By Cary McGovern
ithout exception, records management is always less expensive than passive records storage. This column discusses the method that can prove it to your customer.
There are three typical ways that companies store their business records. These methods include storing them on site, storing them off site using their own personnel for retrieval and delivery, and contracting with a storage and retrieval service provided by a commercial source. Let's take a brief look at each of these methods.
Storing Records on Site
By far, the most costly of the three variations is storage and retrieval of business records on-site at the customer's own facility. The cost per square foot is generally two to three times higher than other storage-location costs. The hard cost of existing staff required to locate the records generally runs between $25 to more than $100, depending on the salary of the person "fetching" the record.
It is not uncommon for several staff members to search for hours to find a file. When they can't find it, the search escalates and management or professional personnel are brought into the "hunt." Missing and lost files are common in virtually all businesses.
Storing Records Off Site
The second method reduces the cost of storage by about one-half to two-thirds but increases the cost of retrieval since, not only is their own staff member still responsible for finding the file but, now, there is additional travel time required.
Outsourcing the Storage and Retrieval Service
This method is always the least expensive, since it is always a fixed cost for each retrieval and delivery. The storage charge is reduced to a monthly unit cost, so there is never a need to lease additional space. New boxes added to inventory increase the monthly cost only incrementally, based upon the increased cubic footage in storage.
Performing the Cost-Benefit Analysis
Let's begin the cost-benefit process with a couple of definitions and assumptions:
Definition: Storage is the cost of storing a unit record, such as a box or a file.
Assumption: Storage always costs something.
Definition: Retrieval is the activities surrounding locating, fetching and delivering a record.
Assumption: Retrieval always costs something; there is no such thing as free space or free employee time.
In order to determine the actual cost, you must discover and acquire several items while performing your site survey. (For more information about the survey process, you can refer to my past columns in Inside Self-Storage, or visit www.insideselfstorage.com or www.fileman.com.)
1. The location of all stored records.
2. The cost of the space of those areas. If the customer owns the building, ask what the value of the space would be if he rented it.
3. The hourly cost of the staff member who most typically retrieves the file or box. Add to that 25 percent for benefits and management overhead.
There are 10 steps required in this analysis:
1. Add the total cost of all storage facilities in which boxes are stored. Include closets, file rooms, storerooms and anywhere that boxes are stored. Count the number of boxes stored in these areas. Use a standard of 1.5 cubic feet for the average amount of space a box consumes. (Some boxes may be smaller--for example, the 1.2 cubic foot letter/legal storage container. Others will range well over 2 cubic feet. The 1.5 factor is considered an average size by the commercial records industry.)
2. Divide the total storage cost by the number of boxes. This number results in an average storage cost per box.
3. Determine the hourly cost of the employee that typically retrieves the file or box. Be sure to add at least 25 percent to that hourly cost to represent the benefits and management overhead related to that staff member.
4. Determine the average time it takes for the staff member to receive and interpret the request, plus the travel time to and from the storage location. Multiply the time in hours by the hourly salary rate plus the benefits factor derived in step 3.
5. Double the dollar amount determined in step 4. The staff member is not only taking the time to do the task, he is also not performing some other more important task.
6. Multiply your storage charge by 1.5 to compute average box-storage cost.
7. Add your retrieval cost to your base-delivery cost. (The base-delivery cost is the cost of the first unit delivered. Typically, deliveries have a base charge and an incremental cost for additional boxes.)
8. Add the average storage cost per self-managed box to the average retrieval cost in dollars. The result equals the unit-retrieval cost of self-managed records.
9. Add your base-delivery cost to the results of step 8. This equals your total unit-retrieval cost.
10. Compare the self-managed cost to your cost.
It is difficult to argue with the results of this analysis. Clearly, the commercial records center always has the edge on any self-managed facility, either on- or off-site. In fact, the services you provide are of great value to the customer as an outsourced service. Your customer requires fewer staff members, and the service results in a fixed unit cost for each box. Additionally, since you require a regimen to be followed for indexing and describing each box, you ensure that the customer can always find his records when he needs them.
Keep in mind that the cost of storage is the smaller part of the two costs involved in records management. Retrieval costs are always greater than storage. Do not to sell records management based on price; instead, sell it based on "value." So what is the value of records management for most businesses?
Value is found in the mind of the customer. What you value may be different from what your customer values. Value revolves many times around finding your customer's pain and healing it. Your records-management system will make his life simpler. Finding records will no longer be a problem. Lost and missing files will be a thing of the past. Remember to look for their "pain" when selling value.
Regular columnist Cary F. McGovern is a certified records manager and owner of File Managers Inc., a records-management consulting firm that also provides outsourcing services, file-room management and litigation support services for the legal industry. For more information about records management, contact Mr. McGovern at File Managers Inc., P.O. Box 1178, Abita Springs, LA 70420; phone (504) 871-0092; fax (504) 893-1751; e-mail: email@example.com; www.fileman.com.