The Computer as an Analytical Management Tool
What follows represents a distillation of the writer's 1960s Aer Lingus computing experience into a short paper, under the above title, which was published in the August-September 1970 issue of Léargas, the publication of an Foras Riarachain, the Institute of Public Administration. It is techno-economic, but also has a socio-technical dimension.
There are two distinct and largely unrelated fields of work in which the computer has proved to be useful. These may be defined as the 'commercial' and the 'scientific'
The commercial field seems to me to possess in most cases the following features:
(a) handling large volumes of data on a routine basis;
(b) restriction of the analytical capability of the computer itself to a few elementary operations;
(c) domination of the computer management by people who tend to be technique-oriented;
(d) preoccupation of the technicians with micro-problems;
(e) a tendency for programmes once written to be inflexible and difficult to adapt to take advantage of opportunities not seen at specification-time.
The scientific field, which developed earlier, has remained in a world of its own; sophisticated numerical analytical techniques for solving difficult problems at the frontiers of knowledge have occupied the minds of the vanguard. Bread and butter is earned by engineering calculations: stress analysis, aerodynamics etc.
Commercial computer installations tend to be restricted by their place in the organisation to remain at the clerical rather than the analytical level. Installations connected with firms where technology is important tend to be under the engineers, and to be staffed by people for whom the solving of the stress equations is the main object in life.
There is fruitful work to be done in the bridging of these two worlds. This does not occur automatically. I have personal experience of one UK manufacturer of sophisticated hardware who was trying to sell it to Irish users, failing to make the sale. It turned out that his computer was under the control of the engineers, but that his sales department were doing longhand calculations to estimate how the hardware would work out in the prospective.Irish customer system.
It happened that the Irish firm possessed a micro-economic model of its production system, which had been developed for the purpose of choosing between the firms which sold hardware. On the basis of this model, the Irish firm bought hardware from a US competitor.
This story has in fact occurred twice in my experience, the second case being a matter of choice between two US firms.
(The hardware was aircraft, and the firm was Aer Lingus. RJ April 2001)
The moral of this story is that there is scope for the development of micro-economic models to check out if the capital it is proposed to invest in the new hardware will in fact pay off.
The Irish computer scene lends itself particularly well to the development of this type of computer application. Our universities produce many good analytical minds, who aspire to be among the world innovators. Often they look to the technologies of the large nations for their fulfilment, They have not yet realised that our future, as a nation with know-how and expertise, is to jump in and excel where the giants are blind.
Our economic life is not dominated by sophisticated hardware-producers in competition with each other. We can therefore apply our expertise to choosing between the produce of the giant competitors, as it can be used in economic applications in Ireland, or in any other small or medium economy.
In other words, we can set our minds to contracting to build models of economic systems to run on computers, use them to choose what hardware we buy in our own applications, and we can export this as a service to those who need it.
This type of computing is neither commercial data-processing nor is it in the tradition of scientific computing. Nor is it simply a mixture. It is best described as a bridge. It takes the technical coefficients from one side and the unit costs from the other and blends them into a model of an economic system interacting with an environment, subject to technical, marketing, policy etc constraints.
The type of mathematics used comes easily to the computer man who has grown up on the scientific side. There is more to it than mathematics: one needs a sense of scientific analysis when it comes to organising and clarifying the data. It is here that the would-be model-builder runs into the morass of the commercial data-processing world.
It is rare to find a commercial system that abstracts and classifies in such a way as to provide good inputs for an economic model. It will count nuts and bolts, and keep track of the money, but it seems rarely to occur to a commercial system analyst that there might be an interest in classifying costs on the basis of their dependence on capacity, or load, or event-counts, or any appropriate easily measurable statistic. Thus the planning model-builder often has to rely on manual input.
This, while being a weakness in that it makes it hard to link a planning model on to a data-processing system in a large organisation, is a strength in that it means that the model must be economically constructed with much thought put into selecting the really significant features. Micro-economic model building is therefore a mobile, portable, exportable asset.
Nor does a micro-economic model necessarily involve a large computer. The easiest way for this type of know-how to spread is to have cheap hardware readily available, without the need to queue for service. The model referred to above which caused concern to the UK manufacturer was developed on a small machine now regarded an obsolete and unsaleable by the computer manufacturers. Yet it is still perfectly serviceable. Such machines could be used to generalise the knowledge of how to solve problems on computers; it would be quite possible for the State to buy up all the 'obsolete' equipment for a song, organise a group to maintain it, and make computing services available cheaply to every town, technical college, vocational school, secondary school, firm and farm in the country, This, rather than some centralised super-machine, for which 100% utilisation is the dominant goal, is the way forward.
Some Techno-economic Modelling Concepts in 1970
After leaving Aer Lingus I attempted to promote the feasibility of computer use in 'what if' scenarios, and I ran a few seminars, mostly with postgraduate students, or at Operations Research Society events, for which I prepared some notes. These are not worth reproducing, as they are somewhat constrained by the then accessible technology, which was dominated by Fortran programming on a mainframe computer. They usually involved using a mainframe in quasi-conversational mode: do a run, look at the printed results, change an input punched card, and do another run, etc. This could often be done hands-on at night.
The notes cover the following processes:
Evolution of a herd of livestock, taking into account the non-linear relationship between feed regime and animal weight, and a time-dependent price environment.
Overhead Costs and Manpower Planning: this constituted an attempt to relate management productivity to the variability of operating statistics, and introduced the 'entropy' concept. Scale economics were related to management costs as well as production unit-costs; large volume helps to smooth the statistics. Middle management costs were related to the variability of the statistics of their processes.
An airline 5-year plan, in two phases, the first being based on revenue, direct costs and projected operating statistics dependent on abstraction and analysis of current statistics. The second phase analysed route profitability after spreading all overhead costs in a manner related to route characteristics. The problem of how to interface the planning statistical database with the current routine data-collection system was addressed, specifying an abstraction process.
The two processes noted above were the basis for the somewhat negative episode noted on June 11 1967 in the Greaves Diaries.
Economics of Real-time Reservations Systems was treated in terms of accuracy and updating lag-time, and the relationship of these variables with the 'no-show' and 'no-record' statistics.
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Copyright Dr Roy Johnston 1999