Cornerstone Communications
Margin Compression
Making the Transition to a Paperless Office:
Learn How Inefficient Document Management Affects
Bottom Line Profits up to 2%
 
What is Margin Compression?
Companies have found themselves squeezed in today's business environment. Input costs have risen but the market has not accepted price increases to cover those costs.  As matter of fact, many companies have often been forced to lower prices or increase promotions to stimulate demand. The result of these activities has been a very negative pressure on margins.  The input costs that cause this pressure can come in many forms:
  • Insurance costs
  • Labor costs
  • Gas prices
  • Product costs
Today we are going to explore margin compression from a non-traditional view, Documents. Specifically, the affect that creating, distributing and storing documents has on margin compression.
 
Yesterday’s Document Management Reality,  Holy Grail =“Paperless Office”
Basically, the Holy Grail of the “paperless office” was introduced with the advent of the PC. We were told that we going to be more efficient, eliminating these cumbersome steps involved in creating a document:
  • Manually creating a document
  • Physically walking the document to its destination
  • Paying for document delivery
  • Manually filing or retrieving a paper document
Since then, we have all come to realize that the Holy Grail is a myth! Today, we are running to the printers to get our documents, standing in line at the fax machine, physically stuffing envelopes and applying postage, wasting office space with document files, and vainly searching for document files.
 
Today’s Document Management Reality
  • Documents in American businesses have increased 500% 
    Document Processing Technology
  • Average white-collar employee generates 12,000 documents per year 
    UC Berkeley
  • Volume of document generation is growing at the rate of 22% per year
    UC Berkeley

 

 Why be Concerned About the Rapid Growth of Documents?
  • 90% of corporate information is contained in documents
  • Documents convert Information into Action:
    • Invoices into Cash
    • Purchase Orders into Product
    • Bills of Lading into Shipment

 

Documents Cost Corporate America up to15% of Their Annual Revenues

Why is this the case?

  • Document costs are invisible.
  • No one has ownership of the day-to day activities and the costs associated with documents.
  • There is no director of documents or manager of the document lifecycle.
  • No P&L Line Item that says, “Your documents are costing you “x” amount.”
  • Document costs are blended into a multitude of expense accounts, such as office expenses, postage expenses, rent or leases, supplies, printing expenses, depreciation, wages, health care, bonuses, etc.

 

Questions to Ask Yourself About Your Document Process

  • Do you have a document strategy?
  • Do you know what it costs to create a document?
  • Do you know what it costs to distribute your documents?
  • Do you know what it costs to store your documents?

Business As Usual: Steps Involved in Creating, Distributing and Storing Documents

Create

  • Enter data
  • Hit print
  • Walk to printer
  • Check printer for pre-printed form
  • If no form in printer, walk to storage room
  • Walk back to printer
  • Setup printer

Distribute

  • Release batch for printing
  • Walk back to printer to collect documents
  • Distribute documents internally
  • Walk through office to the correct destination
  • If faxing, wait in line at the machine
  • Create cover page
  • Wait one minute per page to fax and receive confirmation
  • Distribute documents externally
  • Sent via facsimile of mail
  • Walk to mail room create mailing label
  • Apply label
  • Stuff Envelope
  • Apply the ever-increasing postage

Store

  • Make copy of the file
  • See if there is an existing file
  • If no existing file, create file with appropriate label
  • File by customer name or number?
  • File from back to front or front to back?
  • File by document type?
  • Is there a duplicate somewhere on a co-workers desk?
  • Walk back to desk, chat to co-workers on the way, while getting a pop or coffee

Business as Usual vs. Document Management

  • 1 person generates 50 documents per day
  • $4.37 per document
  • $4,370 per month
  • $52,440 per white collar employee per year

Where Do these Costs Come From?

  • White Collar Labor
  • Copier Usage & Maintenance
  • Printer Usage and Maintenance
  • Filing Supplies
  • Filing Cabinets
  • Envelopes
  • Mailing Labels
  • Postage
  • Fax Machine Wear and Tear
  • Facsimile Phone Charges
  • Plain Paper
  • Preprinted Forms
  • Cost to Design Preprinted Forms
Business as Usual

Document Management
– Document Creation $1.40 - Document Creation $0.00
– Document Distribution $1.67 - Document Distribution $0.07*
– Document Storage $1.30 - Document Storage $0.13*

How Much Are Documents Costing You Annually?

# of White Collar Employees

Ave. Doc. Generated

Annual Vol. Of Docs.

Ave. Cost Per Doc.

Annual Expense Of Docs

3 yrs. at 22% per yr.

Doc.Costs in 3 yrs. W/O Doc. Mngmt.

 

 

 

 

 

 

 

5

x 12,000 =

60,000

x $4.37 =

$ 262,200

x 3 yrs =

$ 390,258

10

x 12,000 =

120,000

x $4.37 =

$ 524,400

x 3 yrs =

$ 780,517

15

x 12,000 =

180,000

x $4.37 =

$ 786,600

x 3 yrs =

$ 1,170,775

20

x 12,000 =

240,000

x $4.37 =

$ 1,048,800

x 3 yrs =

$ 1,561,034

25

x 12,000 =

300,000

x $4.37 =

$ 1,311,000

x 3 yrs =

$ 1,951,292

50

x 12,000 =

600,000

x $4.37 =

$ 2,622,000

x 3 yrs =

$ 3,902,585

100

x 12,000 =

1,200,000

x $4.37 =

$ 5,244,000

x 3 yrs =

$ 7,805,170

250

x 12,000 =

3,000,000

x $4.37 =

$ 13,110,000

x 3 yrs =

$ 19,512,924

500

x 12,000 =

6,000,000

x $4.37 =

$ 26,220,000

x 3 yrs =

$ 39,025,848

With Document Management, You Can Reduce These Costs 60-96%. 

So, Why Have Only 1 out of 4 Businesses Adopted A Document Strategy?

Document Management Case Study: Fleetwood Folding Trailers
Fleetwood folding Trailers is the nation’s largest manufacturer of recreational vehicles. They found that sales were flat and expenses were rising. They decided to take a look at the items putting pressure on their margins. They focused on the cost of their documents. After assessing the affects of documents on their business they found that:
 
Before Document Management
  • Spending roughly $5,000,000 annually managing the lifecycle of documents flowing through their company
  • This equated to about 14.2% of their annual sales
After Document Management
Once they had realized the pressure, they focused on strengthening their document management. After applying Document management process and services
  • Fleetwood saw a 67% reduction in the costs associated creating, distributing and storing business documents
  • The ultimate result was a reduction on the compression of margins contributed by document management
How did Fleetwood achieve such dramatic results?
  • They stopped looking at documents as business as usual
  • They used a non-traditional approach and implemented document management processes and services
Start Thinking Outside the Traditional Box
"The way we manage documents has a great deal to do with the way we manage business"
Kevin Craine, Designing a Document Strategy
 
Today’s companies are struggling to fight margin compression through traditional methods and struggling to increase sales. Begin fighting margin compression by:
  • Starting to think outside the traditional box
  • Managing your documents more efficiently, while increasing your bottom line up t0 2%
What Next?
  • Determine the volume of documents generated everyday.
  • Find the cost to create those documents.
  • Analyze the cost to distribute those documents.
  • Calculate the cost to store the documents.
  • If you are surprised by your document costs, contact Cornerstone Communications

Click here for specific information about how Cornerstone's Document Management Products can bring your company into the age of the paperless office.

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