So, You Want to Be in the Records-managementBusiness

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So, You Want to Be in the Records-managementBusiness

By Cary F. McGovern


If you own or operate a self-storage facility, you are already in the records business. There are undoubtedly records in many of the storage units that you already manage. So, you have by default become the literal burial ground of the records industry.

Records take the lowest priority in business until something goes wrong. Then it is catapulted from the lowest position to the highest overnight. So, what causes this to happen? Usually either litigation or an audit. A key record can't be found, and the boss is furious. That is when we hear the bellow from the executive suite, "Can't you keep things straight down there?" Of course, prior to that, the records department was given little funding and no resources. Records management is indeed the missing link in administrative management.

Why Records Management?

Every individual and organization must keep records--whether they like it or not. Usually they don't like it and want someone to do it for them. Organizations must keep records to fulfill legal, regulatory and fiduciary responsibility. They have no choice.

What's the Difference Between Records Storage and Records Management?

There are several levels of service in the records business:

  1. Passive Storage: This is where most self-storage managers find themselves. The customer comes in and places boxes and file drawers of records in your facility. He keeps the key and you collect a space rental fee.
  2. Active Storage and Retrieval: The first step toward records management is to store records on racks at a monthly cubic foot rate. Usually boxes are numbered and maintained by bin location. You provide pickup and delivery service for new cartons and retrieval of cartons for review. Charges are levied for retrievals, re-files and deliveries.
  3. Inventory Control Services: Sooner or later the customer realizes that he can no longer manage to find records when he needs them. The solution is simple. Inventories are gathered on one or more of three levels: the carton, the file within the carton, and the document within the file. Most companies that offer inventory services use an automated bar-code system. The customer is charged for the creation of the initial database and for updates of boxes coming and going.
  4. Extended Records Management Services: This encompasses professional records-management consulting services. It usually includes retention scheduling, active file management and expertise on developing records-management policy and procedure for the customer. Normally this is performed by a records-management consultant with the certified records manager (CRM) certification. These individuals are available as subcontractors in every area of the United States and Canada as well as, other countries throughout the world.
  5. Electronic Data Management: Records are in the process of becoming digital. We are in the midst of a paradigm shift from paper to electronic records. The shift may well take many years to complete. Managing electronic records has both high cost and high rewards. Services in this area range from computer back-up tape rotation to on-line data warehousing.

Storage Racking and Rates in Records Management

In records-management centers around the world, there are typically two methods of storing records. The most prevalent is in storage cartons. The less common is in file folders on open shelf racks. Let's look at each to determine which is most appropriate for your business:

Box Storage: The industry standard is the letter/legal size box. It allows for filing letter-size documents or files in one direction or legal-size files or documents in the other direction. It measures approximately 1.1 cubic feet and is called the one cube box. Although most commercial records centers will accept any size carton, it is advantageous to recommend that consumers move to the one cube box. This standardization will allow for maximum shelf utilization and ease of handling. Boxes larger and smaller are assessed a rate based on the number of cubic feet they measure, usually rounded to the next highest cube. Although rates vary greatly from location to location, it is usually assessed based on volume in storage, and may be the result of negotiation with the client. It is not uncommon for a commercial records center to charge rates that vary from 15 cents to 50 cents per cube. The rate structure is highly competitive in most markets.

File Storage: The most common open-shelf filing is performed for the healthcare industry. Medical records are more active and require quick delivery, so the standard is to maintain them on open shelves. It is appropriate to have a monthly rate per linear foot of files that includes retrieval and delivery. A linear foot is approximately the same size as a cubic foot. Charges range greatly per linear foot depending on the packaging of services included.

Rack Alternatives: Unlike self-storage, records-storage revenues are tied directly to the density of filing. The most important question always is, "How high is your ceiling?" In box storage, the most recommended shelving configuration is pallet racks nine levels high with two mezzanines. Mezzanines are walkways at the fourth and seventh levels. Although they are not absolute requirements, they certainly are recommended. As your records storage volume grows, the volume of retrievals grows proportionately. Pulling files and cartons from ladders is difficult and ineffective for personnel time optimization. Open-shelf filing systems usually have seven shelves that are approximately 72 inches high. Typically these are stacked on mezzanines where possible.

Pickup and Delivery Methods and Rates

There are two schools in this area of the business. The first is to provide services using your vehicles; the second is to outsource the service. I have concluded based on personal experience that it is best to provide both. As you grow, your delivery schedule will become more hectic. I have witnessed many debates about this subject, but I believe that the best scenario is to have one vehicle--usually a step van--and outsource the rest.

This will give you several benefits. Your van driver can build a rapport with the customers who are on his regular route, you will have a mobile advertisement that drives throughout the community and you have the flexibility of using regular and on-call couriers for other deliveries. Most communities have a number of independent contractors that are available on call or on certain high-volume days for deliveries. Additionally, it is very difficult to plan for "STAT" or emergency deliveries. Bonded courier services can provide this for you on demand. You may have several couriers on call who have been trained with your procedures and wear your T-shirt for delivery.

Charges vary for delivery services and are based on competition, distance and volume or number of pieces. Typically there is both a pull charge and delivery charge. The pull charge may be $1 to $5 and the delivery may be $3 to $50 depending on regular, emergency or evening delivery requirements.

Pickup Requirements and Charges

Since it is rare to have an emergency pickup, these can be scheduled over a weekly or monthly basis depending on the activity of the customer requirement. On regular, scheduled pickups, it is normal to have many boxes--25, 50 or more. Charges for this service are calculated using an hourly rate. Perhaps $25 per hour for one man, one truck. New cartons coming into storage from an existing customer may require a set-up charge for each box to be indexed into the computer system. New customer pickups are best done on a schedule basis at the least busy time at your operation--perhaps Thursday afternoons. Charges for this service range from free to an hourly rate. This will greatly depend on your marketing strategy. Most commercial records centers want as much volume as possible and will pay for the cartons to come in initially.

The cost of bringing a carton into storage is related to three components. The first is the assembly of rack for storage, the second is rack cost, and the third is the manpower and vehicle expense for the movement. The rule of thumb for this cost is that it usually equals approximately 75 percent of the first year's storage revenue. After the first nine months, the rack and move-in cost are paid for. After that the only direct cost to you is the cubic foot space in storage and your overhead. Since you effectively get 18 cubes per square in a nine-level racking system, your rental for one square equals the revenue of 18 cubes. If you want to compute the number of cubes that can be stored in your facility, simply multiply square footage by ceiling height and multiply that by 60 percent. Typically 40 percent of the storage space will be used for receiving, aisles, space between the ceiling and the top of the rack, and administrative space.

Carton Storage Volume Formula
square footage 20,000 sf
mutiplied by rack height x 20
multiplied by 60 percent x .6
equals # cubes 240,000 cubic feet

Offering Other Services

You may want to consider offering services along with the standard storage, pickup and delivery. The most common additional service is indexing. Indexing can be provided at three levels: the carton, the file and the document. It is rare to index at the document level unless there is some urgent need, such as litigation.

Carton indexing usually includes the following attributes:

Example
Customer name ABC Company
The record series (name) Accounts Payable Files
The department generating the record Accounting Dept.
Dated "from and to" represented in the carton Jan. 1996 to Dec. 1996
Alpha/numeric sequences "from and to" Alpha to Cable
Destruction date Jan. 1, 2003

Indexing

File level indexing is considered normal and can be quite profitable. Charges are based on keystrokes, hourly rates or sometimes an algorithm. My personal experience is that when managed well, this can offer a 50 percent profit margin. It is usually an easy sell to customers. File level allows ease of access for customers to find what they really need, avoiding the delivery of several cartons to find one item. Delivery can then be at the file level at a reduced rate. The best way to index at the file level is to set up a production shop. I have used 10-by-16-foot work huts with simple conveyers running through them. Typically, you can set up three work stations in this space. Staffing depends on your volume. For example, sometimes it's ideal to have one full-time person plus a relationship with a temporary agency to provide trained personnel on demand.

Other services range from professional records services, such as retention schedule, to managing on-site customer file rooms. Each of these opportunities deserves separate articles. You can offer these services by forming resource partnerships with professionals in your area. Electronic or digital records management services can also be provided through partners.

So what are you waiting for? Get going on developing your records-management business. Existing customers offer an excellent opportunity for a fast start. Additionally, a kick-off records management symposium can spark interest immediately. Whether your business plan calls for slow growth or a fast pace, you can have a successful addendum to your existing self-storage business.

Cary F. McGovern is president of Mandeville, La.-based File Managers Inc., which provides outsourcing services, file-room management and litigation support services for the legal industry, as well as records-management consulting services. Mr. McGorvern is a certified records manager and a frequent speaker for organizations such as the Association of Records Managers and Administrators, the Association of Legal Administrators, the National Business Forms Association, the Bank Administration Institute and the Association of Commercial Records Centers. He also is a contractor to Xerox Business Services as records-management consultant and has developed the XBS records/file-management product offering.
Mr. McGovern may be reached at (504) 845-1720 or via e-mail at fileman@acadiacom.net.

Construction Issues for Records Management

Constructing a building ideally suited for use as a commercial records center is very important to your financial success. There are several issues that should be considered.

  1. Location and access to downtown or business centers.
    The attractiveness of the commercial record center usually centers around ease of access to the primary customer locations in your community. Records centers that are strategically centered around the entrances to freeways have more appeal to customers who might need quick service. Hospitals are particularly interested in "STAT" service.
  2. Optimum ceiling height.
    Ceiling height is always the most important issue in any commercial records storage operation. The storage density is directly proportional to ceiling height, as is gross profits. One of the key formulas for success is usually the question, "How many cubic feet do you have per square foot?"
  3. Physical security.
    Records represent the corporate memory of any organization. They usually are of no concern until either litigation or an audit takes place. It is important to build into your facility access-control systems on all doors and premises protection including motion detectors. Additionally, bonding of employees coupled with a security of information training program will ensure customer confidence.
  4. Disaster avoidance and management.
    Disaster management includes things like fire-detection systems. These are important in addition to sprinkler systems. Although most communities require sprinkler systems, they can cause more damage than the fire itself. Cross bracing of racks is imperative for earthquake-prone areas of the country. There have been horror stories about racks that dropped like dominoes, even in small quakes. Disaster management should be an integral part of your daily operation. It must include data protection and back-up for your computer system.
  5. Electronic media facility.
    If you choose to provide electronic media storage, it is important to provide higher levels of physical security within your facility. Typically, the additional components are temperature- and humidity-control systems monitored 24 hours a day, fire-suppressant systems and moisture detection.
  6. Optimization of floor space.
    Floor-space optimization is important. The areas that you will define are administrative space, receiving area for pallets, aisles and project-support areas. Receiving areas are important since it is common not to shelve record boxes for several days after they are received. The most commonly referred to carton is the carton that was received yesterday. Placing cartons into temporary receiving areas saves labor cost.
  7. Mobile project work space.
    Project work is a major revenue producer for commercial record centers. This is discussed in the article. Building a small, moveable project room that can be relocated from facility to facility is important. Simple construction-type huts built with computer work stations and manual conveyers work well.
  8. Room to grow.
    You should always consider a location that offers growth potential. The average increase in storage just from existing accounts can be 15 percent to 20 percent compounded annually. No matter how well you plan, you will eventually run out of space. Of course, aggressive sales will make this happen sooner.
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