Part 28

Insurance companies were next in line as computer candidates. Like banking, insurance is believed to have been available to Babylonian merchants thousands of years ago. In those days there were fewer people, and probably claims were fewer; the abacus was the only computer needed to keep pace. But since insurance was introduced on the North American continent, coincidentally in the same state, Pennsylvania, as banking, it has been threatened with drowning in a sea of its own policies.

The computer is ideally suited for doing the work of the insurance business. There is no question today that the computer has taken over from the insurance clerk. One firm installed computers in 1953 and since then has doubled its accounts and tripled dollar volume, without hiring the 250 additional people who normally would have been required for such an increase. Eight outlying offices have been closed, yet service is better and faster, agents’ commissions are paid twice a month instead of only once, and actuarial computations that once took six months are now done in a week.

A computerized world is of course not without its problems. The computer system is so efficient, in fact, that the same outcry is going up from labor as was heard in the days of the first industrial revolution. It has been said with some truth that automation upgrades jobs, and not the workers themselves. The change-over from quill pen to pushbutton console will take some time and cause some pain, but in the end our gain will be as great a stride as we have made since the days of the introduction of the first factories with their more efficient production methods. Surely the business worker already has been freed from the tedium of adding columns of figures and much filing, and given pleasanter work in exchange.

The Shopper’s Friend

After banking and insurance, which businesses yield to the lure of high-speed automatic data-processing? Department stores are dabbling, and supermarkets too are beginning to use the computer. The A & P stores are studying such a system, as is the Liggett Drug Company. At first the computer looked attractive as an inventory and ordering tool; now it is headed in the direction of automating the actual shopping operation.

In Paris, a retail grocer made merchandising history by displaying more than 3,000 different items in a floor space of only 230 square feet. The trick is in a punched-card system that automatically registers and prices any item the buyer selects. At the check stand the card is run through a computer which figures the bill and orders the groceries, which are automatically selected from the warehouse and delivered in a cart to the purchaser at the door!

A similar automatic supermart system is being pushed by Solartron—John Brown, Ltd., in England. The computerized scheme works much like the French one. The shopper inserts a card in the slot beside the item she wants and a punch marks it in alpha-numeric code for item and price. If more than one item is desired the card is reinserted. With each punch, the machine slices off a bit of the edge of the card so that it slides deeper into the slot next time. At the cashier’s station, the card is placed in a computer. Fifteen seconds after she has paid for them, the shopper is delivered her groceries. Besides the saving in time for the shopper, there is a saving for the grocer in floor space and also the elimination of the loss through shoplifting. About the only thing that might seem to be against the new system is the psychology of the large display, which motivation researchers tell us stimulates volume buying.

With this factor in mind, an official of Thompson Ramo Wooldridge, Inc., has suggested retaining the large stocks on display, but coding them with fluorescent paint of certain wavelengths to correspond to price. The shopper fills her cart even as in the conventional store, but at the mechanized checkstand an electronic eye on the computer scans and prices the items while they are being automatically packaged. The doubting Thomases say of this system that the packager will probably put the eggs on the bottom, along with the tomatoes and ice cream!

The advertising journal Commercial Art comments sadly on this accepted fact of automation in the market place:

The checkout clerk is doomed, that last survivor of human warmth in most of today’s supermarkets. His eventual executioner will be the electronic computer, of course. Pilot systems using computers for automatic checkouts are already drawing a bead on the jovial little man in the green smock. Eventually even he will disappear from the faceless canyons of our sleek supermarkets.

But the writer finds a ray of hope in the conclusion of his editorial.

Skilfully designed packages can strike an emotional chord in the consumer, can create strong brand preferences even in the absence of product differences. Supermarkets can give the appearance of being a friendly, “human” place to shop even if the only humans visible are the customers.

To make more complete the rout of conventional merchandising by the computer-oriented system is the plan to automate even the trading stamp. American Premium Systems, Inc., a Texas firm, is developing a plan in which the customer receives a coded plastic card instead of a stamp book. When he makes a purchase, a card is punched with the number of credits he has earned. By means of a centralized computer, an IBM 1401 in this instance, records are kept continuously, and when the customer has accrued 1,500 points he receives a premium automatically. The obvious advantage here is to the customer, who is spared the messy task of licking thousands of evil-tasting multicolored stamps, and the danger of losing the book before redemption. But the storekeeper profits too. He does not risk the loss or theft of stamps, nor does he buy stamps for people who are not going to save them. The complete system will call for an IBM 7074 and represents an outlay of about $3 million to service some 6 million customer accounts.

Before leaving the area of merchandising, it might be well to mention inventory management in general and the effect of the computer upon it. Applying what is known as “conceptual order analysis,” one marketer who is using computers in his business talks of “warehousing without bricks or mortar.” With a confidence born of actual testing, his firm expects one day to have no inventory except that on his production lines or in transit to a customer. This revolutionary idea is based on practically instantaneous inventorying, production ordering, and delivery scheduling. While the warehouse without bricks or mortar is not yet a fact, research discloses many manufacturers who have already cut their standing inventories, from small amounts to as much as 50 per cent, while maintaining customer service levels. This was done using what by now are “standard” electronic information-handling methods. The implication here is of the computer not merely as a data-handler, but as a business organizer and planner as well.

Electronic Ticker Tape

The stock market lends itself to the use of high-speed data-processing, even though a Wall Street man achieved notoriety some time back as the first embezzler to use computer techniques. Admittedly it is harder to track down the hand in the till when it pushes buttons and leaves no telltale fingerprints or handwriting, but computerization continues despite this possible drawback. The same firm has added digital computers to one of its offices for faster service. The American Stock Exchange installed $3 million worth of new processing equipment to provide instantaneous automatic reports on open, high, low, close, bid, asked, and volume-to-the-moment figures.

International Business Machines Corp.

On the floor of the New York Stock Exchange, representatives of Thomson & McKinnon and IBM discuss a model of the computing system which will speed transactions from the offices of the brokerage houses in 41 cities to the New York and American stock exchanges. ]

The stock market’s need for the computer lies in the usual two factors: tremendous paperwork and increasing pressure for speed. Trading of stock amounts to about three-fourths of a billion shares in a year, and occasionally 3 million shares a day change hands. A major brokerage house has confirmations to handle on thousands of trades, dividends to credit to nearly half a million active accounts, and security position and cash balances to compute for each customer. The increasing amount of business, plus the demand for more speed and accuracy, make the computer the only solution.

Simply reporting the results of the day’s marketing in the newspapers is a monumental task. The Associated Press is installing a system based on an IBM 1620 computer, in which ticker information will also be given in the computer for sorting, comparison, tabulation, and storage. At the correct time, the machine will print out the format for publication in the press at the rate of 4,500 words a minute. With a memory of 20 million characters and a capacity for 600,000 logical decisions each minute, the computer keeps up with stock information practically as fast as it is received, and even a late ticker will not mean a missed newspaper deadline. Associated Press expects to be able to transmit the stock-market results to its papers within fifteen seconds after the ticker closes. Not just in the United States but in Japan as well, the computer is invading the stock market. The abacus is out, and now the exchange in Tokyo is using an advanced UNIVAC solid-state computer to process transactions.

Versatile Executive

It is this high-volume capacity, speed, and accuracy that makes the computer a welcome new employee in most business operations. An example is the Johnson’s Wax system linking its facilities for rapid management reaction to changing conditions. Headquarters is linked to twenty three warehouses and sales offices, and today’s work is based on yesterday’s inventory instead of last month’s.

Computers schedule hotel reservations, and handle accounts payable and receivable for the hotel industry. Auto-parking, now a $500 million a year business, leans ever more heavily on computers for ticket-issuing, car-counting, traffic direction, charge-figuring, and collection. The freeway too has its computers, though there have been minor setbacks like that on the New Jersey Turnpike where an automatic toll-card dispenser was mistaken by slow-thinking people for a collector and its working was jammed with coins and battered by abuse when no change was forthcoming! Man will take some educating as the machine finds wider employment.

The computer has been seen in the publishing business primarily as a tool for searching lists and printing addresses. Now it is beginning to take over more important duties such as typesetting. The new daily Arizona Journal is the first newspaper to make use of this technique.

From use in other businesses, the computer has grown to fostering a business of its own. An example is in the production of payroll checks by specialty firms, and safeguarding against bad checks with such services as Telecredit, a computer-run system that spots bad checks upon interrogation from its member stores.

In Waterbury, Connecticut, a computer helps home-buyers and realtors by listing all available homes in the area. Three reports are produced: a total listing, a listing by style, and a listing by price. Bell Telephone in New York uses a computer system to deliver its 9 million directories to subscribers in the city and suburbs. The rapid system permits changing of delivery orders even while the books are at the printers. A computer method of making sausage recipes is now available to all packers. Remington Rand developed this application at its UNIVAC Center on the campus of Southern Methodist University.

Communication

Communication is a vital part of all business, and the digital computer finds another application here. A technique known as adaptive control was recently presented at a symposium by scientists from IBM. Special-purpose computers integrated into communication networks would make possible the “time-sharing” of channels and cut costs per message sharply. Another digital computer, an inexpensive “decision threshold” device, is being pushed as a means of reducing errors in the transmission of messages. These logical uses of the computer were presaged in the 30’s when Shannon wrote his pioneering circuit-logic paper, and in the late 40’s with his work on information theory.