Data Processing and Projecting - R.H. Huebenthall
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Data Processing and Projecting

by

R. H. HUEBENTHAL

Sales Manager - Digital Processing Applications

Industrial Computer Section

You heard Mr. Oldfield state the deficiencies of the present equipment. The technical deficiencies of speed, complexity of programming, logic design, and the high cost and size. And Mr. Geiser's answers to these technical deficiencies.

I am not going to get into the discussion of General versus Special Purpose Computers nor Central versus decentralized units. Those of you who have been associated with me in the past know that I have some opinions on these subjects, but you also know I am a strong advocate of Mr. Dickie's statement "Fit the machine to the business - not the business to the machine."

I am glad he raised that point. We are going to pay attention to it in our design and specifications of equipment. We will design building blocks that fit the problem and, as Mr. Oldfield said: "the study team has the Job of determining the technical characteristics of the basic data processing system which is best suited to the needs of the General Electric Company."

This is not a small assignment. 'We have the summaries of two departments. They contain the volume of data information, the rates of data flow, the sequence of information. We are now gathering statistics from several more.

Because of the diversity of products, the range in sizes of departments, we can get the different problems much easier than, I'm sure, if we contacted outside firms. Let me thank those of you present that have given me information, for the open minded attitude, the willingness to supply us with statistics, to reveal plans for the future that mean much to our study for proper evaluation of the growth provisions we must supply.

The main purpose of this meeting is "to accelerate the interchange of ideas - to permit us to gain an understanding of Tour problems - to fashion equipment you want and need to do your job."

It might be added: to reduce the time cycle of the study group by this vast parallel study. Certainly we, the Industrial Computer Section, are gaining much today. I'm sure the information we gather will reduce, considerably, the time schedule of equipment specifications and design thereby making it possible for you to make gains earlier by use of equipment to do your job easier and faster, and more economically.

Our study seemed to indicate, but now we are going to really look into Mr. Bloodworth's statement "the overall integration required has made impractical the drawing of sharp lines between functions." Also, Mr. Dickie said "the output of our processes feed to accounting" - bear out our findings or necessity of an integrated system.

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Lest I be misunderstood, we should go slow in saying ONE integrated system will solve all problems. I'd suggest we limit our thinking to one department or departments that are similar in their operation, structure, processing and information flow, rather than say ONE integrated system for the Company. It may not be impossible but right now I think it is impractical. Principally because of the variety of businesses.

Another indicator we had was that there is not a need for a high speed "report" writer. We may need high speed printers in printing utility bills, insurance premiums notices, bank statements, and Mr. Long from G. E. C. C. might well state that he needs a high speed printer for follow ups on delinquent accounts. But, basic, timely information is more valuable than many reports. There is no need for report strangulation.

You can readily see that no report is necessary listing all the reservations made or the space open on a flight when the information is available for merely "asking." Similarly we are finding that many reports now being issued will not be required if the information is available for the asking. Lacy Goostree will remember a statement he made. It went something like this: "You mean if I want to know how many taxi radio communication sets we sold this month, all I'd have to do is press a button and the machine would tell me. Why man, I wouldn't need that case full of reports over there."

Mr. Bloodworth is right - Communications is the nerve center Facilities should be provided for information to be supplied where needed at the time it is requested.

The following chart shows the flow of information in a business. This may not fit your department exactly, but bear with us and you'll find it Comes pretty close.

Now, if you'll look at only the PAST HISTORY - we will develop a concept of an integrated system by the flow of transactions or information through your business.

This is an end result of business transactions. The classified profit and loss statement. You will note we have all the elements for the effective management of a business. Sales, cost, Distribution Costs. Just a word on why we put distribution costs here. Located here it shows the maximum profit and the cost of the sales effort in accordance with budget. Not the maximum possible profit but the planned profit from proper realization of budget. There is a difference, you know, between maximizing the best mix of product and building a budget for planned operations. Following distribution costs is volume variance. This is the difference between the planned load of budget and the actual lead of sales. This can be a credit as well as a charge.

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Following Net Sales margin are charges or credits from manufacturing efficiencies and other adjustments such as raw and in process inventory write offs. These are charges against these functions and should not be a part of sales measurement.

The last charge is for Administrative expense which can include some volume variance where top management decides to install facilities in advance of their utilization or larger facilities than presently required. The classified P and L. then, is the end result of business transactions and in our opinion should be used to record this history. It should be used very little in the guidance of the future of the business. It can be used and should be used in the immediate operations of the business to adjust the deviations from budget, to correct the day to day fluctuations, and constantly measure the performance against a plan. We feel, however that it should not be used to establish the future plans of the business. We have, we believe, a better tool for management and will show it to you shortly.

Now if you will look at the PAST-PRESENT part of the chart. This part of the chart shows the flow of transactions into the classified P and L. You might say that this is the chart for a business selling retail or from stock. In a "ship from stock" type of business, the transactions are immediate and the entire operation is history very quickly.

Now turn to the next section of the chart, PRESENT-FUTURE. In a manufacturing business, there is additional time, and orders, of course, are many times taken and then filled in the future. In this case then, the business can start to operate in accordance with load of known things in the future. Now there is a possibility of using information for preplanning on a more known basis.

This planning is done by loading the orders into a schedule ofo production. This can be very detailed or it can be on a general guidance basis. From the loading on this schedule, the factory final assembly line is run either 'On a monthly, weekly, 'Or even daily basis, building for shipment in line with the requirements of the orders or for stock on instructions from marketing.

Feeding this line are the two or mere other production subassembly lines and component parts purchases. As is shown these are small circles of order, schedule produce and stock. Here again formal or informal schedules are written for the items required by the final assembly. These are either fed directly and integrated with the final assembly 'Or are built for subassembly stock. Items from vendors, likewise, are either scheduled to the requirement of the final assembly line or are stocked and redrawn as required.

The circle shown for payroll is familiar and self explanatory. The net amount is paid to the employee and the amount deducted from his pay is paid to the agencies for which it was collected. They in turn send the checks to the bank for clearing to the payroll account. The gross amount paid out is charged to operations through the distribution block shown on the previous section 'Of the chart.

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Now let's turn our attention to the upper right corner of the chart. We now begin to talk more of the future and the effect the future will have on our plans or rather the effect the present booked orders will have on our plans. This is the comparison of booked orders against budget. One comparison is the orders receive by each salesman or agent against the budget established for him. This may be broken down into the different classes of customers that he serves so as to localize where he is over and under the bogey.

This realization or non-realization of budget becomes the basis for adjusting the Sales Projection. You might refer to it as the present three months rolling estimate that is revised monthly.

In our opinion, this constant shifting of the pattern of order and the volume of orders is the greatest single factor in upsetting the smooth flow of production by either changing the things to be made or increasing and decreasing the rate of manufacture.

Now to the FUTURE. This shows the things that can help us in forecasting the future of the business so that we in effect know where we are going before we go. It is likened to a road map. It shows you the road that you should travel to get from one city to the next, and by close examination - such as looking at the small maps of cities, you can keep from getting lost going through the congested section of the city. You might say this is going from a period when orders are coming in at a rate commensurate with plan or budget and then they go either to a different mix or a rate out of proportion to normal.

These maps will not tell us every bump but they will tell us where we will be if we continue at a given rate, it will tell us how much fuel we will consume if we consume the standard rate per mile. We will know how long it will take and the extra expense for stops along the way if we go through a meal period, or the higher expense with a stop overnight.

Having the road map and knowing the factors to make the calculations we can plan our trip before we take it. We feel that the orders received projected by scientific method can do likewise for business. This projection will not tell you the contract that will lose money, it will not tell you which DA will be over-expended, but it will tell you that you are on the right road and heading in the right direction. The degree of detail and the degree of accuracy of the calculation will be the degree that you can write the financial statement in advance. There are many known methods of getting closer and closer accuracy in the forecasting, but all of them get into the mathematical field and require calculating ability, which to the present time has been either not available or has been too expensive for the average medium-sized business.

In the lower right corner of the chart is the resultant of the forecasts. It is the circle of developing the manufacturing instructions for new products. Its flow is as pictured.

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This gentlemen, is the generalization of the flow of the transactions through a business.

In present data processing we are following the principle of start and stop, start and stop. Better expressed as batch bookkeeping. We heard that word - BATCH - several times this morning. This kind of operation by its very nature creates peaks and valleys. Peaks of work and the delay of information or creation of overtime. This is not a condemnation of our present type of transaction booking, it is an examination to see if there is a better way that should be considered. Progress is Our most important product. Not only in the product that we sell the customer, but how we make it and how we serve him. How we run our business and how we serve our shareholders.

By making a study of this type, by being able to sit on the hill and look at the entire business without getting the effect of one particular function or type of transaction, the problem becomes, in my opinion, very simple. This business divided into two main categories:

1. The statistics for future - the road map

2. The records of the business - the results of the past

I would like to show you how we intend to take care of the records part of the business.

The records of the business are reflected by the General Ledger, its sub-ledgers, and sub-sub-ledgers. In these accounts are the results of all the transactions of the past. Nothing gets in the book unless it is history. It is the financial history for recording the actual results for shareholders and tax agencies. In the past when business was simple, the old eye shade bookkeeper wade his postings directly to the sub-ledger accounts. From his double entry journal he usually posted each debit and credit for each transaction in the sequence in which the transactions occurred and frequently  business. As business grew in size and complexity and as machines for adding were available we developed single entry bookkeeping. Actually this is not a single entry bookkeeping but BATCH bookkeeping. A method is used to keep records in batches and then summarizing the batches before any entries were made to the general ledger or offsetting accounts of the batch. There are batches of different' kinds of billing, batches of different kinds of purchases, batches of withdrawals of stock and batches of payment to employees.

In this way peaks are generated. There is no way of knowing from day to day or minute to minute just how the business stands. There are many things to be gathered together before the results are known. Consequently methods have been devised for getting subtotals from time to time at considerable clerical effort. You know the monthly forecast which is made about the 20th of the month. With the development of the computer  - the electronic computer, these batches can be processed faster and faster, but still they are batches that have to be summarized and nobody knows how things are until the summary is complete.

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Now that the computer is being developed so it can remember a lot and locate any item very quickly, we can keep the records so everything is instantaneously available and we can return to the old spread sheet of the eye shade bookkeeper. We will have his continuously "updated" figures for each category of controlling the business. With this 'One advantage, or rather several advantages we can make the posting at the time 'Of the transaction and don't have to move the papers to the "OLE MAN" for recording. We can make the posting to the proper account by electrical connection to the machine thereby posting to the proper accounts when the transaction is made. And we can do it with electronic accuracy. The pendulum has Swung back - but with a different wan on the pencil.

Earlier I stated that we would show you some of our thoughts along the line of looking into the future.

Many of you are familiar with the PRODUCTRON. That simple and inexpensive computer was developed by Manufacturing Services and the General Engineering Laboratory.

PRODUCTRON

Manufacturing Services has stated that successful manufacturing is based on sound production scheduling.

Production scheduling is becoming increasingly important. Automation requires greater fixed investment for less flexible facilities and thereby requires more intelligent utilization of manpower, machines, and materials. The approaching guaranteed annual wage necessitates good production scheduling. The competitive situation constantly requires shorter and more reliable production deliveries.

The General Engineering Laboratory developed the PRODUCTRON, a special purpose analog computer, to handle your production scheduling problems as outlined by the Product Control Services.

The PRODUCTRON is a scientific tool especially suited for solving linear load capacity analysis Of production scheduling. Load capacity analysis is the means for measuring the feasibility of a scheduling plan. This measurement is the means of your planning your utilization of facilities, of making deliveries to your customers, of expenditure of money, and of building your inventory.

The three basic elements of the analysis are:

1. Capacity of the station or area. 

2. Load impact of each product.

3. Proposed schedule.

The PRODUCTRON is capable of analyzing the hour-impact loading

of 50 different products on each of 24 work sections. This computer performs the multiplications and summations instantaneously and maintains the results permanently. By now you are wondering how this desk size computer works. Since each unit of product has a different work-load impact on anyone work station, it is necessary to know what the work load for each station will be if a certain

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number of each product is manufactured. The 1220 adjustable resistors act as the "work factor memory" of this analog computer. The computer multiplies the number of products by the appropriate work factor for each station in the memory. All of the products of any work station are then automatically added together to provide a total in hours, or equivalent units of measure, of the work load on that station produced by that proposed schedule.

The PRODUCTRON is easy to program and operate. It produces answers to entire problems in less than 5 minutes with an accuracy of better than +/- 2 per cent. Three steps represent the entire operating procedure:

1. Set in the quantity of each product on the top dials

2. Depress the work station selector for the desired work station

3. Read the meter indicating the load

In addition to being a most scientific tool for solving your load-capacity analysis of production scheduling, the PRODUCTRON is versatile and is suitable for solving other linear problems like materials explosion, evaluating a process change, and budget synthesis. Also, we can, under a standard cost system write the financial statement (to three significant figures) before the books are closed by inserting certain "batch" statistics in the computer.

The cost of this computer is only about $12,000. This is the total cost, not the monthly or even annual rental. Due to its simplicity of design and proved components, it is estimated that maintenance and service will be less than $100 per year and will result in minimum loss of operating time. The only moving part is a switch whose life is estimated at ten years. It operates on standard 115 volts a-c power and construction permits installation in the office or on the factory floor without requiring such accessory equipment as air conditioning.

To summarize - this simple analog computer that is designed to perform linear problems of the first order, can therefore, solve some of our other projections into the future, provided they are linear. It can calculate the budget, it can calculate the financial statement from relatively few known statistics, it can optimize product mix, and a host of other things. These Mr. Dickie and his associates did not visualize at first, but they did discover them in conversation with others and are still looking for problems that it can solve.

The more advanced computers that solve complex functional equations will be discussed later.

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