Plan now to build inventory pre-Y2K

The good news for companies that plan to stockpile their inventories in case of year 2000-related supply-chain disruptions: Most manufacturers are ramping up their production lines to meet the demand.

The bad news: So many companies plan to order extra parts, fuel and supplies in November and December during the already-busy holiday period that the US transportation and distribution system is going to be stretched thin.

"Companies that plan to import high volumes that can't be flown in at the last minute might want to think about pushing up their purchasing to the third quarter," said Andrew Hodge, senior vice president at WEFA, an economic forecasting firm.

Inventories to Rise

WEFA estimates that US inventories will rise by $US83.8 billion in the fourth quarter and then flatten out at $15.7 billion in the first quarter of next year.

Already, the backlog of orders for manufactured goods has risen "significantly" over the past four months, according to a survey of 350 purchasing managers by the National Association of Purchasing Management.

Troy, Michigan-based automobile equipment maker The Budd Co plans to keep an extra week or two of supplies on hand. "We don't plan on keeping [extra] finished goods, but we are asking critical suppliers to keep a maximum of one week's worth of finished goods," said company CIO Harold Hoffman.

But stockpiling for just the first few weeks of January 2000 might be shortsighted, noted Lou Marcoccio, an analyst at Gartner Group. Because Gartner Group estimates that only 10 percent of Y2K-related failures will occur during the first two weeks of next year, companies should re-adjust their inventories for the period from October 1999 to September 2000, Marcoccio said.

Companies like KeySpan Energy are taking steps to ensure that there are no blips in supply or demand come Jan. 1. The New York utility persuaded the city's Metropolitan Transit Authority to nix plans to stop all of its trains shortly before midnight on New Year's Eve and then restart them all simultaneously at around 12:15 a.m.

Powering up hundreds of trains at once could cause significant systems problems for electric utilities, said Rick Siegel, the utility's vice president of IT operations. Similarly, electric customers who turn off appliances or equipment shortly before midnight and then try to turn them all on at once "may create the very shortages they're trying to avoid," Siegel said.

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