For what it's worth, I don't see Y2K getting serious until late in
January. The economy is a marvelous thing with lots of momentum, and
like
a bull elephant in charge mode, just shooting out its heart won't
bring
it to an immediate halt.
Setting aside the wild-card possibilities, I don't see any way that
the
oil distribution / refining system isn't going to experience
substantial
shortfalls. The modern lifestyle is based on cheap, regular and
adequate
supplies of gasoline. Given that the oil crisis of '73 only
represented a
7% actual shortfall in supply, I'm expecting serious disruptions to
start
showing up in the later half of January.
Given our dependence on foreign oil from Venezuela and Saudi Arabia,
automotive parts from Mexico and Brazil, our involvement with Japanese
banks, etc., I was particularly impressed by the testimony two months
ago
of Jacqueline Williams-Bridgers, the U.S. State Department's Inspector
General, to the U.S. Senate's special committee on Y2K.
She said, "These assessments suggest that the global community is
likely
to experience varying degrees of Y2K-related failures in every sector,
in
every region, and at every economic level. As such, the risk of
disruption will likely extend to the international trade arena, where
a
breakdown in any part of the global supply chain would have a serious
impact on the U.S. and world economies."
My question for those who feel that Y2K will only be a bump in the
road
would be, "Which part of _every_ is unclear?"
Given the current level of dependency on automobiles in our culture,
we
can't afford more than a percent or two disruption in overall gasoline
availability without triggering adverse social reactions (those who
were
around in '73 know what I mean). The odds that the interuption in
gasoline availability will be no more than a couple of percent isn't
very
good.
We'll know one of the key factors quickly enough. The railroads have
announced that they're shutting down for 36 hours during the rollover
in
order to test their systems. If the imbedded chips in the switching
system make it through, then I expect that we're going to be in decent
shape overall.
If, however, we effectively loose the rail system because they can't
trust the switching/reporting network, then the dominos are really
going
to fall. The majority of the electric plants out there use coal, and
they
only have room to stock about a week's supply.
How people will react in late January is a real guess. If they start
hurting, they're going to want to blame someone for that hurt. That's
the
part that makes me nervous.
It's interesting to watch the dominos starting to fall already:
Hershey,
Midland, Volkswagen. Half a billion in losses in those three companies
alone in the last month is telling, but it's the nature of the losses
that's most illuminating.
A couple of years back, as IT managers started to look seriously at
Y2K,
they had two choices: fix the old or create the new. Many a company
made
the reasonable decision to start from scratch and recode every
critical
system they had. Some like Boeng spent more than a million dollars,
and
it looks like they're in the clear. That isn't surprising given the
nature of their business and their capacity for taking on complicated
technical projects that have to be completed on deadline.
Still, they had some interesting surprises. Like the test on the 757.
They rolled the clock forward, and then went looking for problems. Two
hours of checking didn't turn up anything, so the plane started to
taxi
to the runway. Half-way there, the computer shut down. It turns out
that
the bug had caused the computer's cooling fan to fail to come on.
After
running for two hours without a fan, the computer overheated and shut
down.
Lots of other companies also took the second path. While this plan has
a
great potential payoff, i.e. the latest software running on the latest
machines, there is one really big risk. If the software isn't
completed
on time, a situation known to occur on occassion :-), the company can
find itself caught between an old system that will no longer work
after
the first of the year, and a new system that won't work yet.
Even worse, in trying to make the transition, they can corrupt their
data
base and be left with the added task of having to do a new physical
inventory.
This is the sort of thing that's starting to show up. It's not being
talked about on the evening Happy News, but that's hardly surprising.
For
example, Hersey's Y2K program just cost them their largest sales
weekend
of the year. You may not have noticed, but Hersey didn't make it for
Halloween this year, and probably won't make it for Christmas. Lost
sales
are said to be in the $100M range.
Now, it's true that western civilization won't grind to a halt because
of
a lack of chocolate, but it's also true that there are a lot of human
faces in pain disguised by a figure like that. The loss of one
end-product manufacturer involves losses for the business that supply
them, as well as the businesses which depend on their employee's
paychecks.
Midland (I may have then name a bit off; I'm doing this from memory)
is
an example of a good idea that didn't quite work. Their business
consists
of distributing and vending food products. Their distributing software
was way old, but the vending side of their business was more
up-to-date.
And so they decided to expand the vending software to include their
distribution operations.
In practice, they discovered a few glitches. For example, their
distributing division used the term "each" to describe a case of
something, while their vending side thought "each" meant one unit. The
result is that some folks who ordered a case of something got one
bottle,
while others who wanted a bottle received a case.
That lead to a host of unhappy customers, and a lot of time lost
filling
out return slips and processing additional shipments, but the real
problem is that this fubar has rendered their inventory records
worthless. Not only do they have to correct the software problem, but
now
they also have to rebuild their inventory records based on physical
counts.
The upshot is that their latest 10-Q is projecting a 25% drop in
profits
for fiscal '99, word of which lead to a one day drop of $112M in the
value of their stock.
Volkswagen Europe is another example of a company that took the second
path. Fortunately, they finished their new software with two months to
spare. The problem is that it takes a lot more than two months to test
complex software, and to save time, they passed up the step of
operating
the old and new systems in parallel. The upshot there is that the new
software corrupted their old database, and they haven't been able to
ship
parts for the last two weeks.
The best description I've heard recently is the comparison to
Christmas
tree lights; not the old series kind where the burning out of one bulb
would shut down the string, Rather, it's more like the new kind that
have
a by-pass circuit in the base so that if a filament fails, the base
shorts out to let the power keep flowing. The problem there is that
the
rest of the bulbs then have to deal with the fractionally higher
voltage.
As more filaments fail, the rest of the filaments have to carry the
load,
and tend to burn out correspondingly more quickly. In time, this leads
to
a cascading failure of all the lights left in the string.
While none of these examples puts the world at risk, each of them does
put a bunch of people through a whole lot of grief. As light after
light
on the productivity tree winks out, the tension level rises.
And then we get to the IRS's assurance that they have their
contingency
plan in place. They expect to be able to issue 10,000 refund checks by
hand per day. Given that last year they issued some 80 million checks,
that should only take them some 36 years working at that rate. Faster
if
they authorize overtime :-)
How are people going to react if they're told to not expect their tax
refund in this lifetime?
Anyway, just some thoughts on a rainy morning. It's going to be a very
interesting year.
Take care old friend, and do stay in touch.
Walt
-- Sheri (wncy2k@nccn.net), December 05, 1999.