Inside insights from the Food Distribution industry, plus some good places to research for those with more time than I have.... : LUSENET : TimeBomb 2000 (Y2000) : One Thread

Hello all-

Stumbled over a couple of interesting articles from Food Logistics magazine about how they perceive the consumer run-up to Y2K. It's the cover story of their September issue.

This industry has been one of the most influential "lobbyists" on the Pres. Council on Y2K Senior Advisors Group.

Every so often I bump up against a reasonable, business-like statement of a point of view so breath-takingly different than my own, that I simply don't know how to respond. I'll just say that the world they live in seems like a nice place. I hope I'll live there someday.

I bet a diligent researcher could come up with more via:


September 15, 1999


Y2K And The Supply Chain

We've all heard and read about and even personally contemplated our options with regard to the potential for Y2K computer disasters. For example, many of us has already decided that we don't want to be on an airplane anywhere on or near January 1, 2000.

On the other hand, few of us (except for the survivalist types) have given much thought as to whether or not the supermarket will be open--or worse, will products be available as normal--as the millennium turns.

The food industry has worked very diligently to make sure that all of its hardware and software systems are Y2K-ready. Practically all companies expect to have their systems up and running by the fourth quarter. While they are concerned about external factors beyond their control, such as public utilities, cash flow and the Y2K readiness of their trading partners, there is still one great unknown: how is the consumer going to react?

In this month's cover story, "Y2K: Panic In The Aisles?" [page 39], we asked a number of food manufacturers, wholesalers and retailers what they were anticipating in terms of consumer stockpiling, if anything.

On the record, they believe enough inventory exists in the supply chain to support consumer stockpiling--as long as it's within reason. Off the record, however, they expressed other concerns, such as that some of their trading partners may seize the opportunity to turn consumers' Y2K fears into a marketing event.

"Nobody wants to panic the consumer, but many want to strike that sweet spot between panic and letting them know they should stock up," said one food manufacturer. "I suspect you're going to see subtle Y2K ads very shortly."

Others said they were worried about how the impact of shortages in the supply chain could affect trading partner relationships.

"Manufacturers are going to have to be careful about preferential treatment of their customers," said a wholesaler. "What are the principals you need to adhere to when you've got to prioritize shipments to a retailer? If you've got a natural disaster, most manufacturers will say they'll do everything humanly possible.

"Is Y2K a natural disaster or is this something that could have been avoided through proper planning? You've got to have a firm set of principals in place that say here's how we're going to have to process priority loads and shipments for these three windows over the next six or eight months."

What if consumers do nothing or next to nothing? All of the inventories that are being driven up in preparation for some kind of Y2K consumer "event" will be glutting the supply chain for weeks or even months past January 1, 2000. What a way to start a millennium.

September 15, 1999

LOGISTICS 2000 Y2K: Panic In The Aisles?

Not many believe consumers will stockpile food and other goods for Y2K. But it can't hurt to get the supply chain prepared, right?

By Katherine Doherty

Most of the larger food companies believe they are well prepared internally for Y2K. Recent industry surveys have found that many manufacturers, retailers and wholesalers are confident they will be technically compliant by the end of the year.

They are concerned, however, about external issues. Disruptions in food stamp distribution or public utility services, disruptions in the flow of cash and payment systems and a lack of Y2K readiness on the part of trading partners are a few of the external issues, according to "Y2K Business Contingency Planning," a framework developed by the Grocery Manufacturers of America and Food Marketing Institute to address Y2K contingency planning among trading partners.

Supply chain volatility from consumer stockpiling is another of these issues that has not gained widespread attention.

While most companies are working with their local financial institutions, power and telecommunications suppliers--as well as their trading partners--to ensure that any glitches will be kept to a minimum, when it comes to consumer stockpiling, they're faced with a great unknown.

Food companies say they are worried about the effect that consumer stockpiling buying could have on the supply chain. Although they're not pushing the panic button yet, many are taking precautions.

"We don't believe there are any Y2K system issues that are going to cause problems in the grocery industry--or even on a national basis--that should make consumers feel they need to stock up," says Jim Swoboda, director of strategic business development, Spartan Stores Inc., Grand Rapids, MI.

"The question remains, however, will they stock up? We believe they will."

Fueling A Panic That's because many in the industry fear that as Jan. 1, 2000 approaches, the media frenzy will heat up, causing consumers to stock up on groceries and other goods. They also believe some companies may try to capitalize on consumers' uncertainties about food supply and create unnecessary hoarding and stockpiling.

In addition, the impending doom messages on many Y2K survival sites on the Internet are scary enough to turn any Y2K skeptic into a believer [see sidebar]. What kind of effect this type of information has on the general public remains to be seen.

Food Distributors International, along with the other food trade groups, is urging consumers to prepare for the year's end as they would for any other long holiday weekend. They are concerned that panic buying could cause supply chain disruptions that could prove costly for manufacturers, retailers and wholesalers.

"The food trade groups have been organizing public awareness programs to help counteract the 'sky is falling' media hype that could come about towards the end of the year," says Jeff Moyer, a consultant with Ernst & Young and a speaker at GMA's Y2K Contingency Forum, held earlier this year.

"But a shortage of disposable diapers in one area could trigger panic on the part of consumers in other areas, who then go out and buy three extra packages of diapers, for example. So even though no real problem exists, this is going to do nothing but disturb the supply chain--and create a problem."

Swoboda agrees. "If the media starts broadcasting a lot of disconcerting stories from around the world the last couple of weeks of the year, it could have a great impact on our business.

"The event itself is a non event. It's what the consumer might do in preparation for it that could cause all the problems. If there's a 20 to 30 percent surge in national food sales in this country in the last month of the year, nobody can be ready for that," he says. "There's just not that kind of capacity out there. It's going to be an interesting fourth quarter."

Balancing Act What kind of potential impact consumer stockpiling could have on the supply chain is anyone's guess. How do you plan for a spike in demand when you're not sure if, when, what or how much consumers will buy?

Experts say most retailers, wholesalers and manufacturers are planning to stock up a week to two weeks worth of inventory on certain staples--items that consumers typically have on hand during ice storms, snow storms, hurricanes and other natural occurrences.

"That's generally been the consensus among those companies I've spoken to," says Ernst & Young's Moyer. "They're looking at the shelf-stable categories, not products that are immediately perishable."

For Certified Grocers of California, Los Angeles, that means planning for an earthquake. "We expect to see consumers getting their earthquake preparedness kits up to snuff, which means we'll see an increase in sales of water, batteries, those types of items," says Cor Karafa, Certified's vice president of distribution.

"We've had a number of vendors offering extended terms on canned goods and our concern is it might be more hype than actual activity," he says. "It might take eight or nine months to get those inventories balanced if we were to take a big position on a number of those items and not see the velocity or the movement."

With its Midwestern customers, Schnucks Markets Inc., a St. Louis-based retail chain, is gearing up as if an ice storm was coming. The retailer expects the week following Christmas--which is typically slow--to be a repeat of Christmas week in terms of volume, according to Robert Drury, vice president, MIS.

"Consumers are usually buying snacks and beverages that week--you don't see staples at that point," he says. "But we think that's when it will happen. We think we'll see a repeat of Christmas week in terms of sales, but that's not a big deal for us. We don't expect a whole lot of trouble.

"We've had all our category managers meeting with their counterparts on the manufacturing side and they're making sure that we're all prepared for a little bit of a bump in the fourth quarter," says Drury. "The hope is that it comes earlier than later, and for the most part, we think it's going to be fairly narrow in terms of the number of categories involved."

Minyard's Food Stores Inc., Dallas, is also anticipating sales in certain categories to climb at the end of the year. The question for the retailer is, which ones?

"We carry 30,000 SKUs and we only have 'x' amount of warehouses and 'x' amount of retail space," says Joe Tarver, Minyard's senior vice president. "We did a lot of 'what ifs' and created a list of the top 100 items we thought were the most appropriate items to carry.

"That's not a lot of items, but if you look at the volume for four or eight weeks and figure out the amount of inventory you would have, you'd realize you're tying up a lot of cash. And if consumer stockpiling doesn't happen, you're up against the wall.

"We're looking at water, baby formula, those types of things. Our vendors say they're building inventory to support it," he adds. "We're going to follow their lead. As we go along, we'll be flexible with our customers."

The other concern for food companies is what will happen if they ramp up their inventories and the anticipated stockpiling doesn't occur.

"Our hope is that consumers do not stockpile because of the increased supply chain costs and complexity that will drive," says Rick D. Blasgen, vice president of supply chain, Nabisco Inc., Parsippany, NJ.

"We're concerning ourselves with what our trade customers plans are regarding their anticipated inventory needs going into the end of this year."

Ernst & Young's Moyer points out that many companies are indeed worried about pushing product, purchase orders and the like too early at the end of this year.

"I've heard that there's going to be a big push to get purchases in, the transportation completed and the product on the shelf or in the back room," he says. "The food industry will have a fantastic fourth quarter if consumers' pantries are all stocked up.

"But what about the first quarter of next year? If consumers aren't buying product, how will that affect the supply chain?" says Moyer. "And if they change their minds and want to return some of the product they stockpiled, what kind of impact will that have on returns side "

Supporting Independents Retailers seem more concerned about the Y2K situation than the manufacturers, says Moyer, because they believe they're on the front line. "The closer you are to the consumer, the more vulnerable you are," he says.

While the larger retailers have the means to cope with Y2K-related problems, some of the smaller, independent retailers may be lacking the resources to handle any major disruptions. Many grocery wholesalers are developing programs to help their customers plan ahead for any difficulties.

"We sent our customers a packet of information that was designed to get them thinking about Y2K issues," says Spartan's Swoboda. "We included a pre-sell sheet of items which we think are going to have increased movement, so that they can give us some indication of what they would like us to have on hand for them."

Spartan is asking its customers to keep a close watch on the movement of about 20 key items--"survivalist" types of products--for the balance of the year.

The company is also planning to use the fall sales of its Spartan brand--which is comprised mostly of canned goods and staples--as an early yardstick.

"We think that will be the first indicator in a static environment where we can get a real read as to what is happening in the stores," says Swoboda. "We are going to keep up with demand as it occurs as opposed to taking positions on certain items, hoping that they sell, and then having to get rid of a lot of product that gets dated in the first quarter of next year."

Swoboda says that a three percent to four percent increase in sales of the key items is normal. "But if it comes in at 25 percent or 30 percent on those items, it's safe to assume it's all Y2K related."

Other wholesalers, such as Certified Grocers of California, Supervalu Inc. and Fleming Cos., have also sent out brochures, instructional materials and other information to help their customers plan for the event. In addition, they've been meeting with their customers on a regular basis to determine what kind of additional support they need.

Meeting Demand Many of the manufacturers are focusing on finished goods inventories, basing inventories on an assumption that outages and snags will be isolated, not lasting more than a few hours to a day or two at most.

"The food manufacturers have differing opinions as to what consumers are going to do," says Nabisco's Blasgen. "Mostly they think consumers will stockpile necessities, such as bottled water, baby food and diapers. But it all depends upon who you talk to."

Although Nabisco isn't expecting a run on Oreos, the company is keeping an eye on certain seasonal items and consumption trends, says Blasgen. "We're not ramping up inventories 20 percent, but we'll be looking at Cream of Wheat and Milk Bones, those type of items. We're taking it on a product-by-product basis.

"We're also talking with our customers and making sure we're up to speed as to what they're seeing out there as well," he adds. "Some of our customers have said they're going to take inventories up by a week and others have said that they expect us, as a manufacturer, to be there."

Nabisco has set up an intranet site for its trade customers. "We're able to keep on track of their plans and it's worked very well for us."

Land O'Lakes Inc., St. Paul, started working with its retail customers early on to make sure there will be sufficient inventory in the supply chain.

"Some of our products--such as butter, which is used in baking--have a very high seasonal holiday spike," says Judy Ohannesian, director of logistics. "We expect some incremental volume over and above the normal amount, but we're not talking about an extra month of inventory."

Ohannesian says the company is working with its warehouses and carriers to ensure there's enough capacity in the supply chain.

"Warehousing and transportation is always tight around the holidays. Our customers have told us that they are preparing for Y2K as if they were preparing for a severe storm," she says. "What makes this different is that the whole country never has to prepare for a storm--it's usually regional.""

Early Indications In certain parts of the country, wholesalers report seeing an up tick in certain categories, which they believe may be the result of early consumer stockpiling.

Roy Christensen, vice president and manager of the Salt Lake division of Associated Food Stores, says that sales of certain categories--such as water, dehydrated food, grain and canned goods--have been much higher than usual all year.

"It's hitting us especially hard in our private label canned goods, where we've seen a 25 percent increase over last year," he says. "But we were prepared for that. We've worked with our vendors and took a really strong position on inventories."

Certified Grocers has also seen an increase in sales of canned goods. "We're in the midst of shipping items that we sold during our Fall selling sale from the past June and sales are up 20 percent over they were last year," says Karafa. "But I can't say if it's directly related to Y2K or if it's the robustness of the California economy."

The food industry trade groups are urging companies not to capitalize on consumers fears. Most food companies say they're not going to take advantage of the Y2K situation--and hope their competitors won't either.

To Stock Or Not To Stock Trying to predict if and when consumers will begin to stockpile is like trying to hit a moving target. The numbers of consumers who say they will stockpile seems to fluctuate widely from survey to survey.

One of the more recent surveys, conducted for the CBS News program "Sunday Morning" in July, reported that 18 percent of consumers polled said they were thinking about stocking up on water and food to protect themselves against problems associated with the Y2K computer bug.

Government agencies, such as the American Red Cross, are suggesting consumers stock disaster supplies to last from several days to a week for each family member in preparation for Y2K disruptions.

The list includes one gallon of water per person per day, a three-day supply of non-perishable goods, ready-to-eat canned meats, fruits and vegetables. The Red Cross also recommends assembling a first aid kit, non-prescription and prescription drugs and sanitation items.

A quick search on the Internet turns up hundreds of companies offering "Y2K" survival kits, selling water, food and other supplies.

"I live in an area that is supplied by only one wholesale grocer," says William R. Lehman, the owner of one such company, Arkansas-based BL Farms. "What if that wholesaler lost power for a couple of days? How long would it take to get food into the local stores?

"My goal is not to start a panic, but there's no guarantee that our distribution infrastructure will stay in place. Any number of things can happen."

While he may have a valid point, the food industry has withstood hurricanes, tornadoes, earthquakes, floods, power outages and computer breakdowns in the past. In any case, he's offering a year's supply of dehydrated food for a family of four for $4800. --K.D.

Contingency Planning: Keep It Simple The Grocery Manufacturers of America and Food Marketing Institute recommend that all food companies put a contingency plan in place to be prepared for Y2K.

According to "Y2K Business Contingency Planning," a framework developed by the two trade groups, companies need to communicate Y2K contingency plans internally and externally. They also need to establish a crisis management structure to be used during Year 2000 and beyond.

Companies should also maintain continuity in the areas of customer service and profitability.

The framework recommends that companies establishing contingency programs take the following steps:

1. Form a cross-functional trading partner contingency planning team;

2. Inventory and prioritize trading partners;

3. Establish contacts with trading partners;

4. Design and develop contingency plans for dealing with trading partners.

For more information, contact GMA at 202-337-9400 (www.gmabrands.-com), or FMI at 202-452-8444 ( --K.D.

Also found an interesting article about a GI convenience store owner from a feb 99 trade mag:

-- Lewis (, October 11, 1999


well the y2k believers are pretty much done shopping, right? so the folks that may cause the greatest harm are those who have been lulled to sleep by our Y2K czar and his complicit buddies and suddenly awake from their sleep to GO SHOPPING!! i for one--doubt i will go near a store in December. i can't help but wonder if we they had dealt with this honestly 18 mos. ago and increased production over time and been honest with the american public about preparing---could this have been averted/made less devastating?

-- tt (, October 11, 1999.

Great article. I just noticed the other day that the King Kullen in my town suddenly started carry much more powdered milk than ever before. Used to be one shelf, about 3 feet wide, now its a 8 foot double height space. Same thing for bags of rice, they only carried bags of rice in the Spanish/Mexican isle but now they have 10 pound bags of rice on nearly 10 feet of aisle space. Water in 2.5 gal jugs fly off the shelves, never had that before. Rice-a-roni, mac & cheese, etc.. were always older mixed dates but now ALL of them seem to expire 8 months or more in the future. Used to be able to find "soon to expire" stuff on those shelves but no more.

No "Get Ready for Y2k" signs in the supermarkets right now but its bound to happen soon.

-- hamster (, October 11, 1999.

Great Article and you have the best handle on the network. My whole family is in love with Aslan.

Hamster, come back to us and name your town or at least region. I am in Southern California and am watching for a shift in our grocery store shelf patterns. I haven't been watching as closely as you have but nonetheless have nothing to report. Anybody else seen anything???

-- Dana (, October 11, 1999.

Went into BigK today because of a canned goods and TP sale, you should have seen the people jockying for position and grabbing canned meats ($1 per can, no limit), Scott TP (12 rolls $5.50). They were already out of several things and the ad just came out for Sunday. As soon as the shelves are loaded with water, within a day or so they are all empty again at all the stores, and yet, no public word around here or ads regarding Y2K, no one talks about it ever. Somebody is sure thinking about it though.....

-- Sammie Davis (, October 11, 1999.

Sorry, almost forgot, I am in PNW, WA State

-- Sammie Davis (, October 11, 1999.

Jim Swoboda, director of strategic business development, Spartan Stores Inc.:

"The event itself is a non event. It's what the consumer might do in preparation for it that could cause all the problems...."

What is it with these marketing guys? Dude acts like he's seen the future clearly and can state what's going to happen down to the decimal level. Ah, to be a director of strategic business development and so very certain of what the future holds...

-- Mac (sneak@lurk.hid), October 11, 1999.

Just posted this on another thread.

In their newspaper insert on Sunday, Kroger prominently advertised a whole page of "Stock up and Save Sale!" items, to-wit, and in order of appearance on the page: cereal, soup, soda, canned veg, tuna, paper towels, peanut butter, juice, laundry detergent, dried milk, ravioli, toilet paper, firelogs, bar soap, batteries, water, flashlight, Eveready Home Readiness Light Kit, Rubbermaid containers, Coleman propane fuel, first aid kit, oil lamp, 6-gall water can, and Sterno. Sounds as if they read Stan's posts!

-- Old Git (, October 11, 1999.

Our local Hy-Vee store has inventory stacked on top of the shelving units clear up to the ceiling, in every aisle (six feet high). There is a stack of toilet paper six feet high, four feet deep and at least 20 feet long on top of the cold case. Canned goods, sugar, flour, rice pet food, laundry detergent, HBAs, condiments--you name it (except for my brand of cat litter-they rarely have more than 2 buckets there at a time!!). Either they got some really hot truckload deals or they are planning for major stock up buying.

-- Sam Mcgee (, October 11, 1999.

In Indianapolis, more than 20% of the urban residents receive food stamps. Another 20 to 30% have fixed income, or live from one paycheck to another. ( These are guesses based upon figures published in several government and newspaper sources, and are probably conservative ). Indy Metro area is about 1.3 million, 750,000 urban. The point is that even if "we" would have started 18 months ago, these folks and probably a couple of hundred thousand others would not have done anything to prepare. Now, I agree that getting even a few more percentages of people to prepare even a little, is better than no preparation at all, but lets face it, no government is going to tell people to begin stock piling some extra food when they know full well that some just will not be able to do it. It would scare them. The only recourse would have been to ask churchs and other people who could spare some extra food, to help all of them. This most certainly would have happened ( Hoosiers are very generous folks ) but the political implications would not have been correct. I think that we could be in for some bumpy times, and I live just two blocks from a 7-11 ! ( Thanks Paul ! )

-- Ken G. (, October 11, 1999.

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