Capitalists are Praying -- that their profits will be protected

[Guest guest]

US APPAREL TRADERS FEAR Y2K SLIP-UPS BY GLOBAL SUPPLIERS

 

Importers say computer glitches can occur up and down the supply chain

-- from computer-operated factories to computer-issued letters of credit

in less-developed nations.

 

BY PAULA L. GREEN

JOURNAL OF COMMERCE STAFF [Journal of Commerce - May 17, 1999]

 

U.S. apparel importers are preparing as best they can for computer

problems that might arise when the year 2000 begins. But they voice

concern that overseas suppliers may not be so diligent.

 

That has generated concern from many industry observers, who note

textile products are dependent on hundreds of suppliers in developing

countries around the globe.

 

Questions also linger over the capabilities of foreign companies to

handle related chores, such as issuing letters of credit.

 

"We're praying," said Martin Granoff, chairman and president of Val D'or

Inc., a New York apparel company that sells knitwear. Mr. Granoff is the

immediate past president of the American Apparel Manufacturers

Association, which represents about 300 U.S.-based apparel companies,

many of which import from overseas.

 

Mr. Granoff and other industry sources agree that the networks of U.S.

firms and their customs brokers and freight forwarders will be ready

when 2000 begins. That means the computers will be updated so they can

read calendar dates ending with two zeros properly, and process

information correctly.

 

U.S. Customs Service also is confident that its automated system for

processing paperwork as well as Elvis -- the Electronic Visa Information

System -- will function smoothly once January begins.

 

But garment importers are worried about the vast network of overseas

vendors located in less-developed nations that may not have the

resources to update their noncompliant computers.

 

"Your ability to comply is only as good as your weakest link," said an

industry source who declined to be identified.

 

And the apparel industry -- which is so dependent on timely delivery of

fashionable goods from T-shirts to dresses that have a short-selling

period -- is especially susceptible to delivery delays caused by

computer errors.

 

"With some stores like The Gap and The Limited that are constantly

changing merchandise, a systems failure that leads to a delay of a week

could be a third of the selling season," said Robin Lanier, an executive

with the International Mass Retail Association in Arlington, Va.

 

The association, which represents 200 mass retail firms and another 600

companies that supply many of the consumer products sold in the stores,

has even postponed the annual meeting of its members' logistics

representatives -- a group that traditionally meets during the first

week of January.

 

"These people are at the front line of huge logistics systems. They're

not going to be allowed out of the office at that time," said Ms.

Lanier, who is senior vice president of industry affairs and trade

development. Next year, the conference will be held during the first

week of March.

 

Industry experts urged importers and retailers to be on the lookout for

everything from how their foreign banks will issue letters of credit to

how the government office responsible for quotas issues visas to its

local exporting company.

 

"You may have paper visas as backup to the electronic visa, but what if

computers are used to print the paper used for the visa," Ms. Lanier

said.

 

Visas must accompany many of the textiles and apparel that are under

quotas, and Elvis is an electronic filing system run by Customs and

meant to cut down on counterfeit goods. It is used by about 10 Asian

nations, including such large suppliers as China and Hong Kong. Customs

requires the use of paper visas as backup to the electronic filing

system for most of the participating countries. One source said the

prevalance of factories in less developed companies could actually work

in U.S. importers' favor.

 

"You may have companies that are dealing with systems that are so old

and antiquated that they don't rely on computers (for its paperwork),"

said an industry source.

 

But if a factory's electrical system is manned by a computer and the

lights and power needed to operate the sewing machines go out, then a

vendor is going to have trouble meeting its commitments.

 

Apparel importers and manufacturers have the added burden of dealing

with different suppliers in different countries.

 

"Maybe the fabric is from Taiwan, but the bottoms are made in Hong Kong

and the tops in Mexico," Ms. Lanier added. "If anyone along that chain

fails, you're going to have problems."

 

The fact that the peak shipping season for Christmas will be over and

importers will began Jan. 1 with a new quota year takes some of the

pressure off companies.

 

But John Clark, an executive with Paul Davril Inc., an apparel importer

and licensing company based in Los Angeles, isn't taking any chances.

 

"You want to book early and ship early," said Mr. Clark, who is vice

president for production and import administration at the firm. He

advises companies to get their early January shipments out of Asia, for

example, by Dec. 13 for the 11-day sailing to Los Angeles.

 

"You don't want to get caught on the cusp," he added.