PLANNING FOR ELECTRONIC DA'FA PROCESSING IN THIS HOTEL Thus“ {or H» Dogma of M. A. MICHEGAN STATE UNIVERSITY Dan W. Darrow 3961 _I9 IIIEIIII IIIIIIIIIIII WWII! PLACE IN RETURN BOX to remove thIs chockout from your record. 0 AVOID FINES return on or baton dds due. ' DATE DUE DATE DUE DATE DUE 7.3! a" 3., \(J z . w. -.. 1—..- . u-..~- ‘. z a ABSTRACT PLANNING FOE ELECTRONIC DATA PROCESSING IN THE HOTEL by Den‘w. Darrow The purpose of this study is to present the steps a hotelman should go through when considering the feasibility of utilizing electronic data processing equipment (EDP) as a possible management tool. EDP systems analysis is applied directly to the communication of information flow network. The ultimate goal is to place in preper perspective the poten- tialities and limitations of EDP in the hotel. This report is given not necessarily as a singular possible approach to a solution for the inforb nation volumes and the "profit squeeze." but as an attempt to dispel the fears a hotelman may have that EDP is too complex or too expensive to consider. To those who have transcended this psychological resistance, a systematic caution is necessary in planning for EDP. The collection of data for this study came from.several sources. Of primary importance was inforlation gained by interviews with repre- sentatives of two leading EDP manufacturers. This same information was verified by a new but well regarded EDP consulting firm who also provided a portion of the statistical data, equipment costs, and conceptual EDP approaches. Eoual emphasis with the information gained above must be given to the information supplied by the Research Director of the Sheraton Hotel Corporation, Boston, Massachusetts. The systems analysis and overall feasibility information was gathered from numerous current publications, government reports, and Dan W. Darrow articles from trade publications available in the files of the Michigan State‘University Library and the Baker Library at Harvard Business School, Cambridge, Massachusetts. Two additional non-directive interviews conducted by the writer . were of considerable help in providing an opportunity for observation of actual equipment operations: These talks were with the Auditor of the Palmer House Hotel. Chicago, Illinois, and with the Director of EDP for Pan American world Airways, Guided Missiles Range Division at Patrick Air Force Base, Florida. As a result of the collection of data and interviews conducted, three distinct phases appear relevant in the planning for EDP. Phase One involves the important selection of a hotel oriented EDP study team, along with the engagement of a qualified EDP consultant to assist in the planning. Such a group, carefully guided by the consultant, can deal with the specific areas susceptible to EDP and can isolate the present and future hotel goals and objectives, and examine the communication flow systems. Each step of the evaluation is an attempt to determine sources of information, critical data, the time and cost required to produce the results. Phase Two. The completion of this examination phase of the feasi- bility study means that the various EDP manufacturers are in a position to apply their specific "hardware" to the communications model to answer the desired information handling systems. Phase Three. The final step is to consider the financial aspects of each equipment approach by comparing costs of the present manual operation with the expenditure necessary to operate the EDP system. The resulting economies may be appreciable, marginal. or prohibitive. However, it is Dan V. Darrow only through a combined effort on the part of the hotelman, consultant and manufacturer that assurance can be given that the numerous EDP pit- falls will be avoided and that, if EDP equipment is selected, it will be the answer the hotelman needs in view of his future objectives and finan- cial limitations. Regardless of the outcome of the feasibility study. the decision. should not be to forego EDP completely. Rewards may be gained by a continual systems flow examination. The continued and necessary standardisation of operation may enable the application of EDP at a later date when other factors (i.e.. equipment cost, communications volume) are sufficiently brought in line. PLANNING FOR ELECTRONIC BETA PROCESSING IN TIE HOTEL fifiwh} DAN'W.&DARRON .A THESIS Submitted to Michigan State University in partial fulfillment of the requirements for the degree of MASTER OF ARTS Department of Hotel, Restaurant, and Institutional Management 1961 3979&5’ Cay/5W4 11 When the history of our age is written, I think it will record three profoundly important technological developments: Nuclear energy, which tremendously increases the amount of energy to do the world's work; Automation, which greatly increases man's ability to use tools; And computers, which multiply man's ability to do mental work. Some of our engineers believe that of these three, the computer will bring the greatest benefit to man. Ralph J. Cordiner (1956) TABLE OF CCNTENTS CHAPTER I. INTRODUCTION................... Backgroundlnformation............ Purpose of the Study . . . . . . . . . . . . . ScopeoftheProblem............. ReviewofLiterature............. Government and Business Applications of EDP EDP Application to the Hotel Industry . . II. METHODOLOGY.. . ............... Gathering Data . . . . . . . . . . . . . . . . Method of Presentation . . . . . . . . . . . . Delimitations . . . . . . . . . . . . . . . . Definition of Electronic Data Processing . . . Definition of Terms . . . . . . . . . . . . . III. EXAMINATIONOFTHEHOI‘EL............. Initial Step of Evaluation . . . . . . . . . . Clerical and Decision Making Requirements Consultant and Advisory Group Formation . Establish Employee Relations . . . . . . . Systems Analysis for Hotels . . . . . . . Information volumes . .N. . . . . . . . . Importance of Information Gathered . . . . Selection of Job Classifications Susceptible toEDP................. PAGE ‘OQUIUU 12 12 13 1h 16 18 26 26 28 28 31 #5 #6 CHAPTER Isolation of Inputs . . . . sumneeeeeeeeeeoe IV. EQUIHMENT JUSTIFICATION . . . . . . Quantity of Information Necessary . . . . . . Generation of Operational Data . . . . . . . . Processing of Data . . . . . Presentation of Data and Its Additional Equipment . . . . Lease vs Purchase and Use of Center . . . . . . . . . . Equipment Obsolescence . . One-time Costs . . . . . . Recurring Costs . . . . . . Return on Investment . . . Intangible Savings . . . . Hidden Economic Pitfalls . O O O O O O 0 0 0 Response . . . . O O O O O O O 0 0 Computer Service Hotel Payroll and Its Relation to EDP . . . . awry e e e e e e e e e e e e V. SUMMARY'AND CONCLUSIONS e e e e e e BIBLIWRAPHY e e e e e e e e e e e e e e e APPENDIX.A. Computer System Operation . . APPENDIX B. Pour Electronic Data Processing Equipment Applications . . . . . . . . O O O O O O O O 0 iv PAGE h8 55 56 57 59 62 6h 66 67 69 71 72 7h 76 78 79 83 88 9b LIST OF TABLES TABLE PAGE I. Typical Job Classifications Affected by EDP . . . . . . . . &7 II. Potential Payroll Savings by Department . . . . . . . . . . 119 III. Inputs - Food Cover System . . . . . . . . . . . . . . . . . 51 1v. EssentialInputsbySystems................ 55 V. Operational Personnel for an EDP System . . . . . . . . . . 70 VI. Gross Hours and Earnings of Production‘florkers . . . . . . . 77 VII. Comparison of Three Computer Capabilities . . . . . . . . . 99 FIGURE I. II. III. IV. V. Room System . . . Guest Cover System LIST OF FIGURES Purveyor Food Control System . . . . . . . . ”Cetronic Calputer syst.‘ e e e e e e e e e Suple Run for Posting Daily Room Charges by Punchcard System vi PAGE 33 35 a 97 CHAPTER I INTRODUCTION Background Information Historically. the hotel's answer to the rise of fixed and variable costs has been to raise the price of the room 1 in anticipation of addi- tional revenue and ultmmately profit. Since the economy has been basically an inflationary one for the past decade. 2 thg_hotel has been able to «w... wnk . #4 realise ‘,2£9§l§wfif_th' expense of the guest with very little tangib1e .- 'W the page; (39¢! and service). Times‘are changing and whilegthose,operet1no QXDGBICFhEEEEP‘PP! ‘9' 1‘?991!.?9‘1!???fi939'92'r 3 occupancy rates haveagradually declined. I The likelihood of the hotel meeting with success by continuing its present 9’1EPTFP1'1PS method of solving the shrinking profit situation is an extremely dim one. Where, then. must the hotelman turn in the coming sixties to realise a profit? All present factors indicate that the hotel managers will be faced.with the challenge of a revelation growth with more discretionary income to spend 1Borwath and Borwath,‘flgtgl‘nggltigng‘ig‘zgjg (New York: Borwath and Horwath. 1960). pp. 22-23. chCamn-Erickson, m m 91 W (New York: )1ch- Erickson, Inc... 1960). p. 7. 3Harris, Kerr and Poster. m in 1“ 321.21 W (New York: Harris. Kerr. Poster and Company, 1953), p. z. ‘Eorwath, m. m. 6 a continued increase in wages on travel; 5 a rise in consumer credit; and operating costs as well as a possible periodic encounter with re- cessions 7 and an increase in governmental legislation. Hotel accounting textbooks look dimly on the policy of cutting rates in an effort to attract more guests and generate more dollar volume. 8 The method of expanding hotel holdings by buying old ones at a “bargain", renovating them and expecting increased business, is becoming less popular since there are fewer hotels today that qualify under this category of "good buys.” Adding to existing hotels or building new ones is rapidly becoming a com- plex financial proposition due to the high interest and principal charges, plus an even higher construction cost -- a practice for the very rich or very large hotel chain. 9 WW! The relief necessary seems to be not so much in the gradual in» crease or decrease of rates, hoping for an expansion of sales to be eaten up by a faster growing rate of costs, but rather in the consideration of the new, more scientific tools of management. These must be the manage- ment tools that point to a sharpening of goals and definition of purpose W‘nflck.mg no Me. Do 18o 6John A. Postley, Simian m m (1m York: MoGraw-Hill Book Company. Inc., 1960). p. 15. 7W'mckung no meg pa 11o 3:. a. Horwath and Louis Toth, gm; W (New York: 301.“ P”‘. COeg 1956), P. ”So 9Carl Rieser. ”Sheraton vs Hilton -- Playing Checkers with 60,000 Rooms,”‘£g;§ggg, Vol. LXII, No. 1 (January, 1961). through efficiencies and economies of operations that will provide re- ductions to existing expenditures. This may mean doing away with daily stereotyped.methods of doing business; it may mean diverting emphasis of control or altering long and short range goals; it may mean implementing plans for electronic and electromechanical efficiencies heretofore thought to be too extreme. Nevertheless. each effort must be steed at a systematic, proven ”tightening of the belt” to provide the desired spread between revenue and expense, as well as to generate an improved.atmosphere for customer service with its by-promact of increased patronage (sales). Purpose of Study One such management tool is the subject of this study: Electronic Data Processing (EDP). This discussion points out the various data pro- cessing considerations that any hotelman should evaluate if he is to realise the primary goals of innkeeping today. Those goals are to: (1) increase profit, (2) decrease costs, and (3) improve customer service, with such flexibility that addustments can be made accurately to any future social or economic conditions. More specifically. this report is intended to generate the interest and the necessary thought stimuli a manager or owner>mmst experience in order to ensure proper evaluation of all facts prior to any purchase of EDP equipment. Scope of the Problem 5 The scope of the problem is to place in proper perspective the potentialities and limitations of EDP in the hotel industry. It is further intended to dispel the fears a hotelman may have in considering EDP for his operation. as well as an attempt to prevent a poor EDP application as a result of insufficient planning. More and.more articles about the numerous new methods of doing things through the use of electromechanical devices appear in various trade publications. loan more noticeable is the increased availability of commercial data processing equipment for business applications aimed at providing a possible solution to handling the increased volume of information being generated by our expanding economy. 10 what is the application of EDP to the hotel world? Is it worth looking into? we... does an interested hotelman go first to find out about data processing equipment? Conflicting viewpoints exist between the manufacturers of data processing equipment and the so-called data processing experts regarding applications of EDP equipment. On the one hand. the manufacturer presents facts and figures that will attest to the superbhuman abilities of their automatic giants to solve the average businessman's problems. On the other hand, textbooks and dissertations from.the experts say that. although manufacturers' claims cannot be disputed as to the abilities of this equip- ment to handle data quickly and more accurately than the human, caution must be shown with regard to the mamfacturers' claims as to the m with mm. Fabulous Fifteen Years Ahead,” m 1m, 1m. Eiplinger Magazine (January, 1961). p. 8. which this equipment can be mums and implemented. 11 So often one has the impression that all that is necessary is to plug the machine into an electrical outlet and the machine will begin to spout forth volumes of critical data. Such is not the case. Electronic data processing systems should be considered by every businessman today and he should not allow the common psychological fear of new business concepts to prevent him from this consideration. However, it is only through systematic analysis and preplanning of all phases of data processing (administrative, economic. and social) that a hotel manager may realise, or hope to realise, any type of reward or improvuent of his competitive position in the industry and not hinder his primary responsibility to provide service acceptable to the guest. Review of Literature The books. p-phlets. and articles read and the interviews cen- chcted in an att-pt to prepare for this discussion have, for the most part, dealt with I! planning in a general fashion or have applied data processing (N) preplanning to the business situations of manufacturing, insurance, or governmental organisations. Several applications which may have a close association with the hotel problems are mentioned on pages 8, 9, and 10. . The intention of the writer is not to indicate that every possible written article has been covered or that these applications 11P0ltlcy, no Meg 9. 19’s are the only ones in existence. The intention is to show representative emanles of EDP at work in and around hotels. WW One of the largest users of EDP has also provided considerable funds for the development of its principles. The U. 8. Government, as discussed by John Postley in his book, m m m, has been in the computer business for twuty years beginning with EW's first practical application to the population count in the 1890 census. The Department of Agriculture, the Tresury Department, and several agencies involved in national defense have becosm active in the computer field. 12 Equipment is now in use by the government in Providence, R. I. , that practically eliminates the human handling of letters in the local Post Office. Letters are separated, cancelled, sorted by destination, and transported to desti- nation bins electrically. 1’ Postley mrther indicates that there will be, in the near future, such far-reaching HIP applications as the handling of air traffic by means of a centralised control network, and a computer which will abstract and translate foreign languages. These are but two of the unlimited horisons available to man in solving the endless conini- “ In the immediate business world, Postley states cations challenges. that the advent of computers and the development of machines capable of reading “tot-1.1 printed in magnetic ' ink has mono banking institution. 1zPostley, n. 31.1.. p. 221. 131:... item in the m m. Friday, October 21, 1960. p. 23. I‘Postley, a. m” p. 212, 236. to meet their problems of increased paperwork. Bankers feel that the pre- sent. annual ten billion check volume will increase to fourteen billion by 1960 and to twenty billion in 1970. 15 Various co-ercial retail outlets have takmi great strides in per- fecting methods of handling inventories through the use of prepunched ticket stubs which carry prescribed information and are attached to an. item as it is received. The stubs are detached at various points in the process of a sale and are accumlated daily to be handled electromechani- cally. The'overall benefits realised lie in tighter control of the items sold, ease of reordering items, less capital invested in inventory, and less duplication of administrative effort by employees which allows more time for customer attention. 16 Several large retail outlets, according to an article appearing in M I“, feel that the optical scanner (now in the .bryonie stage) will be the answer to the growing volumes of customer charges, increased work in the preparation of statements, and the growing need for better inventory controls. The perfection of the optical scanner would allow the translation of raw data (sales slips) into computer language without the necessity of translating the written word into punched cards. 17 15mg. . p. 208.. “Electronic Data Processing for Retailers (New York: Retail Research Institute, National Retail Merchants Association, 1960) 17msiness Week, uni-on 18, 1960, p. 85. me of the most publicised uses of EDP in the commercial field today is the airline automatic reservations system (RESERVISOR). According to a study by the o. s. norm of Labor Statistics, 18 this system provides an up-to-date inventory of airline seat reservations by use of a central memory drum. Virtually all of the leading airlines today use RESERVISOR. Its implementation was brought on by the advent of Jet aircraft and the growth of passenger volume which has caused an ever-increasing volume of paperwork and clerical costs. Sufficient time has not yet elapsed to indi- cate whether the system has reduced or curtailed the increased administra- tive workload. The Harem: of Labor Statistics, in a study of automatic technology, shows how one large insurance company not with financial success as a result of introducing an electronic computer into its daily procedures. Here again, the success seems to be proportional to the sise of the organisation as the study shows the insurance company employs about 1h,ooo ”.91.. 19 Additional pertinent information dealing with EDP planning guide- posts can be found in the actual experiences encountered by a west coast airplane mmiufacturing fin. R. G. Canning in his book, W M mm mm mm. 01'“ factual information on the com- plete implementation of data processing with specific duties and requirements 18U. S. Department of Labor, Bureau of Labor Statistics, W 21mm: AMMRIBMWW System, Report No. 137 Washington: Government Printing Office, July, 1958). 19D. S. Department of Labor, Bureau of Labor Statistics, W 11 Ms W W .91 as W Show 13 1 Large Insurance Company, Report No. 2 Washington: Government Printing Office, October, 1955). 20 to be performed by all members of the firm. Similar information is available in George Kosmetsky's book entitled, W W N W 92m}. Nov York. Hoax-av 3111 00.. 1956. W Recently, numerous articles appearing in hotel publications have indicated an increased awareness of the potential attributes of EDP to the hotel. C. A. Horrworth 21 states that the hotel inchstry is beginning to experience the benefits of mitemation and he feels one of the most wlnerable spots for application is the accounting function. He suggests other possible areas in which studies might be conducted; such as, an automated kitchen that would accomplish many of the preparation and service functions auto- matically, and coin machines that would provide such services as suit pressing. He further stresses the need for adequate research to determine the best approach to Intonation and its economic aspects. Ernest Henderson, 22 President of Sheraton Corporation of America, indicates his company is utilising me to handle guest reservations quickly and efficiently by use of their ”RESERVATRGI" unit. This electronic memory syst- is installed “Richard G. Canning. mm W m (Washington, D. C.: University Press of Vashington D. C., 1956). 21Charles A. Horrworth, ”Research -- The Key to Successful Operation in the Golden Sixties.” The Small E2311 and W W Quarterly, Vol. 1, No. 2, (August 1960). p. 10. zzErnest Henderson, ”The Sheraton Story Today,” An address to the National Association of Investment Clubs on October 28, 1960 at the Sheraton-Cadillac Hotel, Detroit, Michigan. 10 throughout the chain to answer the growing .phasis placed on inediate referral acconodations now felt to be 25% of Sheraton's reservation busi- ness. 23 The Palmer House in Chicago has in operation an IBM pu‘nchcard syst- which handles autonatically the hotel's general ledger, accounts receivable and payable, trial balance, and collection letters. The equip- , nent is also used, for such eaployee records as time cards, payroll, with- holding. tax, social security and bond-a-nonth plan. 2‘ Humorous articles perused by this writer dealt.“ with the autonation of a particular hotel functional service and not with the handling of infornation electronically. An article entitled, ”Electronics Plays Key Role . . .“, written by Jooeph J. Hassonics, reveals the accumlation of nest of the electrical equipnent available to the hotelman today in the San Francisco Jack Tar Hotel. The particular hotel discussed has an electri- cal roon availability display board which indicates the occupancy status of any given roan. It has a closed circuit television check-in screen which obviates the necessity of the guest leaving his car at check-in and check- out time. Additional equipnent includes an electrical laid call and aessage light, a crystal-controlled radio receiver and warning device, direct dial telephones, and self-operating passenger elevators. 25 23Hieser, m. m. to ”WAHCO Horas Aid Hotel Accounting,” m m (January, 1960) De 5e . 25Joseph J. Hassonics, ”Electronics Plays Key Role as Jack Tar (but 1:: 'FriIcO." mm W. (Hey 9. 1960) pp. 1-2- 11 The Statler Foundation provided a $70,000 grant to the School of Hotel Administration of Cornell University, Ithaca, N. Y. , to be used for research and study into possible mp application to hotel record keeping. 2‘ H. C. Harbor of the Zookendorf Corporation feels that if more than a token appreciation of ms is to be realised, new concepts must be con- sidered in handling information in the hotel to solve management's problems of ”Quantity, Price, and Availability” of rooms. He feels that management must have access to numerous resources possibly available through DP and must learn to utilize them successfully through techniques such as operations research. Ferber also states one fact that may be the key reason for the lack of extensive studies of DP application in the hotel industry; that is, it costs money, requires trained people, and takes time. 27 Adams Associates feels potential application has more to do with labor costs and whether a company can Justly say it has a standardized operation. 28 Government and industry are finding new uses for ma equipment, especially in the relatively new area of internal com-inication and infor- mation flow. Although limited, the hotel is exhibiting an increased aware- ness of the potentialities of DP for the industry. This possibly supports, then, an attupt to incorporate in written form the capabilities of DP as they may apply to the hotel communication flow systems. 26"How‘s Business: A Monthly Analysis of Business Trends Affecting Hotels,” m am My (August, 1960) p. 12. ' z7Robert c. Perber, "Space Age lnnkeeping,“ mg. m (April 25. 1959) p. 1.12. 28"Layman's Guide to Computers,” W [:13 (September 10. 196°): Po 1“. CHAPTER II WWW? Hethods of Gathering Data The collection of data for this study came from several sources. Of primary importance was information gained by interviews with represen- tatives of two leading me manufacturers -- Minneapolis-Honeywell Ilectronic Data Processing Division and International Business Iachines Corporation. The results of these discussions appear in numerous points in Chapters III and IV, especially where specific hotel application of equipment attributes and capabilities are discussed. This same information was verified by a new but well regarded EDP consulting firm, Adams Associates, located in Maynard, Massachusetts. A muber of this firm also provided a portion of the statistical data, equipment costs, and conceptual approaches that appear in Chapter IV and Appendix B. lqual emphasis with the information gained above mist be given to the information supplied by the Research Director of the Sheraton Hotel Corporation, Boston, Hassachusetts. Much of the detail flow analysis and procedure presented in Chapter III and the Justification for DP equipment in Chapter IV was gathered as a result of the close working relationship the writer was fortunate to share throughout the preliminary DP examination of this corporatiom. However, the views expressed herein and the approaches taken are not necessarily supported by this corporation nor its employees. The systcs analysis and overall feasibility information was gathered from numerous current publications; such as, Stanford L. Optner's 5mm 13 m and John A. Postley's W Hill m. sovernment reports and articles fr- trade publications available in the files of the Michigan State University Library and the Baker Library at Harvard Business School, Cambridge, Massachusetts. Two additional non-directive interviews conducted by the writer were of considerable help. Bach provided an opportunity for observation of actual equipment operation and was beneficial in the isolation of specific applications to the hotel problems in Chapters III and IV. These talks were with the auditor of the Palmer House Hotel, Chicago, Illinois, and with the Manager of DP for Pan American World Airways, Inc. , Guided Missiles Range Division at Patrick Air Force Base, Atlantic Missile Test Center, Florida. In addition to the six month's DP work experience with Sheraton Hotel Corporation, a thirty-five hour course on programing was completed during October, 1960. This course provided a working knowledge of mada- mental computer operations and appears in Appendix A. The data was gathered between June and December of 1960. Method or Presentation . The approach taken in the discussion of the data is to first present in Chapter III the specific steps necessary in the internal analysis of a hotel contemplating m. This involves an early evaluation of what the hotel goals are, whether there is a need for an m study, where problem areas may exist. The next step lies in an evaluation of the information flow through the hotel, how it might possibly be improved, and what might be 1h gained from it. Eventually a picture is formed which indicates how the hotel functions and what is the per-unit cost of operation. Chapter IV presents the next segment of analysis which compares this operation image with what is-actually needed. The new operation image is then in a audition to be applied to specific ID syst-s through the guidance of several equipment manufacturers or me consultants. unipment Justification and the various pitfalls surrounding hidden expenditures are discussed in Chapter IV and Appendix B. The decision to proceed or not proceed with DP is then up to management. Additional DP intonation is presented in a Definition of Terms (p. 13) and in the'Appendices, which may ‘help the reader to better understand how a computer operates and how EDP may possibly apply to a hotel situation. Delimitations Two distinct segments present themselves in any complete application of DP to a business operation; one involves the pro-planning or feasibility study necessary to properly evaluate the business situation for possible utilisation of DP. This should occur prior to any commitment for the pur- chaseof hardware. The second segment entails the planning for and the actual installation of the DP equipment after ‘a purchase contract is nego- tiated. This second segmmit requires a detailed examination of the effects DP may have on specific internal hotel areas such as the physical facilities available to house the equipment. It must also consider the social and psychological impact or may have on employee, guest, and competitor. It must deteuine the necessary course of action that will insure the cooperation 15 of all employees during the transition to DP and should prepare the indi- vidual employee for changes in his daily work routines. It must formalise its procedure for the training and upgrading of these people. It should further consider what approach must be taken to psychologically prepare the guest in order to insure his acceptance of EDP as a better way of Aservice, if the guest is affected. Inch of these two segments (feasibility study or equipment implemen- tation) provides ample opportunity for thesis examination. This study is concerned with the first. Several other areas of interest are associated with this discussion. The scope of this study will not allow any more than a mention of the area concepts. These include: 1. Cybernetics. Atconparative study between the mind and its thinking processes with that of an electronic or electro- mechanical memory system. 2. Operations Research. “The scientific approach to and analysis of business problems, aimed at providing management with information for obtaining most effective overall operation of the business.” 29 3. Data Processing Communications and.Telenetering Facilities. This involves the intricate economic, physical, and legal ”Robert Porous». W n W Balsam (Greenwich. Conn.: Management Publishing Corp., 1956). p. 396. 16 complexities of transmission of data between two points sepa- rated by large distances. h. Electronic‘ZIQQQIg Control (Industrial). This automatic system affords new horisons for industrial firms engaged in systematic, routine processing or handling of raw material or liquid pro- ducts. The systems operate automatically through the use of various electromechanical controls. The devices require limited human intervention. 5. Analogue Computers. An electronic calculating machine that uses physical quantities, such as lengths, voltages, or shaft revo- lutions to represent numerical variables that occur in a problem. 6. Special Purpose Digital Computers. The special purpose computer processes specific applications or similar problems. The basic program is built into the hardware and variations are limited. Definition of llectronic Data Processing The rapid growth of digital computers and associated equipment in the business world has caused some difficulty in.providing definitions for equipment concepts involved in the various forms of data processing. Automation has several definitions, depending on the author and its business application. Generally, it is considered to be ”the use of automatic techniques for an integrated.material handling and processing operation.” 3° ”niches-d o. Cannino. mm: Data We is Mum and W (New York: John viiey a Sons, Inc., 1956). p. 6. 17 Data Processing (DP) 31 involves any process whereby predetermined informtion is handled in a prescribed flow and usually involves any type of media or equipment from verbal to electronic. Integrated Data Processing (IDP) 32 is the handling of information in a comon language form by the use of any combination of automatic or semi-automatic (electromechnical) equipment. The addition of the word ”electronic“ to any of these words presents somewhat of a problem since, to be completely consistent with the term itself, there must be an electronic signal or pulse involved and the transmission of information must be handled by these pulses to qualify as Hlectronic Data Processing Equipment. 33 How then is a group of equipment correctly described which has a central coquter (electronic) in which the inlet and output data is handled by means of a typewriter (mechanical) or a card reader (electromechanical)? The answer, in some instances, lies in the use of the word "systems.” _ The addition of this word tends to eliminate the disparity arising when this combination of electromechanical end elec- tronic driven equipment is matched up in a ”package.” The only question left is one that is not fully solved in data processing circles; this is the exact difference between an Automatic Data Processing System (AN) and an Electronic Data Processing System. Since this question is somewhat 3J'See Definition of Terms, p. 18. 32Daniel D. McCraken, Harold Weiss, and Tsai-Hwa Lee, W W (New York: John Wiley and Sons, Inc., 1960). P. 6. ”his W Dr War. (New York: Haskins and Sells, 1955) 9. 113a 18 academic, the reader may assume that where the term ”Electronic Data Pro- cessing Systems” appears, it includes the use of ADP‘and is intended to include not only computers systems but also punchcard systems and the peripheral equipment involved. The abbreviation used will be EDP. The combination of electronic, magnetic, and/or mechanical components which makes up an DP system is often referred to as the system ”hardware.” Definition of Terms 3" The technical terms listed in this section are those most fre- quently encountered in dealing with electronic data processing. The definitions are brief and designed primarily to identify the terms according to general usage, rather than to provide a technical discussion of meanings and applications. A ACCESS TIME. The time lag between the instant at which information is located in or called for from the union? UNIT and the instant at which it is made available for processing; or the time required to return information te the MIMOHY UNIT. ACGIMULATOH. A unit or registerlin a CGIPUTHH in which numbers are totaled, or the results of arithmetical or logical operations are 31‘ U. S. Department of Labor, Bureau of hploynent Security, 9933: Pam n W: 2333 m m. (Washinston: Government Printing Office. January. 1959); general mm ham]. m 1.2“ nets W m Ins Genital Banal he m m. International Business Machines Corp. , 1959. 19 first produced. ADDRESS. In digital computer systems, a label, number, or other set of characters identifying a location where intonation is stored, or a machine unit to be used. ANALOG COMPUTER. An electronic calculating machine that uses physical quantities, such as lengths, voltages, or shaft revolutions to represent numerical variables that occur in a problem. AUTGIATIC DATA PROCESSIm srsrm. An integrated system utilising electronic and electromechanical equipment to process mass data or to solve mathematical problems. AUTGIATIC PMRAMMING. A technique in certain computing systems, in which the COMPUTER itself transforms a program into a form most efficient for the WEB to carry out. AUTGIATION. The technique or process of making machines or devices self-governing and mlly mitaatic. The tum is popularly used to include making machines or devices partially or fully automatic. 2 BINARY CODE. A system of notation consisting of 1's and 0's to represent letters or digits in a CGIPUTER. BIT. (l) A single digit in the BINARY CODE. (2) A single unit of information. (1) A number of nchine words that are transferred or processed as . unite 20 (2) A series of boxes, each representing a logical step in a pro- gramming flow chart. 9 CAPACITY. The total number of digits or CHARACTERS that may be processed by a counter. CHARACTER. Any symbol, such as a digit or letter, that is stored or pro- cessed by a comma. CHDH. The technique of verifying the accuracy of information stored, transferred, or processed by any cuponent of a CGIPUTER. CHECK DIGIT. One or more digits accompanying a unit of information and used as a CHM, so that if an error occurs, the CHECK fails and causes an alarm signal to flash. CODE. (1) A set of symbols representing the information contained in a COMPUTER and the operations necessary to solve a given problem. (2) To convert problems into a code usable for the solution of a specific problem by a CGIPUTER. CGIPUTER. A machine capable of performing arithmetical and logical operations automatically. The machine is capable of storing data, processing it arithmetically or logically, and supplying the results of that processing. COESOLB. The central control unit in an electronic computer system, through which an operator cournicates instructions to or obtains information from any unit in the system. 21 COMM. (l) The section of a computer which controls all operations of the system. It may be compared with an automatic telephone exchange. (2) Method used to monitor or guide a program. CONVERTER. A machine that changes information from one form of computer language to another; as for exuple, changing the information con- tained on punchcards to the same information on a magnetic tape. CORE. (magnetic) Small doughnut-shaped device used for storage in com- puters. Its value is determined by its condition of magnetisation. CYBERHETICS. The study of control and communication theory in machines and humans to eventually substitute self-remlating'machines for human controls. 12 DATA PROCESSING. The automatic processing of information in a sequence of logical operations. DEDG. To diagnose and correct CGIPUTER malfunctionings or mistakes in programing. DIAGRAM. A graphic representation of a sequence of operations designed to solve a probl- or to process data. DIGITAL CGAPUTHR. A COIPUTER that uses digits or yesses and noes, usually expressed in 1's and 0’s, to represent the variaqu in a problem. DWI-TIME. The period during which a COMPUTER is not in operation due to malfunctioning or machine failure. 22 ELECTROCECHANICAL. Mechanical devices that are electrically controlled. Many components of a data processing system, such as the tabulating and printing machines, are electromechanical. I FIND UOD LENGTH. Condition in which all storage fields have a set capacity or length, in contrast to variable word length. M CHART. A graphic representation showing the sequence of operations in a program. Flow charts are more detailed statements of an operation than a DIAGRAM. E HARNARE. The electronic, magnetic, and mechanical components that constitute a computer system. .1 INPUT. Signals or information transferred from secondary or external storage units into the computer's internal STORAGE UNIT. INSTRUCTIONS. A set of cuputer words or characters that define the operation to be performed by a COIPUTER. L LIBRARY. A set or collection of standardised PROGRAMS by which fre- quently occurring types of problems may be solved. The library 23 may be cataloged according to the type of arithmetical operation employed. LOGIC. The science that deals with principles of exact reasoning. LOOP. A repetition of a series of instructions in a PROGRAM. 11 MACHINE LANGUAGE. Information recorded in a form that can be handled by a computer, e.g., PUNCHED or MAGNETIC TAPE. MAGNETIC TAPE. A reel of tape made of paper, metal, or plastic, coated with magnetic material on which data may be recorded. MDIORY UNIT. See STORAGE UNIT. MICROSDCND. A millionth of a second. (0.000001 seconds) MILLISDOND. A thousandth of a second. (0.001 seconds) E mucous. A billionth of a second. (0.000000001 seconds) 9 ON-LINE OPERATION. An operation in which data are fed from recording instruments directly into a COMPUTER. Experimental results are reported by the COIPUTER at the end of the experiment. ORDER. The sequence of the CHARACTERS that indicate the operations to be performed by a CQIPUTER. m. (l) The signals emitted by a control unit. 20 (z) The data transferred from the internal storage of a CMTER to an external storage unit. 2 PERIPHERAL DUIPMENT. These components or units, such as printers, con- verters, and tape reel units, that are separate from and operate independently from the main CGIPUTER. PROGRAM. A plan to be followed to solve a problem or process data by means of an AUTGIATIC DATA PROCESSING SYS’I‘H. A PRNRAM usually includes plans for transcribing and coding the data as well no plans for the use of the results. PUDHCARD. A standardised card suitable for punching in a meaningful pattern. The punched holes later are sensed electrically by wire brushes or magnetically by metal fingers. PUNCHTAPE. Paper tape punched in a meaningml pattern so as to convey information to a sensing device. 3 READ. To copy information frm one form of storage to another, or to sense the meaning of stored information. REAL TIME. The time required to solve a problem and to provide an answer so that it can be synchronised with subsequent processing operations. REGISTER. The hardware used for storing one or more machine words. WTINE. A sequence of coded instructions to be followed for a CGIPUTER to solve a problem. 25 RUN. A single complete run on a PROGRAM. .3 SENSE. To read the holes punched in a card or tape. STORAGE‘UNIT. A unit in which data is stored for extraction at a later date. SYSTEM. {A COMPUTER together with its components and PERIPHERAL EQUIPMENT designed to solve a problem or process data. {I VARIABLE‘NORD LENGTH. Condition in which the number of positions in a storage field or computer word is almost completely under the control of the programmer or coder. (Contrast to fixed word length.) .! ‘NORD. .A set of CHARACTERS having a single meaning and stored and processed as a unit. CHAPTER III EXAMINATION OF THE HOTEL Initial Stop of Evaluation The initial step of an mp feasibility program is to determine whether specific business problems exist that EDP might possibly help solve or at least lighten. The natural tendency is to turn to manpower. Rising payroll costs which take 38 cents of the hotel revenue dollar 3’ have been mentioned as an area of concern and probably presents the largest single challenge to the innkeeper today. Nhat other areas of concern are there that may be more difficult to point out but which are ”drags" on the profit and efficiency of the hotel? Is there a need for more and faster reports in the purchase of food items which will enable a more efficient utilisation of centralised buying? Do customers realise time delays in check-in/check-out routines? Are there numerous errors in guest bills and sales sheets? Is considerable time spent in checking the accuracy of documents and reports? Are there reports, such as market forecasts and sales analyses that might be desirable but are not accom- plished (he to the time factor? Are there considerable quantities of dollars tied up in inventory? Should the hotel be expanded? Are numerous controls necessary to prevent pilferage? . . These are Just a few of the numerous questions a hotelman can ask himself. If these and other questions are sufficiently realistic, than ”Harris, Herr, mid Foster, a. 913., p. 18. 7-7 he is Justified in attempting to correct these situations. As is often said by military strategists, a good defense is to have a good offense. Such is the case here. ‘Vhat are the maJor offensive objectives that must be established that will prevent the weakening defense against loss of profit? By merely rephrasing the pre- vious questions, these five objectives or goals are presented for the reader's consideration. I. Decrease guest checkpin/checkpout waiting tine. 2. Decrease dollar’s-cunts tied up in inventories and accounts receivable. 3. Reduce variable payroll costs by efficient operations. h. Gain.access to accurate and critical decision making data more quickly. 5. Eliminate needless infornation handling and report writing by an examination of the routine operation requirements in order that more time may be spent on custeaer satisfaction. All of those objectives are intended to create greater profits and inpreve the coupetitive position while granting improved services to the guest. It is.sonewhat obvious that those suggested goals surround the areas of cemnunication which have the largest payroll expenditure and the heaviest work load. The implication here is that experience has shown applications of EDP systems to be most promising where sixable concentrations of people and work exist. If savings and efficiencies are possible, it will occur in these same areas. 28 W is a general rule, the problens and objectives above fall into two separate areas of concern in the operation of the hotel. The first ' area surrounds the volumes of information that transpire throughout the hotel as a result of its daily operations. These are more routine and clerical in nature and tend to slow the business down with continuous growth. The second area includes the decision and/or policy making respon- sibilities accomplished through the analysis of various reports generated periodically. These decisions and policies may fall short of their poten- tial goals (he to the untimeliness and, often times, inaccuracy of the reports. A preliminary examination of data processing equipment gives the impression that, provided sufficint volumes exist, EN finds its best application in those areas where certain facts (inputs) require numerous rapid arithmetic manipulations. This is followed by a rapid presentation of numerousfigures and statistics (outputs) which carry a high degree of accuracy. The application nay be made on a daily or periodic basis or it may be made to apply to the selection of the optimm logical alternative froa gong several possibilities. A comparison of the hotel areas of concern and the capabilities of El? equipment indicates that applicatims may be possible. Three questions renain. "here do these applications lie? Do these applications apply in sufficient volumes? Can the Qplications be justified econonically? W The formation of an advisory group to share in the develop-out of 29 a feasibility study is recosmmidod by various coapanies who have considered EDP in their own operations. where possible, this group should be well versed in three areas; hotel financial and decision asking policies; systems engineering and procedures analysis; and the technical or applied uses of data processing. It may be that competent personnel is not avail- able within the hotel in the last two areas above. If so, it may be well to consider engaging the services of a qualified professional consultant who is faniliar with the often-times confusing capabilities of the DP equipment available in large numbers today. 36 This approach has a great deal of merit for the average and small hotel where management may or may not have sufficient background in m to insure e depth feasibility study. Although the consultant fees hey appear to be high, 37 the reliability of the information gathered, the scope of equipment application, and the overall knowledge gained about EDP concepts will far overshadow any such expenditure. It mist be kept in mind that the information gained by the nanager and study group will place then just that much farther along the edicational process in the event.1 EDP is adopted. ‘ Effort must then be directed to the assurance that this group, guided by the consultant, will have the mu cooperation of all personnel from top managenent down. Numerous educational aids are available through colleges and equipment manufacturers which may be utilised to help famil- iarise the selected advisory group or manager with the necessary lay know- ledge of EDP equipment. "sas-s Associates. ..szmm W mu (Man-rd. Massachusetts: Charles 1!. Adams Associates, Inc., 1960). ”At least one consulting firm has a fee schemle of $175-$350 per man day with an estimate of thirty days being necessary for a study of this nature. W Prior to the initial examination of the information flow by the advisory group, consideration should be given to the psychological con- ditioning of all personnel during such an examination through an extensive public relations (PE) program. Industrial psychologists point out that each employee has a desire to know what he may expect with regard to his job and the hotel in general which stems fronts fear or desire for security. The failure by management to recognise this need may create the logical counter expression by an individual to prevent this fear through a reluctance to participate in any such progru. Just as important as the selection of competent persons to serve on.the advisory group is the preparation of the employees from whom the pertinent information is to be gathered. Their cooperation can often mean success or failure of any attempt to apply EDP. The public relations approach to the dissemination of such information through bulletins, posters, talks, etc., must consider EDP's effect on the work perfornance of every employee; it must insure that the individual is aware that the present study is to determine the feasibility for EDP only and that progress reports will be made as to the findings of the study. Of utmost importance is to make perfectly clear the basic reasons for such a move and, if EDP is adopted, every effort will be made to upgrade and crosstrain each employee affected so that no one will suffer a loss of job or loss of pay as a result of the study or installation of EDP equipment except as a last resort. A government survey of twenty large company office installations shows that less than one per cent of those employees affected by EDP 31 suffered a loss of job. Normal attrition affords the necessary tool for reducing total required manpower. 38 The primary purpose of the employee relations approach is to gain the cooperation of the employee and his union by providing the necessary confidence in management and satisfaction of the individual's desire for security. W11. Any misdirected attempt to analyse a hotel operation in a detailed manner in order to obtain an accurate picture can obviously take on staggering proportion. The result is the econ-nation of volunes of statistical facts and figures which say have no particular relationship. It is imperative that consideration be given to two distinct approaches to gather data on com-inications flow. One, by an examination of each departnent in a hotel, collecting data pertinent to its operation and its inter-relations with other departments. The second method which is supported here, may possibly assist the study group in obtaining the information desired with the degree of organisation and purposefulness necessary. This method utilises a more progressive concept of business com-inication evaluation through what is called the ”systus approach,“ 380. 8. Department of Labor, Bureau of Labor Statistics, Billetin No. 1276. mm is m mummies 9.! sum: manner: A Study 01 some inplications of the installation of electronic data processing in 20 offices in private industry, with special reference to older workers. (Washington: Government Printing Office, May, 1960) p. 31. 32 and subjects the operations of the company as a whole to a logical exami- nation of its interdependent cmications flow. One does not study isolated departments. Instead, the true objectives of the information processing activities of the company must be defined. 39 Here again, the hotelman and his advisory group are faced with another internal detenination of what they consider to be these infor- mation processing activities (systens) which make up the skeleton network over which is superimposed the daily activities of the hotel. Fortunately, or met, there appears to be a similarity betweu all business's as to the small number of distinct, yet closely interdepudent, systems nd sub- systems which go inte making up the complete operation. In order to isolate and explain this method of analysis, the mind rust [first be clear of the conventional orgenisetion structures in existence and must concentrate on the isolation of independent "loops" or related bits and pieces of information that go into the completion of a system. The system in turn is integrated and interwoven with other processes and sub- systems to complete the natural flow process of infornetion. This endeavor may cut laterally or vertically through the organisational structure. Consider the sale of a room to a guest (See Figure I, p. 33). This one act on the part of the guest creates a chain of events and flow of ”Herbert T. Glants, “Converting to Autaatic Data Processing,“ mm mm. (October 1957) pp. 13-16. “nicberd r. ueuscbel, W p; m (New York: scorer- Hill Book Company, Inc., 1960), p. 70. 328 INFORIAIATION FLOW AND INPUT DATA SHEET LEGEND 0 Handling Operation 1) Separate orders © Origin 0 f Document 1) Prepare 2) COpy on another form or duplicate ® Adding to Record 1) Mark credit acceptable 2) Post D Transportation Inspection El 1) Scan order 2) Check credit 3) Adjust record h) Reconcile 5) Compare ‘<;7 Storage 1) File 2) Post Combined activity 33 rxeuar 1 noon svsrau Information Flow and Input Data Sheet or me. x0e in Party, Type of Accommodation. daily charges and cash with cashier reports. R E 8 E R V A T I O N F R O X T D E S K C A S H I E R A / C s 5 q 5 C . FED-1_nn | Telephone Walk-In File by Room .\'o.fl|"\~ Night Audit Letter (No reservation) g \‘ori {y charges Registration and reconcile. * Pick up: card. Nana, Date, Tine Cashier posts of Arrival, t Pick up: ledger. Acti- Length of Stay, Name, Date, vate by daily Type Accommodation Length of Stay, charges by Post room No. in Party. Rm. No., Price voucher from all charge, balance depts. (i.e., food i beverage, valet, laundry, room service, Sort by Arrival Date, Confirm Reservation. File by Arrival Date. Reservation report and forecast. Distribute report. © Walk-In (Reservation) * Pick up: Room Rate, Price, Any Ad- justments to previous infor- mation. Signature. Room Slip Bellman (Rooms Guest) Typist Quest Folio Dept. Info. Slip Room Rack Tele. Rack Into. Rack a equipment used. Guest Check-out. * Pick up: Tax, late charge Total. | :4 O etc. 10 possible departments) * Pick up: Room No., Date, Item, Amt. of Charge unless point of sale Pay by Cash. I Deposit in 0 Register. Post to NCR machine. File ledger card Cash Sheet Balance , 3% O * Indicates point of origin. I Charge Check credit, qet signature. Post to XCR machine. File ledger card. Take vouchers, cash sheets, tapes and totals, can- celled ledger cards to Accounting Office. Overage or Shortage lAccounts Receivable Balance, verify, and add late charges, Post A/R to Journal. Prepare bill, close account or re-statenent. Prepare reports (i.e. to Mgr. or Dept.) Mail Payment received. 3h infolmation which begins at the time his reservation is made, or he walks into the hotel, and ends at the time he leaves the hotel and payment is received. The reader may say, ”What isn't activated by a guest occupying a rec”, intimating the opinion that the hotel consists of one large process. This may be the case, since the isolation of a system and the establishment of its boundaries is somewhat academic due to the continuous nature and flow of information through the hotel. The dissection of this flow into specific systems is sonewhat related to a sine workable by the analyst or data processing group. The important consideration is that its isolation not be limited by the boundaries of existing departments, or be diverted by an apparent EDP application to a minute segment or a sub- system process witheut first considering the caplete flow system. There- fere, if our original process hinges around the sale of a room, then our system should not extend beyond nor be limited to anything less than the direct association of the guest to that room. To further clarify this, it is probably best to suggest another system (See Figure II, p. 35). This one revolves around the purchase of a meal by the guest. Again, a series of related events in information flow are generated by this act that carries through the waiter, kitchen, store room and returns. It then continues from the guest to the cashier, through the accounts receivable section of accounting where a statenent is prepared, payment is received, and the account rebilled or closed out. A third system (see Figure III, p. 36) has as its etinulue the activation of a request for purchase. A quote price is taken for an item and it is eventually purchased for the hotel. The process continues G U E S T F I G U R E C O V E R I I S Y 8 T E M Information Flow and Input Data Sheet 35 C O V E R O R D 8 R I S S U E C O N T R O L A C C 0 U N T I 8 G Guest order taken by waiter. * Pick up: Cover, quantity, price, room no., no. of guests, meal sold at, co. name for C/L Acct. Check is serial numbered. Waiter hand carries order to kitchen. Kitchen staff scan order. Order prepared. Waiter pick up and serve. Check presented. Guest inspects check and hand carries to cashier. A from kitchen received by storeroen, butcher. Issue slip prepared. e Pick up: Item, no. on bad . no. ordered, dollar p value, date of last issue, dept. issued to, date. (one copy returned with food items) Requisition | Prepare * Sales forecast, daily menu and daily food cost from figures re- ceived from daily receiving sheet, verbal order sheet, daily cover consumption count, issue slips, or issue sheet. O Indicates point of origin. C A S h I E R j 1. take change, close sale. 2 . Guest charge to room or C/L Accte, signature. Post to daily cover count. 3. Charge check to front desk for posting. pest and hold for night audit. I >, © Prepare daily cover count, cash & charge sheet, waiter check no. issue. Front desk I * Pick up: Itemise meals sold, quantity, waiter no., guest check no., employee meals, gratis nesls, weather special events. To 1" a 3 audit (1 copy) 1“ z.- a controller (1 copy). Cash turn to General Cashier. 4;nt~ O F h 8 Audit Balance & Total. Prepare outlet activity report, post to outlets, file. Night audit gets charge sheet and guest checks. Verifies with guest ledger CCNe All items to Accounting. General Accounting verify, sort, prepare reports, verify cash re- ceived from out- let deposit. P U R V B Y O R F O O D E I I I C 0 N T R O L . S Y S T S M Intormation Flow and Input Data Sheet 36 P U R C H A 8 I N G R B C B I V I N G S T 0 R 8 S A C C O U S I S P A Y A 9 L S Agent - Determine food requirements from daily activity tore- cast, scan, and food cost. Inventory item; on hand and prepare form. hand from needs. Contact pur- veyors. Prepare F- telephone order sheet. Order sheet to Accounts Payable. Subtract on I Order placed with purveyor. Goods received. Invoice checked. Goods inspected. Invoice to Accounts Payable and/or Food Controller i I Daily Receiving Sheet * Pick up: Purveyor, Unit Price, Size, Item, Quantity, Invoice No., Extension, Total Price. Daily Receiving Sheet to Accounts Payable or to Food and Beverage Controller. Physically count It... on hCDde Mark record sheet accord- 1391!. Match up with purveyor bill. Compare with in- voice, order sheet. Error calling‘ A I Up-date perpe- tual inventory records. ' Pick up: Items On Hand, On Order, Unit Cost, Par Stock. for adjust- I'DIe * Pick up: Rebates. Distribute tiguros to Manager, Food a Beverage Mgr.. ChCIe Post accounts. ‘V __’_<: :> Reports ‘7 —-—*———-\—?—_ — Issue Checks Reports Signature or Manager and Controller. u? ‘V ‘I------ s Indicates point or origin. A ”V 37 through the administrative preparation or a purchase order, the physical receipt, storage ot the commodity and the indication o! the quantity and price to an inventory control Journal. Payment oi the purveyor's invoice completes this iniomtion system. Two additional areas are mentioned (but not diagrmed since they are nore conventional) which will possibly caplete the total hotel comnications new. They are: 1. Payroll, personnel, and tiaekeeping control systu. z. Managerial and tinancial analysis (General Books included). From a systens analyst's viewpoint, it becomes apparent that insoiar as the hotel accounting tunction is concerned, very little input inioimatien has its point oi origin-within the department. me of the accounting department's priaary sanctions appears to be to verity, check, and prevent errors in the reports which it is ted irom all departnuits. Statistics iron rooa count to dollars paid tor potatoes Illt be processed by accounting with any discrepancies being carried back to the point oi origin tor solution and correction hetero turther statistical accumlations are carried out by then. For this reason, there is a certain overlap in the hotel pro- cesses in which other departments encoapass certain tunctions oi the accounting department in order to complete the now oi information. Although not com- pletely Justiiiable, it appears as though utilisation of a “teen” or unit #1 concept, as presented by B. J. honor-rm, nay lend noon to this “B. J. Ruller-‘l'hyn, "Practices in General Management New Directions for Organisational Practice,” Part o1 a Report, ”Ten Year's Progress in Management. 1950-1960.” mm 21 M £2: Inm- Tran-scum American Society oi Mechanical Engineers, Winter-Annual Rooting, New York, Novenber 27-December 2, 1960. Paper No. 60-VA-59. 38 problu by the dissection of those portions or accounting that lie alaost wholly within another system, and the placenent of responsibility oi those portions within that systen (i.e., accounts payable to the purchasing and general stores system and accounts receivable to the roons systen). The accounting responsibilities that remain, such as general books and payroll, would cmtinue in its present capacity along with the newly proposed data processing inaction. The pursuit of. this thought, whether well-rounded or not, leads us without the context oi this discussion but serves as an ex-ple o! the type or progressive management systens analysis that mst be carried out to insure the success oi the EDP progran. “The underlying idea here is that the syst- objectives are developed ior the-purpose oi improving management. To the extent that they approach the ideal management systu, such objectives nay involve new paths of data flow and new processing procedures. When the complexity and volume require- nents detined by these objectives so dictate, digital computers and asso- ciated equipment can be introduced as a mean to extend the limits oi data processing capability tar beyond those which say be realised without th-e N ‘2 W The establishment oi the tive selected systems provides the boundaries within which a detailed analysis may be conducted. Bach systea (cumulatively ‘zpo.t1.’p no Meg pe 11o 39 or individually) further provides a fruowork for the numerous overlays of intonation to be collected for a feasibility study. The technique used by the advisory team in the collection of infor- mation volumes will not differ greatly fru that used by the industrial engineer, methods analyst, or systems and procedures expert in performing his job. It is imperative to isolate quantities and volumes of informa- tion generated at each position on the systcs chart and also ascertain its importance. Considerable help may be found by the ex-ination of the file storage cabinets, in and out baskets, reservation cardex holders, room racks, “tickler” files for reports due, etc. The following are typical key questions and statuonts that would facilitate the collection of these facts. Purchasing - How is purchasing done? (How many people can purchase for the hotel?) Number of purchases made daily, weekly, monthly, by phue, by [purchase order, where each copy of purchase order goes. Number of times information is duplicated through a cycle, time el-ent from order goods to actual receipt of item (lead time). Vendors used and frequency. mantity of reports and forms and time required for preparation. What dollar volume is purchased monthly, by each vendor. What is the dollar counts of rebates? Receiving - Determine the number of items received daily by invoice, with- out invoice. Is information as to items received indicated by copy of invoice or on a receiving sheet? What information is necessary for each item received (i.e. , purveyor, date, unit, nunber of itus, price, extension, terms. The purveyor's name say be important to accounts payable clerk while the store room may only require date received, quantity, it- name, unit price, etc., which is then given to the cost controller, food and beverage to manager, etc.). Determine the number of errors in receiving docu- ments. Who receives goods? What guides .are used in determining whether goods meet specifications? How mch of it is judgement as opposed to routine? Obtain copies of reports and foams used mid time for preparation of each. Isolate aaxi-im and minimum dollar figures taken from invoices and transcribed to other forms. Inventory - How many items are carried in inventory, and their frequency of use in categories for food, beverage, general stores? Determine the frequency of physical inventories and what reports are promced and their distribution. Determine the dollar value of total inven- tory. Isolate dollar amounts required to be kept on each item. What dollar amount of food is lost? Why? Consumption - Record the number of issues to each department. What itus are ordered by par stock and how often is it done? Record the time spent in preparation of issue slips, posting of records, and com- pletion of reports. What is the dollar value of issues to each department and the unit cost? Kitchen - Determine the number of covers sold by outlet for each meal, a la carte, ’de jour. Isolate quantity and frequency of transfer of food and beverages to and from kitchen. Collect all forms required, and record time spent in their preparation. What is the dollar value of food consumed through kitchen by each outlet, food used for employee meals, and food trimings sold. Front Desk Cashier - How many postings are required to a guest ledger? Determine the number of checks cashed and number of vouchers received bl after guest has departed. Determine the volume of checknouts per day, umber of errors in posting per day, time spent per posting, per check-out. Record the number of vouchers received per day, by department. list is the average time delay of the guest for check-out. Collect all reports and forms used showing distri- bution of each and time for preparation of each. What is the total dollar volume handled and by department? Restmirant Cashier - What information is cashier expected to tabulato such as number of each check issued to waiters, types of covers sold, mmber of guests served, number of checks charged, tax, amount of each item, and total chock amount? Record the number of charges to customers who are not guests of the hotel. Deter- _ mine the time spent with each customer , in preparation of reports and sales sheet. What distribution does the information receive? General Accounting - Determine number of hours spent by each employee to check incoming reports, vouchers, cash and charge sheets, cashier banks, to handle guest complaints as to charges. Record time spent in- posting and preparing city ledger accounts receivables, time spent in preparation of Profit and Loss Statements and Balance Sheets. Isolate bottlenecks in billing guest and purveyors. How many vendor checks are written per month? As previously mentioned, the majority of energies spent in today's accounting operation appear to be as a result of two situations. The numerous manual transcription errors in completing reports, and the necessity of control to prevent mishandling and missuse of hotel property b2 and funds. Therefore, it is indeed worthwhile to isolate and examine the time spent in this type of effort by each person in the accounting department as well as throughout the hotel. Considerable savings may be possible in their daily routines if the study can produce conclusive statistics as to effort expended in these rechecking functions. This non-productive effort may be eliminated through the use of point-of-sale input machines directly connected to sue type of central process center. Payroll - Capote the employee turnover rate and the number of uployees per departmmt and shift. What portion of the total labor effort is spent on productive output (direct labor) as opposed to clerical or administrative (indirect labor) tasks? Determine the number and type of deactions per employee, the method and frequency of pay- ment, and the reports and forms used along with preparation time and distribution. What is each employee's rate of pay, meal, and uniform allowance? What is the total dollar payroll by department and shift? Front Desk - Accumulate totals as to the number of guests having reser- vations, number of turnaways due to a full house where this condition actually does not exist, number of rates available to guests and reason for differences. Determine themaximum and minimum most) check-in time. What are the steps involved and time spent on each? Isolate information that is duplicated and forwarded to other departments. What specific information is required from each guest and from other departments? #3 Personnel - Accumulate job descriptions. Determine the degree of training required to perform each job, the level of education of each indi- vidual, as wellas age, sex, and personal history. Collect organi- sation charts. Minor Departments - Record the frequency of use of Valet, Laundry, Garage etc. , departments. Reports and Forms - Accumulate a copy of all forms and reports. Analyse and isolate the origin of information. Show point of origin and distribution of all copies. Indicate whether information is tran- scribed or original. Show time intervals necessary to complete purchasing cycle, check-in time, indicate count of time necessary to prepare reports, and check other reports. Determine what infor- mation is necessary from other people to complete a report. What inforntion is originated at each position? All areas - Determine for each above, the item maximim and average transactions or dollar uounts possible (i.e. maxismm number of daily check-outs in a 1000 room hotel may be 800 guests, with an average of 300). It is also important to establish where and what types of office equipment are presently available in the hotel, as well as a listing of its serviceability. This is necessary to insure utilisation of all equipment possible and determine dollar value of equipment considered obsolete. What information would management like to have that is not now available? The study group has now gathered information in a detailed manner that may lend itself to sue form of EDP system. M The following reports, forms, and records appear to be the more susceptible to EDP application: Reservations files Reservations computation for forecasting Room assignment decisions Rooms inventory status (i.e., out of order, available, etc.) Night Clerk's reports Guest history cards Other room revenue reports Room revenue forecasts Food and Beverage sales records Food and Beverage inventory control Food and Beverage forecasts and analysis Food and Beverage revenue reports Hutu patterns and popularity indices Other reports of guest charges (i.e., valet, lmndry, etc.) Guest ledger posting City ledger posting Accounts receivable records Accounts payable records Incoming voucher reports Inventory control Payroll records Payroll preparation Cost distribution of various items above. Monthly financial statements and statistical analysis. Annual financial statemuts and statistical analysis. #5 W The next worthwhile step is to examine the usefulness of the volu- minous data (outputs) generated throughout the hotel, and deteimine what effect it would have if these figures were no longer kept. It may be that the information is necessary and vital to the daily operations. Then the effort to collect and produce such information mist be compared to its worth as a tool. If the data still stands up under this economic test, then the final question is, ”How often is it necessary?" Would it be sufficient to know that the information is available at amoment's notice? The essential information would be stored in such a manner that would enable reports to be printed out as needed or when deviation from- predetermined “norms“ existed (manag-ent by exception) rather than daily, monthly, yearly, etc., as is presently done. The critical examination put to each output presently deued necessary by management and employees, may produce mite a different operational picture. It is hoped that it will result in a redaction of the necessary information (outputs) required to operate the hotel which will, in turn, reduce the overall equipment expenditure and programing requirements. It is mrther hoped that it will reveal to the study group these areas where bottlenecks of information occur, where there is need- less duplication of facts and figures, and where excessive time and effort is being spent in routine functions. Where this condition is exposed, these sue facts and figures should also allow the systematic formulation of a similar system in which as many problems as possible in the information #6 flow have been isolated and corrective recommendations made to mange- ment. Even if EDP equipment is not used, the act of going through the physical process of an analysis and evaluation of the present system, could help numerous hotels to realise substantial savings in handling information and reducing and redistributing workloads through standardi- sation. ‘3 Two i-ediate uses remain for the data collected. me is the isolation of these job classifications which may be most affected by EDP due to the nature of the duties involved. The second is the isolation of inputs to the systa which, to a great extent, will affect the sine ad cost of SIP equipment. W The effectiveness of determining those job classifications most affected by EDP in the hotel lies in the ability of the study group to establish, first, which jobs are strictly clerical and routine in nature; second, which are considered "service” positions and are in existence the to the direct catact with the ghost; .third, which jobs are a coahination of both but whose duties would be more easily done by elimination of certain written mnctions. This would, in turn, give the aployee more time to do a better service job or would create an excess of idle time. Fourth, which positions are supervisory over one of the three previous areas mentioned. The table on page #7 serves as an example of the possible classifications affected bngDP ad the degree involved. ”Nevischel, 93. m” p. 279. h? .383 8.39380 Menu 02330“ houses: ooeaeoom one pooh mousse: coauuo «noun no.8 sou men can colon new 38: none-.283 33H:— .83.: mxooo uefioaunloo uses-deed uaneasn daemon chateau «cocoa-3 phonon—n nee-sax onauoaso one“: hounds: puma: nomads: edduuo anch— vacuumed noaeueno eeEen soon Ecuonoen au.uo 83.885 on. a: £36 83— 0:9; aheuo Sou 3.8.5 soapstone: flueno neon 9.8 «:85 .8330 no.8 .288 28a no.8 soon conch. 38.2.33 no.8 25.89 no.8 sameoueoem nuances HAP—hen «35 hon—.994 0—3.; veuoeuud ammo..— cevoewud assign a cum dug: amenaduuhnmao no... SHE H ”184,—. veaoeuud vac: A8 It is pointed out that the possibility of a reduction in payroll decreases as the responsibility of the jobs moves from the clerical classi- fication toward the ”service“ category. It is extremely difficult to realise a savings. in the moderately affected areas unless the number of employees performing the same duties are decreased as a result of making each job loss burdened with paperwork. Once the number of persons in this type classification is reduced to one, it becnes almost inossible to eliminate the position (i.e., a desk clerk is still necessary to make room selections and meet guests, regardless of equipment involved). Elimination of this position would be possible only through the realisation of a completely automated hotel -- snething to which the present day guest mist become conditioned. An accumulation of payroll dollars ca now be made by the various departmats (See Table II, p. ‘9) with allowances and reaced aounts for jobs only partially affected. The total dollars giving a indication as to the present costs of labor can be applied, in some measure, against ay estimated 3W equipment expenditures to produce the dollar return on investment deaed acceptable. W Several approaches to the selection of basic hits of information (inputs) exist. me such approach is to select all the fons and reports catering around the basic infonation systems ad begin to aalyme each figure ad heading that appears thereon. The numbers and itas necessary to complete a given fen give an indication as to what the intonation is R9 83...": H keno defined. a ue>o moaning. w keno ooac> nuance an“ 93 can aoemounau Hooch on mo «5 noacaoooo a can com coo.” assoc Hoooe mafiu a an mafia » and 03.3» «on aspen non canyon ooze: a eohonnlm no nonasz Haven. and a one a mum ma . . . . . .oonaoaos co." H com m can w . . . once—8:33: can a cam a” can.” aw . . . . ooaauom noon m3 N on» m nun?" ca . . . . . . . uoaon ohm NH oun.~ um oom.n as . . . . . . acuoooo a cognates-64 mao.a an oa~.n ma oow.a No . . . . . . . . coon can a n mau.a a an oom.~ » an . . . . cognac «noun Seaman c3334 Seaman cocoouu< Sound.— oouoouu< e93 had—co: seemed—a nausea eoohoanmu fixes: aoomoas no .oz no .oz «o 6: neehoanam mm." cooked—an 23 ceased—mu can ”seem «anon .7qu dance: Heaom onus.” Aennlouuv gamma rm mozH>H ”Jada 55 wide distribution and carries tho critical infomtien to be extracted as needed. This say be accomplished by sale EDP process of reporting or by tho design of new forms (snap-out type) recomended by the study group which does not involve RIP. m The preplanning function has carried management through an exani- nation of the hotel's major goals. They have in turn selected the appro- priate personnel and outside consultants to serve in an EDP advisory capacity . charged with the responsibility of critically analysing the hotel's connunication flow network. This group has established the basic infomtion flow systems and also has shown graphically the processes susceptible to change, the Jobs involved in paper handling. the inter- dependence of the data volumes that exist in the system, and how much it costs to Operate it. They have attempted to collect all outputs, deter-inc the operational value of each, and to isolate the basic bits of information (inputs) necessary to produce those required results. The advisory group has also initiated a well-planned employee relations campaign to prepare the employee psychologically for the EDP study. All in all. a realistic picture exists in the minds of management as to how the hotel operates today and what it costs (fixed and variable) to perforn its present operation. Further. nanngaent has a picture of how they would like the hotel to function in the fixture and is cognizant of the fact that RIP nay be appli- cable to the hotel situation, all things being equal. The next stop in- volves EDP application and its Justification. CHAPTER IV IQUIPMINT’JUBTIFICATION A discussion of the basic principles of an Electronic Computer System appears in Appendix B along with the Definition of Tens on p. 18. The inforaation is intended to be supplementary to this chapter and famil- iarise those interested in the basic operating principles of EDP systeas. Any decision as to whether EDP handling of information should be omployed.in the hotel must evolve around four ole-ants as applied to the existing information gathered by the study group. These elements will enable the hotel to detennine what type equipment should be utilized and its sine. They are: 1. Quantity of information necessary. 2. Generation of operational data. 3. Processing of data. b. Result presentation and systea response. Consideration of these factors will of necessity formulate the first indication of how an EDP system might look and operate. It will further require a close-knit relationship betwoen hotel management and.manufacturer in the consideration of different approaches to handling detailed daily information, decision.aaking infonaation, and the overall establish-ant of operational and organisational structures. The degree of cooperation that the hotel group can give to the manufacturers or consultant will be propor- tional to the completeness of the final eoonoaic proposal to deal with the selected procedural areas. W The ability of any automated system to improve on a manual operation must have as one of its characteristics the capability of holding within itself the essential numbers and items presently kept in some written form. These numbers and items of concern might include,among other things, the number of different line items of inventory (i.e.. 3.000 with 1,000 considered critical items), the total number of rows (i.e.. 1000), the maximum number of details required to be kept on each room (i.e.. room rate, present occupant, characteristics about the room, etc.). and the various categories in which revenue is reported (i.e., transient, permanent, restaurant outlet, valet, etc. . each having a daily dollar value of no more than six digits). The sum total of these itus will enable either the equipment manu- facturer or the consultant to ascertain the approximate memory or card layout necessary to accomodate the hotel operation. The economic impor- tance is twofold. One, to determine whether the hotel requirements are of sufficient volume to Justify the purchase of a memory unit (drum, disc. tape) and if so, with what capacity; if not, is cardpunch equipment suitable? Second, to determine the amount of time (man hours required) necessary to convert this initial information into machine language. This ”one-time” dollar amount will be utilised in the comparison of total no costs to present methods of operation. WW ”Contrasting with information from which the basic files (maory or 58 cardpunch) are formed, operational data are generated as a by-preduct of the operation itself. These data are generated by each occurance of the business operations they represent." M A large portion of this collection of operational data has been per- formed by the study group in its determination of the worth of information produced on reports and forms. It has also isolated the necessary inputs (See Table IV, p. 55) required in the daily operation and also where these inputs are first picked up (point of origin) and placed in the flow stream. Our economic evaluation not now consider whether the automation or pickup of this information by some electromechanical form is more pro- fitable than continuing with the one manual method. For instance, the table on page 51 indicates the waiter is in a position to pick up numerous inputs at the point of origin, yet it is difficult under the present system (manual) to expect this individual to physically operate some type of electronic slave station that would enable him to place into memory these inputs as they are collected. This limitation is due largely to the type of work involved and the individual concerned. However, it is possible that the guest check be redesigned (possibly by mark-sensing) to facilitate the pickup and transmission of the pertinent inputs by the, cashier. Especially if this transmission could be accomplished by some type of ”black box" able to transmit the guest charges directly to a memory outs for subsequent readout at check-out “Postley. 93. 211.. p. 68. 59 time, as well as total the guest check, itemize sales by required cate- gories, compute tax, and make change -- a task which sounds impossible but is not far from reality. The economic evaluation, then, becomes a comparison of costs in operating under the present guest chock system with that of the proposed system taking into consideration time spent by cashier to process a sale, make corrections to checks and sales sheets (frequency of shortages and errors), competence of employees to operate both systems; expense of developing and installing the "black box“. including the total number necessary. The results may bethat a third method proves to be the most economical -- one in which the original data is first punched into a card or a paper tape (flexo-writer) and is then physically carried in tape form to a central area to be converted to magnetic tape for processing at a computer station. This solution may be necessary the to the adverse physical makeup of the building which would make it prohibitive to wire for a more complex system of impulse transmission. This type of evaluation should be conducted through each position in the systems chart. The final result being an indication as to the ex- tent of the input network necessary (card or tape) to solve the hotel problems of infouation transmission to a central processor. The dollar amount to accomplish this task is also shown. W The processing ability of a computer or cardpunch system is of funduemtal importance, since the way in which a system functions depends 60 on whether the hotel data handling problem is solved or not. The cardpunch system has the ability of being relatively easy to install, flexible in acct-pushing simple tasks such as a payroll and other accounting ninetions and low incest. However, it is restricted as to the economical sise it may be expanded to. It is unable to handle exceptions within the normal machine.routino, or make simple logical decisions. It must also solve com- plex probl-s in pieces or runs which are not in one contimous process. ‘5 Computers vary in many respects and although basically static in capabilities, are continually being tailored or changed to meet the desires of a given customer if he will pay the development costs. The awareness that any process may be mitomatically handled for a price returns the discussion to whether or not it is essential to allow for the availability of speed handling of information within the hotel system. Although it may be questionable on the basis of frequency of use, quick access to information may be advisable on the basis of customer con- venience and satisfaction. For emample, the difference in cost between an. EDP system which provides a memory with ”random access“ (See Definition of Terms, p. 18) capabilities may run $5,006 more in cost-than a system which provides a ”periodic readout" of‘memory information at pro-stated intervals. (See Appendix A) The assumption is made that all other; features of the two units are equal. If this prior system were installed in a ”his W m m, (New York: Haskins and Belle, 1955) p. Ilse 61 resort hotel or in a hotel catering to a more permanent guest, then its use by the front desk to quickly produce a guest bill at check-out time would be questionable. The preparation of a guest bill may be Just as efficiently done by a “readout" system since the average length of stay in this type of hotel is longer and the check-out process may be done in a more leisurely manner. However, in a transient hotel situation, the advantage of being able to produce a bill instantaneously with up-to-date charges is obvious and the increased cost factor of having the random access feature is overshadowed by guest service. The necessity of speed handling of information (microseconds. miliseconds) tends to surround the guest check-in/check-eut procedure. Yet speed handling may be of little significance when consideration is given to total man hours spent per day in these tasks compared to equip- ment costs. The critical question regarding utilisation of as appears to lie in the hotel's ability to maximise the use of central computer time and storage capacity while holding to a mini-in the down-time and off-time in relation to the investment. In other words, management must avoid being oversold or talked into buying computer equipment merely to do a specific Job or to meet the panic of increased competition. Conversely, equipment in operation at maximum capacity is not reco-endod. Sue excess capacity is healthy since this will allow for unexpected down-time and expansion of the business as well as to provide for ”such contigencies as peak loads, moderate increase in normal loads. development of new operations, a reasonable number of unforeseen special proJects. and finally, reduce 62 equipment unavailability due to engineering causes as well as errors cc-itted by operating personnel.” ‘6 Idle time (slack time) on a computer in terms of dollars is much more costly than idle people doing the same Job. This fact may be quickly brought home when one considers a small ID! 1301 computer leases for $7,500 per month or approximately $155 per hour. ‘7 Two hours slack time daily would easily pay the wages. of several people who could be used to perfelm numerous additional duties. WW Just as the analysis of inputs is necessary to determine the sine of a memory unit and point-of-sale equipment, so is an analysis necessary of what is to come forth fru the EDP syst- (outputs). The examination by the study group of the worth of the various reports and the figures appearing thereon will answer such questions as: 1) Will percentages serve where figures now appear? 2) Are figures showing last years actual sales to date as well as a yearly budget to date both essential on a daily sales report? This type of introspection will help extablish what intonation is really needed to run the hotel, what form it should be pre- sented in. and how frequently. The optimum daily report would include only those items essential to daily operations, such as deviations from predetermined "benchmarks.” ‘6’“t10y. me Me. Do 72o ”Adams Associates, 3. m. 63 In many respects the presentation of the information from.an EDP system is in the eyes of its users, the only Judge as to the worth of a data processing system. In the sue vein. hotel people. as well as people in all industries, ”are unaccustomed to accepting summary information from machines without receiving the detail infonation to support the su-ary. They are not 'machine oriented' ." ‘8 Therefore, the ability to accurately condense the present day infolmation into essential requirements and needs in a format acceptable to all can be extremely difficult to accomplish. It may result in the acceptance by the study group of the information and format as it is presently displayed in hopes of future changes with the gradual transition to EDP. The economic value of determining the information format is somewhat obvious since any type of data processing system must carry with it the ”hardware" necessary for an output display which is preceded by the proper eoaputer and tabulation manipulation. The solutions to the four basic elements discussed above have given to the study group or consultant an indication as to what the hotel desires in teams of information necessary and in what form. It has also determined the volumes of information that must be stored and handled to accomplish the operational and marginal tasks. The group is then prepared to approach a specific manufacturer to ask him to fit these requirements to specific types of hardware and provide some indication as to the amount of capital investment required to accqlish the transition to Ell’. hBPOItloy, no “I“, p. 72o The result may be the presentation of several solutions by the manufacturer based on the hotel sise, financial capabilities, time require- ments. and desires. A discussion of four such equipment possibilities appears in Appendix B. The remainder of this chapter will touch upon several additional equipment factors that may be encountered by management. .Ansiiisnsl_lnninasai So far. the discussion has dealt with the consideration of the central computer and input/output equipmmit. It is necessary to include along with this the requirement for obtaining peripheral equipment which is not nonmally included in the basic package price but which is necessary for the operation. Requirements for this equipment might be as a result of a need for a special device to transpose the medium of input information from punched cards, normally handled by the equipment to punched paper tape. This would require an additional rental charge for a paper tape reader. It suffices to say that the hotelman must become aware of each ”systems package? makeup, and the additional charges for extra equipment 'if and when it is ' necessary. The question as to whether the hotel should lease or purchase the electronic computer system is not one the individual hotel of less than 1,000 rooms need worry about. The apparent lack of individual application for these hotels, thus far. (based on known equipment costs, and potential 65 economies available) means that neither purchase nor lease is worthwhile. There is a possibility still that a punchcard system or the rental of time from a computer service center may be feasible. The service center is normally owned and operated by a manufacturer of EDP equipment. The wide range of equipment available along with experienced personnel makes the service center a possible answer to the small hotel which cannot Justify purchase or lease of equipment but whose operation can benefit by EDP usage on a “per Job” basis. Data are taken to the service center location and charges reflect the actual ”use time" of the equipment. For the large chain and large individual hotol capable of the utili- sation of punchcard equipment by virtue of information volume handled, the question of lease or purchase may be relevant. The considerations are those dealing with tax advantages, if any exist at time of delivery of equipment; management policy of fixed asset acquisition, which may mean purchase of equipment if an increased cash flow situation is especially desirable; availability of capital, which not include the price of money weighed against an appraisal of future economic trends. ‘9 ale point should be kept in mind that is often overlooked; that is, the fact that the lease price of any EDP equipment is nonally based on an eight hour shift operation with approximately a 507. 5° increase in lease price for each additional shift required. The lease quote first seen for ”Wallace. Frank. Anni-ins the m 21 Wis W. (New York: Controllership Foundation, Inc., 1956). p. 61. “mg. , p. at. 66 equipment to be housed in the hotel may be misinterpreted as beings total fixed price. Anticipation of a two or three shift operation may result in a significant cost advantage in outright purchase of the equipment. Other- wise, leasing should provide the economic flexibility necessary. W Of equal inortance in the economic evaluation of electronic data processing equipment is the obsolescence factor. The recent chang es in equipment design from vacuum tubes to equipment which is capletely transis- torised is but one example of the rapid progress made in the electronics field. This one change has ”enabled savings up to 50% in floor space while reducing air conditioning and power demands to 10% of the previous “Cl’eu 51 The llinneapolis-Boneywell H 800 (1960 model. cuplotoly transis- torised) is six times more powerful in terms of memory capabilities and is half the price of its predecessor, the D 1000 (1957 model). How then should a hotelman look at this problem? Electronic equipment is not obsolete as long as it does the particular Job economically. Better use of this equipment by improved operating techniques may more than offset future technical ad- vancements. This philosophy does not hold forever. ". . . the real danger is not that your equipment will become obsolete, but that you will let humans interpese themselves in the information flow of your business. and thereby slow the entire system down to their particular speed.” 52 ”curry, Robert 3., “Facilities for aLargo Computer Installation," W W m. Vol. 23. No. 1 (January 1958). , BZDeHart, John. ”Should I Have A Cupoter.” M, May 2, 1959. . . 67 .9as:!ins.£2:is If there are real savings to be obtained, or at least anticipated as a result of an accurate study, the one-time costs are relatively unim- portant. Eventually. the amortisation of costs will end, but the system savings will continue. 53 However, where these savings are not clear, which is more nearly the case at hand, the accuracy of these costs becomes more important to prevent equipment acquisition where savings are sub- marginal. Programng, installation. and parallel operation costs repre- sent this type of one-time expenditure.- W. Costs for programing any type of my system may be grossly underestimated by a study group. The task involves the preparation of detailed equipment information flow charts and block diagrams. the organi- sation and proof of the numerous machine "orders" necessary to complete even the most simple addition, subtraction. or cowarison. The process is a complex Job which requires highly skilled. well paid progra-ers. It must not be forgotten that in the case of computers, the m-ory system has its own internal way of handling information that requires translation of the input media whether it be card, tape. or imulse. This translation is done by means of ”edit” orders which must in turn be reversed and dupli- cated for output require-ants. Once these edit orders, command orders. codes, tags for locations in memory, and sub-routines have been defined and ”Stanford L. Optner. m W. (Englewood Cliffs, N. J.z Punticfimlg hceg 196°). pa 1.3. ”proves” by means of actual performance in a controlled situation, the problem-is said to be established and "downed." Then the actual con- version of information can take place.” As a rule of thumb, these costs generally equal the rental price of the equipment for one year. 5‘ This ' guide is especially true in situations in which the business application (such as in a hotel) is new and equipment manufacturers are unable to rely on past programing experience. W. These expenditures again will vary widely from hotel to hotel due to such problems as space availability, air conditioning facilities, electrical wiring (especially if point of sale equipment is used), humidity and dust control, raised flooring for the ness of inter- connecting cables. In'situations where the hotel is yet to be built, these costs may be reduced appreciably. Installation costs for a medium sise computer system will approximate $15,006-$20,000. ’5 W. Installation costs may include the expenditure of funds for simultaneous operation of the ED system and the manual operation during the initial conversion period. This one-time cost may involve a siseable dollar amount in those situations where complex equipmmlt may require a lengthly installation and debugging time. The amount is best estimated by the consultant or mamfacturer. I 5"Noted as result of interview|with Norm 8tat1and, Vice President, Adams Associates, 8eptemborp1960. 55m. 59 W Recurring costs are those which will be sustained to operate the system after it has bemi established. The equipment lease or purchase price will generally be the largest dollar amount in this category. The total purchase price for cards and tabulating paper may be small but should be included. Haintenance cost is a recurring expense factor which can generally be avoided by a contract with the manufacturer to provide such a service. The expense of a service contract is far overshadowed by the immediate availability of men who know the equipment and its pecularities. The requiremnts for operating personnel to carry on the EDP function remain fairly stable in numbers (See Table V, p. 70). The clerical wages necessary to attract and keep cupetent people in these classifications appear to be higher than these presently being paid in the hotel. (Boo Table VI, p. 77) The salary requirements shown for Systems Analyst and Progra-er in Table V may fluxuate with the individual's experience and availability since this type of background requires the greatest amount of technical skill. Either type of syst- (computer or punchcard) may require a siseable complement of personnel available in those two classifications. This is especially possible at the outset of the data processing installation since, in all probability, application will be made to those porticms of the com-inications system which are more easily accomplished and provide for the greatest and quickest economies. This would leave the maJority of the more complex areas to be enveloped as the operating group becomes more proficient at the technique of EDP programming. 70 .doueom .obHasuneoennom neHcm .emneHo season .EH no ooHHnnse no: one nopoHsOHou mans oceans-co om eoHnom EH new one eon—65R .soHououa mam .neuenc: noHom noonom .nHono Ion. .HHesmocom mHHonseanH: no ooHHanse eensaHmwm . .Houon Ioon 08H 0» an a. a. .o-(oRHw mun .osxooomn Hnua neoon .333 on com via ueanc< 3-328 no neleneonn .w .om\omn H novsnoao anon Ianum Henomanon .m .o-Qooa H nooenog 6333 H nansnan anon. .m 03300: on .oa\oom H nouns—8 omen. .n .2533 TH nooenono noose new .N .osxoom H nousneno eHoedoo .u as 6-33» H noenbnonsm .H as .333» H nongnensm mam .H hem no even 62 e33. new no even .oz 93:. R anaconda—com canon: unsound—fl on ease-535.com and": noosnfloo as: oszmmoQ—A <93 05835 24 m8 Huzzoaum flzogamo > mafia 71 .BIEBII.EI_IHIEISIIII The study group must then proceed to evaluate these expenses (one-time and recurring) and determine if, within the hotel(s), there is sufficient monthly savings based on payroll and volume analysis to offset the equipment and payroll costs. Numerous comparisons are possible, but today's managers appear to be most impressed by the rate of return on the investment or lease. By application of the total anticipated increase in profit, which is the payroll savings, along with equipment and material savings (i.e., fewer typewriters, NCR posting machines, fonds, etc.) to the purchase or lease price of equipment, it is hoped that the capital 58 investment can be recouped within a reasonable period of time and/or the lease price offset to show an acceptable profit. This comparison is a difficult task and one that may produce a condition where adequate savings are not possible, in which instance there is no alternative but to forego EDP. It may produce a typical “no-relief" situation. That is, there is no real offsetting dollars to balance against the costs to be incurred by establishing the more desirable EDP system. 59 In the sample solutions, (Appendix.A, Approach 1) it is apparent that this condition may easily exist in any individual hotel where EDP equipment, at a lease price of $h,500 per month, is applied to a limited function which 58Vallace, n. 211.. p. 61 ”thor, no Me, Do lhae 72 may at best save something less than this amount in current payroll and expenditures per month. The main problem is that not all positions sus- ceptible to EDP can be eliminated. Will-Ln“ what further Justification might be used when there is an apparent marginal line of profit to be realised? Intangible savings (or benefits) which may or may not carry a dollar value may strengthen the arguments for EDP if they are carefully analysed. The difficulty of using these benefits in a financial Justification for EDP arises in the accessment of a dollar savings that may be attri- buted to the intangible. Such elusive areas as ascribing a dollar value to: l) a purchasing or cometitive advantage gained by having reports and statistics more timely and accurate; 2) the anticipated growth in the hotel's operation which would be favorably assisted now by the implementation of an EN system at a loss. This may be) done with the expectation that a ceiling can be established that would prevent the normal growth of variable costs with a growth in sise. ‘0 3) There may be an advantage unionwise and tax- wiso in the conversion of variable payroll costs to fixed capital costs through use of an EDP system. This might mean fewer lost time accidents, better insurance rates, and fewer union grievances, but to what extent and in what amount? 15) Easter handling of infolmation in a hotel may mean 6°C. Northcote Parkinson, mm m. (Cambridge, Massachusetts: The Riverside Press, 1957), p. 12. 73 more business, but how mach? 5) There is a possibility that priority handling of information could be eliminated by EDP since preferential treatment is usually an outgrowth of the slow or vomuninous manipulations of routine situations. 61 6) A comptroller of a large midwest hotel feels the tangible advantage of their 134 punchcard system is in the realisation of payroll savings. as felt that equal importance should be given to the intangible advantages of increased Job satisfaction among personnel through elimination of many repetitive routines and overtime requirements. The punchcard systea further creates a more organised day with fresher. cleaner working conditions, at the sac time proving the ability to create manage- nent reports which are accurate. timely and presented in a standardised my. 62 ' ' Often the attachment of a meaningful savings to these intangible benefits are so illusive that management. unless it is already convinced to utilise DP due to some other factor (cometition squeese). may not be convinced of its worth on these facts alone. However, this cannot. be pre- supposed and the necessary effort mist be expended to ascribe some type of dollar value to these benefits especially when the tangible savings are marginal. In the long run, it appears that these intangibles (such as the six mentioned above) are the real rewards to be experienced through RIP and not tho direct dollar savings. 6’ 61P0.t1.y9 me me, pe 70e 6ZInterview with Frank A. Mikes. Auditor, Palmer House, Chicago. Illinois in September. 1960. ”Postley. m. 91.3.. p. 7 7!: W “The ability to demonstrate actual dollar savings is the most devastating test of an EDP system which has been avowedly designed with this as the sole criterion.” 6" Care must be given when indicating a dollar savings possible through EDP. The savings may be directly attributed to the improved method of handling the infolmation which would occur whether ED? is utilised or not. With this type of savings available without EDP, it might be advantageous to forego D? at the present time. This would enable the hotel to continue the hotel information examination in order to mold the necessary frueworh of standardisation of operation so essential to any future application of DP. A questionable utilisation of EDP that often occurs is in the appli- cation of a system to an economically unsound area in order to gain as much programing experience as possible and, with time, expand the operation into other marginal areas. The chances of success by this method are directly proportional to a continued growth of hotel business; upon the sincerity of management to see such a long term program through while faced with the absorbtion of the equipment expenditures over an undetermined period of tins; and upon the ability of the BDP personnel to apply EDP pro- perly to the ”grey areas” of the hotel. Business experience will confirm that failure to realise expected efficiencies through EDP can often be attributed to its application to only “Optner. m. 311., p. 1&5. 75 a segment of an information system. The greatest potential for economic rewards lies in the greatest possible application of EDP to the complete hotel communication system. Successively smaller applications to a single information system or sub-system.may require less capital for installation but will:mean an even greater reduction in the savings which may have originally prompted the purchase of the hardware. If the sup program is Justified economically (intangibles included or not). and if it is finan- cially advantageous for the hotel to proceed slowly, it should be unques- tionably understood by management that a realisation of the econnnic goals which prompted the venture can only be realised with the conversion of the entire comnunicatioas program or at least extensive enough to include one of the five or six information flow systems. Violation of this prin- ciple generally means that paperwork "bottlenecks“ are merely relocated and “floating problas“ are created. .kmmple: It would be difficult to economically Justify EDP to handle guest ledger cards alone for the purpose of collecting and analysing guest histories when, for an additional sum of meney. the breakeven point might be realised by enlarging the process to its logical systems flow (See Figure I, p. 33) which would include the entire guest check-in process. An evaluation of equipment costs as presented by the manufacturer may show whether the prices included a heavy research and develop-cut expense. Several manufacturers should be called in to give a quotation on the hotel communication specifications. It is worthwhile to select those manufacturers who have installations of their equipment in businesses similar to the hotel. This may insure a better application to the hotel 76 problem since in all probability, certain groundwork need.not be dupli- cated and costs incurred would be primarily for equipment modification at a marked reduction. In this same respect, the hotel may endeavor to utilise its own existing oquipaent (i.e., attachment to lcn.posting machine to produce a paper tape) and conmunication transmission networks. .E2121sEIII211.lifl.1§l.fll1!ll§fl.§2.§flfi A recent study by the Bureau of Labor Statistics (See Table VI. p. 77.) shows that the hotel industry (year-round) is below the average weekly earnings of the maJority of other industries. This situation exists even though the yearly rise in wage rates from 1958 to 1959 has increased at a rate approximately commensurate with other indistrios. It is an awareness of this low payroll situation in the minds of hotel management that may provide the very stimulus for the defeat of any preliminary m installation proposal. Any type of economic Justification on the basis of personnel economies must necessarily use present day low payroll figures which. when compared to equipment costs, may not yield the percentage of return on investment management feels is necessary thereoy defeating the plan. It may require additional time and possibly competitive outside pressure to cause sufficient management realisation that this dis- parity of wages in existence between other groups of working people and the hotel employees cannot endure. It is difficult to believe that twenty and thirty year employees who have miraculously survived a depression and inflation, and done so on minimum.wages. will work until they are ninety. It is Just as impossible to expect a young person from today's environment to be satisfied with the same wage condition. Change may be inevitable, union or not. 77 .eensuooa you and» .maowuns .mooa .nneon no cease Henouaaens ”mane sane-hen henoxnw humddldneunvw .Aowmn hen-U009 .eownuo ufldafldhm fine-flueecc .flovundaejiv ramncdvdnnooo uddaco eudn3.uou shops; asp: :.ommn on soap-Honoa on» no sonsaaonua auox.:.aema on schoonom son-anoasoso aosooooor .aa .oz .8 Jo> .32 hoe-soon sag Hal g .aoaoanasan p33 «o 388 £33 no ans-ton:— .m an» maé 9mm -.~ m6» on.~ m.m~ um." 73 Penance: Hoof: . see an I noun—swoon one: .3.~ 5.3 can m6: mu.~ «.3 SJ n23 eves—noun cases a neon I and." spoon nus: on.” H.mn on.a H.mn am.~ n.wn ~m.~ e.~n Assn-Ha undanane a.on«vse aneouev ensue “aspen ha.~ H.oo so." n.oa an." a.oa ”a.~ m.oa sauna sasssaon: na.a o.oa ma.a ~.oa -.a ~.oa MN.” «.mn he onnonuhso» .sasoon sand—ken ensom nonunion eunom eunuch-fl carom eonannsn an 3m .3.» new Manse) he.» now nausea 5.26m manoet 3.26m Dice: ensueod soon ere ensueb< ensuebd eoeae>< ensue>< eosnerd easae>< or: a3 :33 on soothes Essa ensue>< Henna—4 3m." mw mamauot.zcaeo=aomm mo mozuzm undo .ooaoaoaa n Aaonv 40“ .n .aoasn nice so: one» nooou Heooaoaooe one on anemone cooa onoaeasoo non . need . no ooaaoeauu .3: a 6383» 35E ones .3... fl 883 one .~ .oaeonuuaa now need oz .meaaoan cacao on pen: on . one ounce sauna uoannal m .ol\oooam canoaao> coda nouoooeauua one Amono ooze: .H euoaoom nonovno>o< aovooueno veoo opened one} each shone: ends aeoocd anoananou 9e. BHSflmeaeo mus—zoo as .3 2824.28 HH> “Jada 100 means that RAHAC, taking 1/2 to 1 second to post to transactions 71 would require 250 minutes or four hours to post all the daily charges and provide the random access. The present 1,000 room hotel operation appears to require approximately a 1,000,000 72 character storage. The RPC 9000 is cheaper in price but would not provide for the necessary initial capa- city in the basic package, even though it has virtual unlimited memory capabilities with the purchase of additional tape storage units. If the tape drives were purchased, the mini-um hotel requirements would bring the cost very close to RAMAC. The RCA.301 is still relatively unproven and appears to have strength where the hotel does not require it (i.e., fast access) at a higher price. Wm Payroll Costs - $5,000 per month Progranming for the unit selected - $5k,000 Installation for the unit selected - Approximately $30,000 Peripheral input equipment already developed would run 3175-200 for each keyboard plus the installation charge which may run very high if multi-stations (point-of-sale) are utilised. The problem involved is in the switching expense to produce the multiplex entry to the memory unit, requiring a high research and develop- ment installation cost. 711tid. 7zIbid. 101 Dual Operation - $2,000 (5 employees for 1 nonth) Feasibility Study - $9,000 (30 man days O’$300/day) If the HmMAC is selected: 9 Total tile to handle 10,000 daily transactions - A hours per day. Total one-time monthly costs - A $ 1,750 (anortised over 5 year period) Total recurring monthly costs - 9,000 Total Monthly Cost $10.750 (point-oi-eale equipment not included) (Zone Concept) This approach would handle all internal information generated for a group of hotels (3 to 6, associated or not) by the utilisation of the Minneapolis-Haleywell H £00 computer system. This computer does not have randon access capabilities and leases for $10,000 per month. The advantages and disadvantages of the acne concept are as follows: 1. There may be a greater payroll savings realised than in the two pre- vious approaches due to the larger number of employees involved. 2. Guest ledger would be produced twice per day. Additional charges would have to be manually posted in event of guest check-out. This may be detrimental. 3. Costs are shared by several hotels, making it possible for smaller hotels to utilise the more powerful equipment. 5. 7. 8. 102 Programming and conversion could require approximately two to three years to complete. 73 Several problems arise as to conformity of operations where different hotels are involved. High programming costs and a more complex switching or’multiplexing problem would arise. Duplication of equipment would be necessary in the event of breakdown. Total time to handle room, food and beverage, reservations and 7b accounting for one hotel - approxinately 1} hours. This nay not be sufficient utilisation of the equipment for the cost involved. IIIIIIAIBIII Payroll Costs per'month - $6,300 (includes 7 programners and/or systems analysts) Progranning Costs - $120,000 (estinate) Installation - $120,000 (estimate) Line Charges - $10,000 (estimate) Dual Operation - $20,000 (6 employees from.6 hotels for z nonths) Feasibility study cost - $18,000 (60 man days 0 $300 per day) Total one-time monthly costs - $ 0,867 (amortised over 5 years) Total recurring monthly costs -‘ 16,300 Total Monthly Cost $21,167 (To be shared by par- ticipating hotels, 3-6 maximum. Includes one computer system only. Two would be necessary.) 73"Pluoboerd Thinkino.” m m £12m W mm. Jun. 1959. ’0 11a 7‘Iistimate fron Minneapolis Honeywell, Septeaber 1960. 103 We: Again, this solution as the previous one, would find.its greatest economical advantage if used by a group of hotels, affiliated or'not, since the total volumes of information available are the basic success ingredients. The group of participants may consist of a larger number of hotels limited only by the geographic distances which may make communi- cation ea line charges prohibitive or limited by the sise of workload requirhng a second and third shift operation. Information processing would be done by a medium sise conputer system and would imnediately handle all statistical reports, reservations and possibly, at a later date, he axe panded to include the centralised purchasing and payroll functions. It would not be required to handle daily activities at an individual hotel but would function more as a top level centralised management tool. The Minneapolis-Honeywell H 800 is used as a choice of equipnent. The system rents for $20,000 per’month and does not have random access capabilities. By utilisation of a tape memory, it has virtually unlimited capacity for retention of information, and is capable of handling eight prograns simultaneously. Its smaller relative, (H 000) although less expensive, can process only one program at a time. General advantages and disadvantages to this approach are as follows: 1. Line costs for transmission of inputs would be a large factor unless hotels are located in the sane general vicinity, or unless each hotel accumulates information manually, mails it to a central point for conversion and.manipulation. This last method appears to be the most economical. 2. 3. 5. lot No particular payroll savings will be realised since local personnel are not directly affected. However, definite intangible savings should be realised by management's ability to visualise trends more quickly, institute required changes promptly, and have in a relatively short period of time, critical information previously too expensive to accumulate. The system will require the hotel employees to become cognizant of the fact that automation is in process, giving each one time to ”live with the idea” of data processing. This may be useful in the event of future applications of sea within the hotel. It creates standardisation of information mannually picked up for processing. 9 This concept is the nest difficult to sell management since it lacks the payroll savings aspect. It requires very little manipulation of figures by hotel, other than daily ones, since the weekly, monthly, bi-monthly, yearly forecasts, financial and statistical reports now done locally would be centrally processed. .llllnflllnlll Payroll Costs - $11,500 per'month (includes 15 programmers or systens analysts) Programming Costs - $100,000 (estimate) Installation Costs - $100,000 (estimate) Dual Operation and Conversion Costs - $10,000 (13 people for 2 mo.) Feasibility Study Cost - $18,000 (60 man days 0 $300 per day) 105 Total Monthly one-time costs - $35,000 (amortized over five years) Total monthly recurring costs - 35.500 (manual delivery of input intonation) Total Monthly Costs $70,500 (to be pertioned among . participating hotels) The manufacturer has completed his part of the analysis with the presentation of one or several proposals similar to those above. Each figure would be supported by copies of computer-run charts showing basis for time estimates necessary to solve the hotel ”operation specifications." There would also be an indication as to delivery‘date of equipment; neces- sary steps to train and indectrinate the hotel personnel to perform EDP Jobs; and detailed characteristics and specifications of the equipment. 75 75Neuschel, 93. 91.1., p. 260. "ITlflflififlfljflfifl'fliflw'flmflITS