Data Processing and Projecting
R. H. HUEBENTHAL
Sales Manager - Digital Processing
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
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
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
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
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.
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
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.
|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.
|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
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.
|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.
|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.
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
|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
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
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.
TO INDEX OF SPEECHES