Spring Street Company (SSC) wanted to reduce the “hidden costs” associated with its paper-intensive processes. Employees jokingly predicted that if the windows were open on a very windy day, total chaos would ensue as thousands of papers started to fly. If a flood, fire, or windy day occurred, the business would literally grind to a halt. The company’s accountant, Sam Spring, decided to calculate the costs of its paper-driven processes to identify their impact on the bottom line. He recognized that several employees spent most of their day filing or retrieving documents. In addition, there were the monthly costs to warehouse old paper records. Sam measured the activities related to the handling of printed reports and paper files. His average estimates were as follows:

a. Dealing with a file: It takes an employee 12 minutes to walk to the records room, locate a file, act on it, refile it, and return to his or her desk. Employees do this 4 times per day (5 days per week).

b. Number of employees: 10 full-time employees perform the functions.

c. Lost document replacement: Once per day, a document gets “lost” (destroyed, misplaced, or covered with massive coffee stains) and must be re-created. The total cost of replacing each lost document is $200.

d. Warehousing costs: Currently, document storage costs are $75 per month.

Sam would prefer a system that lets employees find and work with business documents without leaving their desks. He’s most concerned about the human resources and accounting departments. These personnel are traditional heavy users of paper files and would greatly benefit from a modern document management system. At the same time, however, Sam is also risk averse. He would rather invest in solutions that would reduce the risk of higher costs in the future. He recognizes that the U.S. PATRIOT Act’s requirements that organizations provide immediate government access to records apply to SSC. He has read that manufacturing and government organizations rely on efficient document management to meet these broader regulatory imperatives. Finally, Sam wants to implement a disaster recovery system.

Prepare a report that provides Sam with the data he needs to evaluate the company’s costly paper-intensive approach to managing documents. You will need to conduct research to provide data to prepare this report. Your report should include the following information:

1. How should SSC prepare for an ERM if it decides to implement one?

2. Using the data collected by Sam, create a spreadsheet that calculates the costs of handling paper at SSC based on average hourly rates per employee of $28. Add the cost of lost documents to this. Then, add the costs of warehousing the paper, which increases by 10 percent every month due to increases in volume. Present the results showing both monthly totals and a yearly total. Prepare graphs so that Sam can easily identify the projected growth in warehousing costs over the next three years.

3. How can ERM also serve as a disaster recovery system in case of fire, flood, or break-in?