The Economics of Document Management Systems: How DMS Applies to Economies of Scale

People frequently use the term “economies of scale” to indicate that bigger is better. This simple explanation doesn’t do justice to the effect that economies of scale can have on your organization. The amazing thing is that you can apply economies of scale to all areas of your business, even your document management software (DMS). This article explores how your company can benefit from DMS with higher profits and savings.

Economies of Scale Defined

An economy of scale is a concept attributed to Adam Smith, an economist who lived from 1723 to 1790. The basic principle is that organizations obtain a cost advantage due to their size, output, and scale of operation. The cost per unit decreases with greater operational efficiency and scale. Therefore, a big organization should be able to create products that cost less per unit than a small organization, with all other things being equal.

This may sound complicated, but it’s actually very simple. Making a lot of products is cheaper per unit than only making a small amount of product. It may also take less time to create the product.

Part of the equation is that a big company may choose to produce only a handful of different items. Specialization goes hand-in-hand with achieving economies of scale, because switching production is costly.

Economies of Scale and DMS

What does document management software have to do with economies of scale? These two may seem unrelated, but the similarities aren’t far-fetched at all. Traditional record-keeping using papers and filing cabinets can be compared to small factory operations. Creating new paperwork, altering existing paperwork, finding specific documents, and organizing the paperwork is extremely time-consuming. The same is true for manufacturing widgets for a small company.

Now when you implement document management software, a lot of the hassles disappear. Your employees can create, edit, and archive documents much more quickly than before. There doesn’t need to be a delay in the hiring process because of tedious record-keeping requirements. You also don’t have to have as many employees in charge of record-keeping for your company.

The best part is that instead of having to scale up operations to achieve economy of scale, your company can take advantage of DMS that’s already in place by using eFileCabinet. There is no need to reinvent the wheel.

Lower Overhead Costs

Many companies are concerned with keeping overhead costs low to remain profitable. Did you know that using a paperless document management system can significantly lower expenses for your company? When you switch to electronic document storage, you don’t have to spend a lot of money on paper, printers, ink, filing cabinets, storage, and other stationary expenses. If you’re relying less on printers, you may also find that you’re not spending as much money on repairs and upkeep, either.

Lower Employee Costs

Your company needs employees in order to provide the products and services you offer your customers. But do your employees really need to spend most of their day with tedious record-keeping? Implementing document management software allows you to lower employee cost, which in turn can help your company grow.

The less money you spend on administrative tasks that can be streamlined and automated, the more resources you have to use for product creation, product innovation, and customer acquisition. Obviously, this has a direct effect on your bottom line.

Increase Employee Profitability

Many companies measure employee profitability by how much business an employee is bringing in. This is especially important for salespeople. However, you can increase the profitability of other employees as well. For example, with DMS your human resources employees can focus their efforts on employee training and satisfaction instead of doing repetitive paperwork.

If your employees were free to brainstorm solutions for your company instead of bogged down with finding documents, how many good ideas could they generate to improve employee retention? You may not be able to measure the difference very accurately, but increasing your employee’s productivity will result in a more profitable business. And while paperwork has to get done, most people ever felt productive after spending 5 hours looking through filing cabinets in their office.

Increase Your Response Time

How long does it take you to create a proposal for a client? How much time do your employees spend on tracking down the paperwork they need to set up a new contract, hire an employee, or start production of a new product?

Using DMS can increase your response time enormously. Your DMS gives you faster and more accurate access to information you need. This increases your workflow productivity, but it also improves your quality perception for your customers. Sooner or later, this will result in more profits for your bottom line.

As you can see, document management software is an easy way to achieve economies of scale without the need to invest a lot of capital. Let us show you how eFileCabinet can help you by starting your free demo today!

By | 2016-12-15T11:59:12+00:00 December 7th, 2015|
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