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No matter how much we automate, it seems the
requirements of hard-copy records will continue to cause
managers to manage paper. Typically, this task is assigned to
junior staff and is seldom considered in reorganizational
reviews. Hard-copy records are ignored until needed. Until
disaster strikes a records management center, many consider
the documents to be nearly worthless. During a meeting, held
at a General Services Department I managed for a $5 billion
savings & loan association, the Director of Security told
those assembled that, "The value of our stored records was
greater than all of the vault cash within the entire
forty-seven branches." He was referring to the fact that these
documents provided a means of reducing liability in instances
of claims against the Association, and as a means of proving
financial liability of others, through property loans, etc.
As Budget Repair person, it is your job to reduce the cost of
operations and to reduce the threat of liability. That is why
we have legal documents such as the aforementioned Janitorial
Contract and insurance. Now you need to reduce your
presently budgeted, cost of paper handling AND the means to
prevent an unbudgeted expense, which could be even more
crippling. First off, let's talk about a means of generating
revenue from a present expense.
PAPER PROFITS
The primary difference between an expense and revenue is that
of perspective and experience. Many firms pay to have their
paper trash removed to dumps. You can immediately turn trash
into gold by utilizing local rubbish haulers. Many managers
aren't aware that office type, paper products are being
purchased by these haulers and sold to recyclers or placed on
ships for foreign recyclers. Initially, the hauler will quote
you his charge to you for removing the paper from your
facility. Oftentimes this paper is included in other disposed
items, and hauled at your contracted monthly rate. You need
only ask him, "How much will you pay me to take this paper
away?" His answer will surprise many to learn that paper can
earn anywhere from $20 to $60 per ton, depending upon whether
or not carbon paper, plastic tabs, etc. are attached to the
files being discarded. This price includes the cost of
trucking the stuff away. A recent client of mine at a Santa
Barbara hospital had 2,300 storage boxes (40 pounds each) of
files to discard. The storage firm asked the hospital for $900
to haul it to a land fill. Also, the hospital would have to
pay a dump permit fee. As a result of my knowing what to ask
for, this estimated $1,200 liability was turned into a $2,760
return, for a difference of almost $4,000. Another example
of turning trash into cash occurred while I served as Manager
of General Services. The department had been paying $100 per
ton to have confidential records destroyed by a certified
destruction firm. As a result of my negotiation efforts, we
received the identical benefit AND a check for $15 a ton.
Let's face it, a vendor is not going to volunteer this
information, you are going to have to ask about it. The 90s
is the decade of the environment. Do not limit your recycling
attention to only paper. Almost any item that is similar and
in quantity is a good prospect. Some firms utilize compactors
to bale cardboard, others resell petroleum products, and some
recycle metal and plastics. Just because it has always been
done a certain way, is no reason to continue a practice.
Challenge the past! Call vendors outside of your immediate
area and ask the right question, mainly, "How much will you
pay me for my excess scrap?" If your volume is small, you may
have to deliver your discards, in which case, you will have to
complete a value analysis to determine the feasibility of
recycling a particular item.
PAPER HANDLING
What would your firm do if its records were lost as a result
of a natural disaster, such as a fire or earthquake? Some
studies have indicated that, because most of what we do in
daily business is paper oriented, 70% of today's businesses
would fail if they had a major fire. Fail! I think most would
agree that business failure is the ultimate budget buster.
Many organizations handle paper the same way it was handled
fifty or more years ago. The only exception may be that of
using color coded tabs or other visual identification
appendages. Upon close examination, most organizations spend
a large sum to store and manage paper records. Let's look at
some statistics. Research conducted by Bell & Howell, the
Association of Records Managers & Administrators (ARMA), and
Dartnell Institute of Research indicates that an average
company with 10,000 file folders spends almost $30,000 for
managing them. The costs of $14.00 per filing inch includes
storage space, labor, supplies and equipment. And, 1% to 5%
of all paper records are misfiled. The average cost of
searching for that misfiled record is about $100 of labor and
opportunity cost. Using an average of 3% misfile rate and
10,000 papers, you can project 300 misfile occurrences per
year. The total hard and soft-dollar expense of managing a
Charles Dickens era type of records storage department,
utilizing the aforementioned volume figures is:
Annual file maintenance expense $30,000
Annual misfile expense $37,500
ANNUAL TOTAL EXPENSE FOR 10,000 FILES $67,500
Misfiles occur because (i) unable to determine correct record
location, (ii) carelessness, (iii) unable to read folder
identification, and (iv) workload stress results in
inaccuracy. You should be aware that almost 80% of record
storage and maintenance is labor, with equipment and space
eating the remaining 20%.
WHAT TO DO
The alternative to paper storage is to transfer the document
images to either microfilm or optical disk. Regarding the
legality issue, the courts and the I.R.S. will consider any
storage media that does not allow a document to be altered.
The storage media must allow for a readable/portable image,
such as a photo or a paper copy.
Regarding the destruction of the original, following image
transfer, the courts have ruled that a photocopy of an
original becomes the original, in the absence of said
original.
Regarding the choice of microfilm versus optical storage,
the most economical is that of optical storage. My perspective
as both a manager of a 10,000-square foot, records storage
department, containing its own microfilming center, as well as
consultant for the "Canofile Optical Disk" Records Storage
System, allowed me to see both sides of the records issue. As
Records Center Manager, I compared the cost to microfilm
original documents to the cost of storage. If your ceilings
are high enough so you can utilize cubic-foot versus
square-foot storage costs, it is cheaper to store paper than
to microfilm it. However, if you recall that about 80% of all
records costs are labor, then the figures have an inverse
result. To illustrate a paper versus an image storage
system, I will utilize an analysis and proposal that I
completed for a potential client. This analysis is typical but
will vary on the number of records stored and how records are
handled. Only the name has been altered, to preserve the
privacy of the firm. I believe you will find this useful in
creating your own analysis. The following is an analysis
prepared for The Title Company. This analysis will accomplish
several things. First, herein is contained a description of
the firm's current filing system and some of the difficulties
faced with it. In addition to pinpointing the difficulties,
the implications of these difficulties are discussed.
Second is a description of the proposed system and some of its
features. These features will be discussed in relation to how
they will provide solutions to the firm's problems. The
implications or benefits of these solutions will also be
addressed. Finally, this analysis concludes with a cost
analysis and justification which shows the monetary savings
the proposed system will provide.
CURRENT SYSTEM
The Title Company currently utilizes a manual, paper, filing
system to store all of its important documents. These
documents are not stored in a fire-proof environment. Staff
are tasked with retaining the documentation on all Escrow and
Title transactions. The files are stored by transaction
number. Most activity is completed prior to storage of the
file.
For Title transactions, the sequence of handlers are: the
Title Officer, who hands a completed portion of the file to
the bookkeeping department, who forwards it to Typing, who
sends it to the Title Assistant for proofing, who sends the
appropriate documents to the Customer, with the completed file
terminating on the Shelf.
For Escrow transactions, the Escrow Officer hands a
completed portion to the Escrow Assistant, who completes the
bookkeeping, with the completed file terminating on the Shelf.
The files must be kept for five years. The Title Company
currently has approximately 19,500 files, accruing at a rate
of approximately 4,500 per year. Due to the recent economic
slow down, 1990 files accrued approximately 4,000 files, while
1991 is estimated to accrue approximately 3,200 files. These
files are occasionally accessed by staff.
These files have some very important special
considerations. For obvious reasons they are legally
sensitive. If a file were lost, The Firm would lack the
evidence or paper trail to protect itself from a claim. In
addition, the files are confidential because of client privacy
rights. For both of these reasons the security of the files is
very important. The files are currently stored within five
locations, with one location being a remote storage site.
The benefits of the current filing system are the following:
* Most of the files are easily accessible and within close
proximity to everyone who needs them,
* The response time to customer needs is relatively good with
the current filing system.
The shortfalls of the current filing system are:
* Current filing methods prevent adequate disaster recovery or
prevention and pose a financial risk in a natural disaster
such as an earthquake or fire.
* Some files are stored in an off-site storage facility that
is not easily accessible, generating a variable expense.
* Some files are stored in a basement, generating a variable
expense.
* When misfiles occur, it is very difficult and time consuming
to find a file.
* There is a security risk because the files are not kept
locked as they are too bulky.
* Too much time is spent on filing and refiling: professionals
should be accomplishing other projects.
Some of the implications from these shortfalls are as follows:
* The Firm could suffer monetary loss if a file was lost.
* In the event of a natural disaster or accident, The Firm
could not easily reconstruct its work-in-process, which could
result in a loss of client confidence and monetary loss.
* Due to earlier staff cutbacks, the task of filing is in the
hands of more talented and expensive staff.
* The working environment is not as positive as it could be,
as staff are not working as productively as they could. This
costs The Firm money.
* Files could be removed from the premises. This could result
in a monetary loss.
These problems and implications can be summed up in three
words -
1. space,
2. time,
3. money.
PROPOSED SYSTEM
The proposed system for The Title Company is the Canon
Canofile 250 Electronic Filing System. This system utilizes
optical disk technology to capture images of documents, on
disks, for easy storage and retrieval. Using the optical
disk system, The firm would scan files onto the disk, upon
completion of the client's file. The files could be
cross-file-indexed by transaction number, client name and
date. Due to the volume of files, separate disks would be kept
for Escrow and for Title files. Disks could be given
passwords so that access to them would be limited. An average
of six disks per year would be required to handle Escrow files
while approximately twelve disks per year would be required to
handle the current quantity of Title files. Backlog files
would require approximately eighty-five disks. All Loan files
would be located at a centralized location. Print-outs of a
file could be made with a single command.
DRAWBACKS: A drawback of the optical disk filing system is
that there would be time and effort involved in the conversion
process.
BENEFITS: Some of the benefits of the optical disk system are:
* The threat of business disruption or liability will no
longer pose a threat during an earthquake or fire, because the
optical disks can economically be stored in a fire-proof
environment. Also, duplicate disks can be easily created and
stored off- site.
* Space requirements for files will decrease by 99%.
* Time spent on filing and retrieval will be cut to a minimum.
* Passwords can be used to access a disk so that information
will not be jeopardized.
Those benefits can be summed up in the phrase,
"More work will be accomplished in less time, with fewer
personnel and at a lower cost."
CURRENT SYSTEM
Storage: 198 square. Foot. off-site/ $200 per month = $0.99
square foot.
216 square. foot. basement = $0.50 square foot.
TOTAL MONTHLY VARIABLE STORAGE EXPENSE = $308.00
Labor: One full time filing clerk = $1,387.00
(a recent staff cut-back has eliminated this expense, as the
burden has been shifted to others)
Supplies: 3,000 file folders x $0.15 = $450.00
TOTAL COST ALL STORAGE AND MAINTENANCE PER YEAR = $20,790.00
ADJUSTED TOTAL COST ALL STORAGE AND MAINTENANCE PER YEAR
$8,310.00
(25% or $347.00 monthly labor cost has been adjusted to
reflect needed file maintenance, as this task must be
performed, and salary must be paid to current staff. Labor
cost is also adjusted to reflect a realistic reduction of the
work load)
PROPOSED SYSTEM
Storage: 864 Escrow files x 80 pages per file @ 13,000
page-disk = 5.32 disks
2,336 Title files x 65 pages per file @ 13,000 page-disk =
11.68 disks
TOTAL DISK STORAGE FOR 1991 FILES = 17
TOTAL DISK EXPENSE FOR 1991 FILES = $3,910.00
Equipment: Canofile 250 is proposed with a 7 year amortization
schedule, as 10 years is unrealistic. This figure was derived
by dividing $14,500 by 7 and multiplying it by 10. A
replacement unit would be considered after seven years.
$14,500 for Canofile 250, Keyboard, File Print 100
$14,500 @ 7 year depreciation = $2,071.43
Labor: Scanning time = 864 Escrow files x 80 pages per file @
40 pages scanned per minute @ 60 minutes per hour x $8 per
hour = $230.40 (28.8 annual hours)
Scanning time = 2,336 Title files x 65 pages per file @ 40
pages scanned per minute @ 60 minutes per hour x $8 per hour =
$506.13 (63.27 annual hours)
File Preparation (disks are rated with a 10 year life span,
therefore the disks would be reused for future files, thereby
reducing true conversion cost) time = 75% of scanning time.
$506.13 + $230.40 x .75 = $552.40
TOTAL LABOR EXPENSE FOR 1991 FILES = $1,288.93
TOTAL ANNUAL COST OF CURRENT SYSTEM = $8,310.00
TOTAL ANNUAL COST OF PROPOSED SYSTEM = $7,270.36
COST SAVINGS WITH PROPOSED SYSTEM = $1,039.64
CONVERSION COSTS
The optimum plan would be to eliminate the variable storage
expenses first. The rental space is holding approximately 50%
of all stored files. It is suggested that the most recent 50%
of existing records be placed upon optical disk. The oldest
records would be stored on the first floor and discarded upon
maturity. That discard effort would eventually allow for
desperately needed supply storage.
Labor: 15,000 Title files @ 2 x 65 pages per file @ 40 pages
per minute @ 60 minutes per hour x 1.75 preparation x $8 per
hour= $2,844 (355.47 hours)
4,500 Escrow files @ 2 x 80 pages per file @ 40 pages per
minute @ 60 minutes per hour x 1.75 preparation x $8 per hour
= $1,050 (131.25 hours)
TOTAL LABOR HOURS = 486.72
TOTAL LABOR EXPENSE = $3,894
Supplies: 667,500 pages @ 13,000 pages per disk = 51.35 disks
51 disks x $230.00 = $11,730 @ 2 * = $5,865
TOTAL CONVERSION COST = $9,759
TEN YEAR COST COMPARISON
Current System
Storage & Supplies............$41,460
Labor (adjusted). ..............$41,640
TOTAL
$83,100
Proposed System
Equipment.........................$20,714
Maintenance......................$14,500
Conversion Labor................$3,894
Disks (103 total).................$23,690
TOTAL
$62,798
OVER THE LIFETIME OF THE OPTICAL DISK PRODUCT, THE TITLE
COMPANY WOULD SAVE OVER $20,000 OR 24% and IMPROVE UPON STAFF
ACCESS and PROVIDE DISASTER PROTECTION.
MICROFILM VERSUS OPTICAL DISK
Now, let's compare the lifetime, operating cost of a microfilm
environment to that of an optical disk system. Granted, the
desktop optical disk systems will not copy from 11" x 17"
computer paper. Assuming the bulk of your needs are from
letter or legal size documents, the following cost comparison
should be an eye opener.
When considering the comparison of an entire paper
reduction/retrieval environment, the savings gained through
the use of the Canofile 250 is even more compelling. After
all, copying documents onto another media is just the first
step in the paper elimination process.
Listed below is a comparison of the total costs involved to
operate an optical disk system versus a microfilm system. The
maintenance cost of each machine is listed below itself, and
is described as full service maintenance, not Time and
Materials maintenance.
5 YEAR EXPENSE COMPARISON
Canofile
3M Microfilm
$12,500 250 Canofile
$24,000 Rotary Camera
6,250 Maintenance
13,000 Maintenance
2,000 File Print 100
7,780 File Saver Software
1,000 Maintenance
2,000 Personal Computer
$21,750 TOTAL
8,000 Reader/Printer
4,000 Maintenance
1,440 Additional Space Cost
$60,220 TOTAL EQUIPMENT
$90,000 Dedicated microfilm labor $ 6,300 General and
Administrative overhead of 7%
$156,520 TOTAL OVERHEAD & EQUIP.
Unlike microfilming efforts, the Canofile does not require an
additional labor factor. The labor that is presently being
expended by staff to, (i) create folders (ii) sort and insert
documents into file folders (iii) retrieve records from
folders and (iv) search for lost records, is equally expended
through the use of the Canofile. Canofile is merely altering
the method of storage at the user level.
The 3M Microfilm Reader/Printer consumes 3 x 4 = 12 square
feet of floor space, while the Microfilmer consumes 3 x 4 = 12
square feet of floor space. When one completes the math, 24
square feet x $1 per month x 60 months = $1,440 of additional
space cost that is not required for optical disk. Optical disk
systems require a desk or a six foot table.
The footprint, or amount of space required of the Canofile is
similar to a Personal Computer, thus reducing the need for
unique environments or expensive floor space.
When comparing the total machine life operating costs of this
optical disk system, $21,750, to that of a current microfilm
system, $156,520, you can easily see that the newer technology
actually costs only 13.9% of the Civil War technology. The
Canofile, in the above example, costs almost 86% less than
conventional microfilm. Not factored into this equation is
vendor profit, should this service be purchased from the
marketplace. To give you a bargaining edge, you should know
that the $12,500 Canofile selling price has a lot of
negotiating room, as the dealer net cost is about $8,000.
RESULT: By reviewing and modernizing your current records
procedure, you should be able to substantially reduce the cost
of handling vital records. It is probably the last place
anyone has looked, because it has always been done this way,
and because some managers may not have been aware of the
available technology or legal rulings that allow for image
transfer. For most firms, even if you have microfilm cameras,
you are spending too much. Remember, microfilm technology was
in place during the Civil War.
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