put simply, the market will not be able to respond fast enough, if at all, with supplies. Think about that as it relates to our imports.

It's not much use, for example, that a local council is compliant with its rates data base, if it does not have sufficient stock-piles of water purification products.

And if the petroleum industry is not sufficiently on top of its y2k problems to guarantee supplies of resin pellets and emulsions to, say, the plastics industry who use them in the manufacture of hygenic containers in the food industry, then supermarket packaging, and consequently public health beyond the tinned and bottled food area, is in jeopardy.

Government is also engaged in a high-wire act. It needs to get people to take the problem seriously enough, but at the same time it doesn't want to unnecessarily panic them into actions which would be counter-productive.

It has been revealed that many organisations in the US purchased new equipment for y2k but sold much of their older computer equipment to less wealthy nations. And in Asia some of the hardware and software they have is pirated. The impact of that is totally unknown.

I don't subscribe to the three-day scenario for stock-piling family supplies either. Y2K is not a one-off isolated New Zealand event like a cyclone, earthquake or flood. It is a simultaneous global slam-dunk event of unknown proportions or duration.

We live in a global economy. People travel, money travels and goods travel. So it doesn't really matter what is happening on the ground in our country - it's what is happening elsewhere that counts. It's not about planes falling from the sky, it's not about a meltdown of society, it is about economic and social rust. Given that global y2k computer remediation has now cost more than the entire Vietnam war, we should be taking it seriously.

I am neither an optimist or a pessimist - I am a realist, and I'm preparing for a period of uncertainty.

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