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1998-03-13 10:07:37


Auto Suppliers



This is the auto industry's problem: suppiers are not compliant. If just a few go bankrupt, this can shut down a production line. If a lot of them go bankrupt, this could shut down the auto industry.

If the auto industry goes bankrupt, the nation goes bankrupt. A massive depression will result.

And that's just autos. Every other industry faces the same problem, including electrical power generation.

This long article also covers health care and retailing.

This is from COMPUTERWORLD (March 9).

* * * * * * *

Ed Yourdon talks with Computerworld's Rick Saia about the importance of making sure your suppliers are Y2K compliant. Yourdon heads up the Y2K Advisory Service at the Cutter Consortium in Arlington, Mass. . . .

Why have companies been so slow to deal with the supply chain problem?

The automotive industry has been united in trying to get their suppliers engaged in Y2K, but supplier response has been minimal. Do you think they get it?

Despite the poor response to the auto industry's initiative, auto makers act as if there's no need to move on to Plan B. What are they thinking?

The letters and surveys most companies are using to get their suppliers' attention are not working. What do companies need to do?

Looking at the numbers and looking at the calendar, it doesn't seem possible to keep the supply chain from breaking. Is there any hope? All your year 2000 remediation is done and tested. Then January 2000 comes, and you're out of business. Why? Because your suppliers screwed up.

Your retail shelves will be empty; your assembly line will have nothing to assemble; your emergency room will lack lifesaving devices.

Everyone is praying that suppliers get religion on time, but there's little basis for that hope. "The vendor issue is the biggest risk issue and the biggest litigation risk issue and the issue people have least control over," says Lou Marcoccio, year 2000 research director at Gartner Group, Inc. in Stamford, Conn. "And yet it's where people are focusing the least amount of attention. It makes no sense whatsoever."

"The supply chain is really one of the weakest areas in year 2000," says Stephanie Moore, a senior analyst at Giga Information Group in Westport, Conn. "We can expect to see many, many, many suppliers fail." . . .

The auto industry: On a collision course

No industry illustrates the domino effect of year 2000 better than the automotive industry, where suppliers and subsuppliers down the line are all interdependent and where there are many sole-source vendors. "It's all win/win or lose/lose," says James W. Lloyd, vice president for information and network resources at UT Automotive, Inc., a Dearborn, Mich., supplier of a broad range of auto parts.

Although 94% of all companies are communicating with suppliers through paper surveys, that doesn't work, says Lou Marcoccio, year 2000 research director at Gartner Group.

Most suppliers don't have enough information to answer the surveys, so they throw them away, Marcoccio says. Others guess. As a result, only 20% of surveys are making their way back to companies, and only 3% of those are accurate, he adds. . . .

Marcoccio estimates that it takes five to 10 people per 100 vendors to get this done. "But how else can you assess their risk?" he says. "If you're not doing audits with those vendors, you're not doing due diligence and you're liable. If you have to hire 500 people, that's what it takes." Kathleen Melymuka. . . .

Audits show that suppliers that have responded have vastly overestimated their own prepared-ness. "In every instance, there were potential serious, even business-threatening, surprises," Ferron says.

None of the Big Three would say what they'll do if the effort fails to gain momentum in time. Instead, they are bringing in European and Japanese automakers to broaden the initiative. They hope that critical mass will force suppliers to respond, says Joe Bione, lead Deloitte Consulting partner on the AIAG initiative. "The pressure is going to get so great they're going to have to get moving on this," he says.


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