Unworried firms not hoarding for New Year

By DITA DE BONI

We are known as a nation of laid-back people. That description could, on the face of things, be applied to the majority of businesses as the millennial countdown nears its climax.

As the clock strikes midnight on December 31, just 11 per cent of business will be holding more finished products, while only 15 per cent will have extra stocks of raw materials, according to the last survey before the big event of more than 1300 businesses.

The Y2K Readiness Commission says its survey shows that because most manufacturers are confident they face the new millennium well prepared, many feel uneasy about boosting stock levels for a crisis which may not evolve. Consequently, they are counting on their suppliers to also ride potential problems through the season.

Others have pointed out small companies tend to run "just in time" not "just in case" manufacturing operations, often lacking the cash and the space to stock up for problem patches.

Still others claim the holiday closedown for several weeks over the festive season allows them a buffer zone to rectify problems. But the Commission says all these reasons may not be good enough to avert calamity.

"We've been a little disappointed at the response of business to continuity planning," says John Good, special adviser to the Y2K Readiness Commission.

"Many may well have been monitoring their supply chains. Presumably they've satisfied themselves that their own risk is covered, but we had hoped for more emphatic planning, especially from a country with a good line in natural disasters."

By comparison with New Zealand, Australian businesses will have boosted their stocks enough to contribute an estimated 0.3 percentage points to their December quarter GDP figure.

In the United States, heavyweights like Federal Reserve chairman Alan Greenspan have publicly ruminated on the effects of stockpiling on the American economy.

An informal survey of several New Zealand manufacturers' stockpiling efforts by the Business Herald confirmed findings that most companies ticked the "we are not doing so and don't intend to" option in the readiness questionnaire.

Peter Fletcher from Supply Chain - supply chain management consultants to 30 large and small companies - says the attitude of business is consistent with the general public's attitude to Y2K.

He says as far as his clients go, most are not taking exceptional precautions with stock, none have said they are stockpiling and none have asked for stockpiling advice.

"After all, how many people do you know are storing three days' worth of water and food in their pantries?" he asks.

In fact, of 1003 households surveyed in late November, 90 per cent claimed to have stored the requisite amount of food while 49 per cent had stored water supplies.

Natural ingredient supplier to the food manufacturing industry Marsanta Foods says while orders for stocks have picked up in foreign markets, Marsanta has not greatly increased supplies.

"Bean suppliers in the States, for example, are having a field day," says Marsanta chief executive Richard Keene. However, New Zealand business clients like Cadbury are "realistic about possibilities and problems."

Marsanta is holding only a fraction more than the usual 3000 tonnes at its warehouse in Glen Innes - and says Y2K will not be too disruptive for the company as most ingredients like dried fruit, nuts and seeds come from low-tech areas such as China and Bolivia.

"The worst case scenario will be we can't issue an invoice on time - something I'm sure none of our customers will be complaining about," says Mr Keene.

David Mair, executive director at Interlock Industries, says the company has not boosted supplies for its window and door hardware manufacturing line and has had a good relationship with suppliers leading up to the big event to ensure continuity of supply.

"Philosophically we would never pull in huge amounts of stock because the possibility of a quality fault is too great."

He says the company's product lines into Japan hit a bump around a month ago, when Japanese manufacturers were stocking up on window and door hardware.

"In New Zealand smart manufacturers have covered their bases already, and because we tend to be more mechanical than electronic, we don't have quite the reliance on systems."

Lion Nathan has stockpiled an extra week's worth of product, says Graham Seatter - "more in anticipation of celebrations than Y2K" - and the company is confident suppliers have stockpiled enough cans and bottles in case of faults or emergencies.

But New Zealand's largest glass manufacturer ACI Glass says hoarded stocks of three to four months ago have been decimated by a 15 per cent to 20 per cent increase in Christmas and supermarket beer sales.

Frucor Beverages and NZ Food Group are also running to keep up with healthy Christmas demand.

Frucor's Mark Cowsill says the company has stockpiled a couple of weeks worth of water to meet anticipated demand from consumers over Y2K but it is business as usual otherwise.

"If you stockpiled too excessively, you'd have to shut the factory to run stocks down again."

Several of the companies canvassed were concerned about a glitch in utilities, with snack food manufacturer Nice & Natural head Allan Peters saying producers had been unable to get any guarantees for water, sewage and gas supplies around that time.

There are a few ants among the grasshoppers. The New Zealand Herald has stockpiled six to eight weeks' more newsprint than usual to avoid supply problems and will have its printing press robots computer-monitored from abroad for possible "first-in-the-world" hitches.

Electronics manufacturer PDL has also increased componentry stock by around 12 per cent. Chief executive Mark Stewart says the stocks will get the company through to the end of February if unforeseen disaster should strike the company's 1500 suppliers.