You
In this series we've been probing the development of computers in terms of their evolution design and capabilities
We're now ready to turn to the application of computers in various fields and this program will deal with computers in business
At first computers were applied to scientific and engineering tasks
But it wasn't long before these machines were applied to the repetitive clerical operations that consume so much time and effort in large business
organizations
Corporations today depend on computer processing for clerical operations
Many medium-sized companies with 100 to 1,000 employees are also using computers and even smaller companies are finding it profitable
To use a computer for some of their operations
They contract with bank or data processing bureau to provide computer facilities
The company delivers its information to the services and the process data is returned the following morning
Until recently most businesses large or small and use the computer it but a fraction of its potential
typical applications involved simple logic and arithmetic transactions such as
issuing utility bills on the basis of meter readings
reporting dividend checks to stockholders
maintaining inventory records
and calculating and writing payroll checks these
Repetitive operations are simple for the computer in comparison to the enormous number of hours needed if the actions were handled manually
Consider for a moment all the ramifications connected with the concept payroll. In other words paying people for work done
The payroll program involves updating the employee file by making additions and deletions to cover new employees and departing employees
new addresses name changes
deductions
dependence
automatically keeping track of sick leave and vacations
Computing wages for each employee based on regular and overtime hours work making deductions for federal state and local taxes
Making deductions for annuity and retirement funds union dues health and life insurance social security payments
deductions for savings charity credit union debts government bonds
Allocating labor costs to various departments projects and fund accounts issuing w-2 forms for each employee for tax purposes at the end of the year
producing reports for management use and auditing purposes
issuing checks with speed and accuracy and
So it goes a maze of operations revolving around your paychecks once handled by manpower
now handled efficiently by the computer and
Now we'll deal with some of the more sophisticated
Applications of computers in business uses that involve inventory control point-of-sale retailing and electronic banking
First let's look at inventory control and imagine yourself the head of a company with a warehouse system
That seems to be in trouble
Inventories are sporadic some items overstocked and some run out quickly and orders cannot be filled promptly and as a result
Salesmen are complaining about loss of sales
Basically, you're faced with two
Conflicting goals in maintaining an inventory
The first is never to run out of any item
But the danger here is that you may tie up a lot of money in stock
And so the second goal is to maintain the smallest possible inventory and still satisfy customer demands
The task is to find an economical compromise between these conflicting goals
You'll probably need the services of a computer
No, the computer can do more than merely process your payroll and accounts receivable if properly programmed
It can control your inventory now
Let's see how a computerized inventory control operates at a large corporation in this case
Nabisco incorporated
At Nabisco a computer system called system 66 controls production inventory sales and distribution of approximately
600 different products in the biscuit division
This computer system helps management answer such questions as how much of each product to produce
What's the best distribution method to the 180 different sales branches and how can production costs be minimized?
There are more than 50,000 computer equations solved each week to answer those questions
This computer controlled storage operation is in a modern seven-story high warehouse at Nabisco's Richmond, Virginia facility
As the product comes off the line, the packages are assembled, shrink lapped, and placed on pallets all under the control of a computer
This computer decides where the products should be stored and instructs the crane to move them
Each unit is kept track of by the computer system
When an order is entered, the computer instantly analyzes the data to determine which package to move for best turnover
The goal is to maintain freshness and yet minimize crane movements
This system also assembles products into truckload lots and then loads them on the trucks all automatically
There are over 200,000 retail food stores in this country
Nabisco products are sold in almost all of them
The orders, manifests, and invoices necessary to keep all these stores stocked can create a formidable avalanche of paper
To solidify this paperwork for customers, salespeople, drivers, and billing people, Nabisco instituted a computerized system
The old handwritten invoices are now replaced by co-printed invoices
Billing discounts and returns are automatically calculated and tabulated by the computer
It's easy to read printed invoices of increased efficiency, cut down on errors, and improved customer relations
An added benefit is an end-of-the-day report management, giving data on sales, inventory, and other important facts
The management information system at Nabisco uses a computer simulation program to help plan new distribution systems
By analyzing data, the most effective method of distributing products is proposed
This new distribution strategy, produced with the aid of computers, is being tried in several areas of the country
And, of course, computers are monitoring this effort for efficiency and savings
Are there kinks in the computer-based inventory control system?
Well, sometimes, yes
Assessments made and programmed into the computer by humans can backfire
The economic climate of the country changes
Fashion and design changes don't help either
An unexpected competition from a breeding product at a lower price can play havoc with computer predictions
These forces can also affect a non-computer system
However, a computer system would trigger an early warning of difficulty, thus allowing management to make adjustments in production and marketing plans
One of the places where that early warning would register is in supermarkets or department stores
Where a new computerized point-of-sale checkout system is being introduced
Remember the long lines, the old cash register, the human errors in pricing, consumer complaints, checking prices, and the tedious task of amping prices on each item?
This series of black and white bars is known as the useful product code
Each item on the grocer's shelf has its own individual code marked right on the package
And this code is the key to an important way that computers are becoming part of the grocery business
This supermarket in New York has replaced traditional registers with these new point-of-sale computer terminals
Instead of keying the price of items into the terminal, product information contained in the code is entered by passing each item across a special scanner
Each terminal is connected to a mini-computer, which stores information about every product on the shelf
Price of each item and the inventory status are both stored in the computer
When an item is brought across the scanner, the computer recognizes it from the arrangement of lines in the product code
Immediately, the computer recalls the price, and at the same time, the inventory is adjusted to show that one item has been sold
Quickly and efficiently, the central computer has processed an entire grocery order and created a part inventory record
Because of the stored information, the computer can easily do several things that are difficult for cashier to do
For one thing, the computer keeps track of which items are taxable and which are not
For another, the computer knows which products are eligible for food stamps and which are not
When the order is totaled, tax is automatically calculated for only the civil items, and a separate food stamp total is available at the flick of a key
Another advantage of the product code and scanner is that the central processor can keep track of multiple item specials
As Tom Downs of the Spera Univec Corporation explains
Certain items in the supermarket industry are multiple priced, which means that I might buy three of them for an odd amount, 89 cents in this case
And for this green giant item, it's very important customer pay for only what she is purchasing
So when I scan the first item, I will come up with a price on the display of 30 cents
The second item again is 30 cents, and it doesn't matter where in the order this third item appears, the price is now 29 cents
Assuring the customer that she's getting the correct price break on the merchandise that she's buying
But checkout fizzy is just one of the benefits of product scanners
Perhaps even more important is what the computer can do when the information is recorded each time an item is scanned
That information is stored in the central processor, and it can be tabulated in a number of ways
With this information, the store manager can have more control over his operation
Mr. Richard Gardner of Spera Univec shows the simplicity with which information is recalled
By inserting a short key which the manager would possess into the keyboard module
The manager can merely depress a single key and obtain a report of all the sales history
Which has been recorded from all the tunnels in his zone during this current day
In a similar manner, he is able to request and obtain the same information on a weekly basis first of all
At a moment's notice, he can determine that 94% of all the sales today occurred on grocery items and through the grocery department
In a manner, he has on a real-time basis one of the operating tools that he needs to more effectively manage his store
In the same manner, he can determine what the pattern has been on a weekly basis and plan his merchandise stocking accordingly
The supermarket industry is a very labor-intensive industry
There's a great deal of labor intended for a very minimal amount of profit in each store
And in order to keep up with inflation and the other problems in the industry, rising labor ratings like this
It's very important that the productivity increase in the industry as well
And also that the information that the retailer, wholesaler type of operation it is, has a great deal of information where he can make accurate buying decisions
So that he knows what the merchandise, so that he can get the greatest return from his investment dollar
These are just a few of the factors that have caused the MNPC and optical scanning in the supermarket
It is more productive, it's definitely more accurate, proven so
And because every single item, or because items that are bought and are coded, we're able to know what items
If we have an item on the shelf that doesn't sell, we're obviously asking a lot of money to keep an inventory with turn
And so the maximum factor, the optimum effective scanning in this area is to carry those product number ones to be out of stock less
To get the greatest number of turns, or product turns on the merchandise that the supermarket does sell
And the data collected by the scanners can also turn the system into a valuable market research tool
One Californian realized that certain displays can actually slow the sale of a product
For example, a store ran a special on peanut butter and customers bought out all of the items on display
But after the special was over, peanut butter sales dropped by 25% and stayed low for some time
When the sales data gathered by the scanners was analyzed, the manager found that in the long run it would have been better to leave the product at its regular price
So far we've examined the way computers help with the manufacture and distribution of a product
And how a computer can speed product handling in a store
But now we turn to revolutionary ways in which money can be instantly transferred to pay for the purchases in order to keep the whole system moving
Case in point, you're in a supermarket, ever find yourself at the checkout counter and suddenly you realize that the total is more than you have in cash with you
You know, you figured you were spending about $35, but there on the cash register appears $52.35
You know, you take out your wallet, you sneak a quick count, and you're $15 short
Maybe you've got a blank check with you, there's plenty in your checking account at the bank, no such luck
Let's see, maybe they'll take a credit card, no? Well, okay
There's nothing that you can do except start figuring out what items to drop to get $15 off your bill
So let's see, knock off the coffee, $3 roast, $6.50, and the jumbo giant detergent, $3.25, right?
But imagine that at this supermarket or any large store is hooked up to a new computer-based working program called Electronic Fund Transfer System
Then you can forget about carrying a lot of cash with you or even forget about those checks
You merely pull out your plastic-coated membership card, give it to the clerk
Your purchases are electronically recorded and deducted from your checking account at the bank all in a matter of seconds, courtesy of the computer
Perhaps you're thinking that this isn't really that much different from the use of credit cards, except it eliminates some paperwork, credit card bills, or the checks that you write
But the potential of the Electronic Funds Transfer System is really more revolutionary
No more is there a need for payroll checks
Salaries are paid by a direct transfer from your employer's bank account to your bank account
Social security payments and veterans benefits are handled in the same way, eliminating the possibility of lost or stolen checks
Telephone bills, rent, and other periodic charges are paid directly from your account by phone
Several hundred EFTS projects are now underway in the United States
Some theorists foresee a day when we will experience a cashless society
The exchange of goods and services being totally controlled through computer payments, which credit one account and debit another
However, that day, should it ever come, will be a long time evolving
EFTS is not one all-encompassing system, but a variety of money transfer methods which help make financial transactions more efficient
As labor costs escalate, more and more clerical work has been computerized
In 1959, the banking industry recognized that processing paper was becoming an overwhelming part of its operations
The use of magnetic ink on checks and automatic check sorters was an initial attempt to reduce the clerical bottlenecks, which were choking bank efficiency
Today's credit cards also eliminate vast amounts of cash handling and check transactions, but there is still paperwork to be processed
Credit card bills are still paid mainly by check, and the checks must go through the bank clearing process
But EFTS holds the promise of eliminating most of the paperwork
Instead of paper, electronic pulses control withdrawals, transfers, and payments, all through a system of interconnected computers
And the amount of money that can be saved by eliminating paperwork is substantial
Donald Hollis, vice president of the Chase Manhattan Bank, discusses current trends
I think the first thing that will happen is that as labor costs keep going up, and as they're bound to do in this country,
the cost of handling the traditional paper item will continue to rise
That's not going to go away, that's only going to get worse
I mean, there's been a lot of technology applied there, there will be some more technology applied
But nonetheless, the cost of handling a paper item is going to increase
So the gap between handling a paper item and an image is going to grow
Meanwhile, on the technology side, the cost of processing those images is going to come down
So you have two forces driving the relative cost of an electronic versus a paper transaction further apart
Of the many EFT systems now in operation, one of the most common is the money machine, or automated teller
The automated teller machine is an interesting device in that it employs technology that is customer activated
And I'm sure you've seen them advertised in the newspaper and perhaps even used them at your financial institution
The plastic card activates the transaction, you put in your personal identification number,
you put in the dollar amount of the transaction, and you put in the nature of the transaction
Normally a cash withdrawal, but there are other kinds of transfer transactions
One of the unique ways in which that's been used is by American Express at major airports around the country
Where using your American Express card, you can get travelers checks from this machine on short notice
Unlike a credit card transaction where purchases are simply charged for later payment,
this traveler's check machine allows a direct electronic transfer of money
Payment is made directly from your checking account without paperwork, without a later bill
Mike Strauss, American Express Vice President, demonstrates the device
In order to activate the American Express traveler's check machine, a card member will insert into this slot either his green or gold American Express card
There are instructions as to what to do in the next step
It indicates, enter your personal identification code
This is a six, a four digit code, which is provided by American Express, which only the card member and the computer knows
The next step is to key in the amount of traveler's checks required
The next instruction states here that your transaction is now being processed
Each machine is equipped with a telephone which is directly linked to authorizers in Phoenix, American Express Center
In the event that there are any problems in completing the transaction, the card member can pick up the telephone,
talk directly to an authorizer and determine what the problem is
And it can hopefully be rectified so that the transaction can be completed
The machine, which is linked directly to Phoenix Authorization Center, will now authorize the transaction
The card should be coming out momentarily, and there it is
The card has come out, the drawer has opened up, and in the drawer is a receipt to indicate the completion of the transaction
And in this situation, since there were $100 requested, five $20 traveler's checks in this packet
Another innovation that is caught on in pilot areas is the pay by phone service
The customer calls his bank and communicates directly with the computer
He can use the touchtone buttons on his phone as a local terminal, punching in the amount he wishes to pay
Hello, this is George, bank by phone
And the account numbers of his creditors, for instance utility bills or mortgage payments
Bill 516, amount $25.50
Is this correct?
This means an immediate transfer from the bank to the utility company
Saving the customer, check writing, bookkeeping, and postage
For the utility company, it means receiving a single transfer of funds from one bank
Instead of thousands of individual checks
So, EFTS are speedy and efficient, but they give rise to another concern, security
The primary security signature that pertains to plastic cards today is the personal identification number or the personal identification code
Which is either issued by a financial institution or picked by the consumer in concert with the financial institution
That is the equivalent, that's your electronic signature, if you will, that provided you the protections that you previously had on the check
I don't think those are the long-term solutions, I think those are artificial solutions
Those are substitutes for truly knowing who you are
The long-term solutions will either be signature dynamics, which is the use of accelerometers in a pen
To pick up the unique characteristics about the speed and pressure and motion that you go through in writing your signature
Another one is in fingerprint characteristics
And I think electronically we'll be able to read your fingerprint in a way that is not dirty or messy
And doing that then will identify you uniquely as the author of the transaction
The computer has had a tremendous impact on business
Uses range from straightforward clerical functions like payroll preparation
To much more intricate processes such as inventory control and management information systems
But computer-based systems do not run businesses
People still analyze the information and make the choices based on computer records and reports
Computers focus management attention on matters of control and decision-making
How do computers affect the business world?
How does it affect customers, consumers?
One prediction for the long-range effect of computers in business is that top management will be able to control the corporate organization in more detail
And that middle management will become less important
In terms of employees, a company is apt to hire more technicians than clerks
And more highly skilled than unskilled employees in general more skills and education will be required
The effects on consumers will vary
A better run business based on up-to-date information about what customers want can be more responsive producing better products at lower prices
But on the other hand, computers often seem to intrude between the customers and the people who run the system
You've got a problem or a question you may find that you can't contact a single human being who has authority or knowledge about your problem
And finally, large data-based computer systems make it easier to locate information but at the same time they may infringe on the rights of personal privacy
The computer is after all an instrument, a valuable instrument
It's up to informed and concerned people to determine the uses to which it will be put in our society