The 'Just In Time' Concept Made Possible By Computers

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The 'Just In Time' Concept
Made Possible By Computers

North: So, having said that, let's talk about the other problem which is supplying this country with goods. We know what the demand is going to be, assuming people have access to money and banks, which may not be the case late in the year 1999. But let's at least talk about now and the time before the year 1999 where people can make decisions. We have a potential problem which has been created by computers called 'Just In Time Manufacturing,' and 'Just In Time Shipping.'

Everybody in the business of manufacturing, certainly, everybody in the business of retailing has been forced by computer technology to reduce the size of inventories because it costs money -- bank money, borrowed money, or their money -- to keep an inventory. This is one of the obvious ways that modern marketing and distribution have been able to reduce the cost of doing business. They have substituted their inventories for 'Just In Time' processes which have been made possible by computers.

Now, let's talk about grains. Let's talk about agricultural products, that's your field, Steve. What exactly have you seen in terms of supplies and the supply delivery problem over the last two or three years?

Portela: Let me inject one comment first on the year 2000 and computers. On March 9th in our daily paper here in Idaho, there was a story. "IRS will pay millions for computer fix." The article went on to say that the IRS is going to pay a minimum of $129 million so their computer programs will recognize the year 2000. This was just a couple of days ago in our newspaper. I thought that was interesting.

[Note: in June, 1997, the IRS told Congress that it will need $258 million in 1998 to fix its computers.]

The Huge Problems Facing Every Industrialized Government

North: Of course, it is a low-ball figure because the IRS has been working on a basic computer fix, actually for a period of 30 years. But they have admitted that a $4 billion fix over the last 11 years has failed to integrate the IRS computers. Now they must add to this the year 2000 problem. And it's not just the American IRS. It is every government of the Western world that is facing this problem.

This also has monumental consequences for the capital markets because of the size of the government debt of all these countries. They have to roll over large parts of that debt every 90 days. In the United States, the entire debt has got to be rolled over about every 48 months. Now the problem here is, the IRS may be perceived as unable to collect the taxes. This is because people will figure out, first of all, that they are not going to get caught if they don't, and more to the point, there may be no bank out there on which you can write a check to pay the IRS. If the IRS can't be paid, then the IRS dependent U.S. treasury cannot pay. This means that you could see, I believe, interest rates in 1999 getting well up into the double digit levels all over the world with respect to almost any long term capital investment. This could very well be the case if the banks are perceived to be at risk, which I think the banks are.

Having said this, now, lets get back to your problem, Steve. Your problem is on the supply side. You have a problem, as I understand it, irrespective of the computer problem, and I'd like you to talk about it.

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