Purchasing a Shredder Vs. Using a Shredding Service

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Damian Wheeler
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1 White Paper: Purchasing a Shredder Vs. Using a Shredding Service Important Facts for Business Decisions October 2008 Brad Lewis President F & E Check Pros

2 Purchasing a Document Shredder vs. using a Shredding Service A case for Shredding: Information is key to everything in today s world. It has been said that Knowledge is Power and information is the basis of knowledge. Businesses have become increasingly aware that the information they possess is extremely valuable, and leads to profits. So much so that some businesses entire revenue stream comes from the gathering and creating of information. Conversely, businesses have become increasingly aware that this same information can undermine their profits when used dishonestly. As a business functions, information about its customer base, vendors/suppliers, personnel, HR and payroll are all gathered and developed some as assets, others as necessities. All of it is valuable to the business and can be equally valuable to its competitors or others with illegitimate interests. In the wrong hands, this information can be detrimental to the business, its customers, employees and shareholders. Plus, it is greatly coveted by wrong hands because it can potentially bring quick wealth simply, albeit illicitly or illegally. Consequently, data that must be retained for the purposes of doing business must be secured. Storing confidential data creates a liability as well as an ongoing and increasingly, growing expense. Documents and data no longer needed must be destroyed to minimize risk and disposed of to control expenses. The key word in that sentence is destroyed. No longer is it acceptable to simply throw away information. Consider this statement from the Federal Trade Commission Bureau of Consumer Protection. Trash can be a goldmine for an identity thief. Destroy confidential data so it can t be read or reconstructed. What s the safest way to get rid of documents and files you don t need anymore depends on four things: 1. Sensitivity of the information 2. Cost and benefits of the disposal methods 3. Changes in technology 4. The nature and size of the business With the increasing threat of identity theft and breaches of corporate security, laws passed by both federal and state governments obligate businesses to destroy documents deemed confidential (ie: personnel records, medical records, electronically deposited checks, etc.). Additionally document destruction is simply a good business practice. The bottom line is this: all businesses must have a document destruction policy in place and enforced. This doesn t apply to just one or two specific departments within a company. ALL departments within a business have the need for document destruction. The most secure, efficient, practical and environmentally friendly method of document destruction is proper shredding. Before delving into the argument of whether to purchase a shredder vs. using a shredding service, there needs to be an understanding of what to shred, when to shred and the different results of shredding.

3 Types of Documents that need to be Shredded: What documents need to be shredded? Here s a comprehensive list that can apply to any business. Note that the first two are mandated by law. Several of them are musts for security. All of them are necessary to be a good steward of sensitive information. Your business or industry may have some other specific types of documents outside of this list that need to be shredded. a) LAW: Personnel records that are no longer needed to be retained must be destroyed b) LAW: Medical records physical & mental health, dental, etc.; any documents which contain medical information; records that are no longer needed must be destroyed c) Company pricing both purchase & sell price lists, costing and margin reports must be destroyed to secure competitive advantage d) Customer lists must be destroyed to secure competitive advantage e) Marketing development both campaigns utilized and those that are scrapped must be destroyed to secure competitive advantage f) Financial statements must be destroyed to secure competitive advantage & protect from non-authorized viewing by personnel inside and outside the organization must be destroyed g) Any document with a signature on it must be destroyed h) Cleared checks business & personal, must be destroyed prior to disposal i) Personal documents: credit cards, statements, drivers licenses, pay stubs all must be destroyed prior to disposal If you have any questions at all on whether or not to shred something beyond this list, answer these questions: Does it need to be kept on file? ~ or ~ Can it be gotten rid of? If you need to get rid of it, is it publicly available information? If not, SHRED IT! Better safe than sorry. The Different Levels of Shred There are different types and levels of shred. Below is a list of the six different levels and what they mean to businesses. This should help any business understand what level is needed for their documents. Shred size is categorized by the level of security attained, established by DIN (Deutsches Institut für Normung), the German Institute for Standardization, and adopted by the National Association for Information Destruction (NAID) in the United States: Security Levels 1 through 5 with level 1 being the least secure, level 5 being high security. More recently, the U.S. Federal Government has added an additional level level 6 also adopted by NAID. Level 6 shredding provides an extremely high standard applicable to top secret government documents - primarily those that could compromise national security. Note the mention of FACTA (Fair and Accurate Credit Transactions Act) compliant shredders. FACTA outlines the appropriate disposal of credit reports and other financial information by businesses like banks, insurers, landlords, employers and more. If your business falls under compliance rules with FACTA, you need to use a shredder with an appropriate security level.

4 Security Level 1 (for shredding general internal documents good for high-speed shredding with slight discouragement of theft not appropriate for confidential records and documents containing private information or passwords): Strip Cut: 3/8 to 1/2 Crosscut: between 3/8'' to ½ wide x 1-1/2'' long and longer Security Level 2 (for shredding sensitive internal documents good for general business use to discourage attempts of theft - not appropriate for confidential records and documents containing private information or passwords): Strip Cut: 1/8'' to 5/16 wide Security Level 3 (for shredding confidential documents good for general business use): Crosscut: 1/8' wide x 7/8 to 3-1/8 long shredders in this category are generally considered a FACTA Compliant type paper shredder Security Level 4 (for shredding secret documents would meet FACTA compliance in all but extreme situations): Crosscut: 1/16" to 1/12 wide x less than 1 1/8" long shreddings must be less than square inches (60 square millimeters). Security Level 5 (for shredding of extremely confidential documents Department of Defense & National Security Administration level): Crosscut 1/32 to 1/16" wide x 5/8" to 1 shreddings must be less than square inches (20 square millimeters). High Security Level 6 (Approved by the NSA/CSS for top secret shredding not applicable to European Standards): Crosscut shreddings to be less than square inches! (1 mm) x (4 mm) approved NSA/CSS shred size (0.8 mm) x (4.5 mm) approved NSA/CSS shred size Contact a shredder professional with any questions about which level best applies to your business or situation.

5 o Explanation of what a shredder does A document shredder mechanically destroys documents. Some document shredders are designed to likewise destroy data storage devices like CDs, data tape cartridges, etc. Additionally there are machines specifically designed to destroy these specialty types of data storage. One that destroys hard drives would be an example. For the purposes of this paper, references to shredders are limited to document shredders. A shredder consists of a shredding compartment, a drive train (motor, gears and/or chain) to power the shredding teeth, a bin to collect the shreddings, a housing and the controls. Below is a list of some of the features shredders may have. Understand that not all shredders will have all of these features, and the inclusion of them can affect the final price. Auto-detection sensors to determine the presence of documents to be destroyed. When documents are placed into the shredder, the sensor will automatically power the shredding teeth. Safety Kill or Stop button. Auto-detection sensors to determine when the waste bag is full. This will cause the shredder to no longer operate. Auto-detection sensors to lock out the shredding teeth when the door is open. Very important safety feature. Continuous run (handy in shredding volumes of small documents like receipts and checks) Resettable circuit breaker that trips when the motor is overloaded. Auto-reverse that kicks the shredding teeth into reverse direction when the shredder is overloaded. Keyed lock-out to prevent unauthorized use. Two-stage or multi-stage drive for light vs heavy load shredding. Auto oiling (provides continuous oiling of shredding teeth and eliminates need to manually apply oil intermittently). Apply the types and volumes of documents your company needs to shred along with the security level needed by your business and you have a good, basic understanding of your shredding requirement. Now it s time to figure out which is best for your business: hiring a shredding service or purchasing your own shredder.

6 About Shredding Services: A shredding service will typically have large, high capacity shredders at their facility or in their trucks. The service then sends trucks to the client s location to pick up their documents to be shredded and shred them. Often, the service will install one or more secured bins in a business for employees to place their sensitive documents. Periodically (weekly or specified number of times per month) the shredding service will send a driver to empty or remove the bins from the business. Depending on the level of service, the secured documents may be shredded in the businesses parking lot on a truck equipped with a shredder or, more frequently, be taken back to a centralized shredding facility. Whether shredded on the truck or at a centralized facility, documents are rarely shredded beyond security level 1. At the centralized shredding facility, documents may or may not be sorted separating plain white paper from color paper. The documents are then shredded and bailed. Bales of shredded paper are often sold off to paper recyclers. About Shredders: For the best comparison against shredding services and an understanding of how to select the right shredder, a full description of the types of shredders available and how they work is essential. o Different types of shredders There are many different brands, styles and sizes of shredders, but they can really be grouped into three different categories: Consumer Consumer-grade shredders are made for light-duty, occasional use. These units are generally made with many plastic components including drive gears and stripper teeth, or low-grade steel which can dull or break easily. The consumergrade shredder is designed for home or small home office use. These units are typically offered through large office supply stores and internet sites. Prices generally range from $25 - $1,000. Caution: the size of the unit or the horsepower of the motor can be very misleading! Some larger units from brand names which also offer low-end models may have many of the same components as their lower-end counterparts. Many times these consumer units will have low-grade, large horsepower motors only to overcome the excessive friction in the inexpensively designed cutting compartment. Commercial/Business These units are made for medium to heavy volume internal business use from single office user to large departmental size. Typically these machines have very few or no plastic drive and moveable components. Commercial or Business-grade units feature high-quality components made for durable, long life including the cutting teeth, drive train, circuit boards, switches, sensors, housings, etc. Commercial grade shredders are designed and made for continuous run use for those heavy shredding days. Generally these units require very little service maintenance with repairs being few and far between. Repairs, when needed are at a

7 fraction of the cost of the machine, parts are maintained in inventory by the reputable manufacturer, and enable bringing the machine to like-new condition for literally a decade or more of reliable use. Prices generally range from $1,000 to $4,000 and may exceed this in high-volume or specialized applications. Industrial These units are made for businesses that are in the shredding business, or for large companies which destroy huge volumes of materials. These units may have high-speed, precision ground rotating blades and feed conveyors, generally only used in highly specialized applications. For the audience reading this report, the choices most appropriate for your business and applications will typically be in the Commercial/Business category. In this category, here are a couple of other things to consider: Strip Cut vs Cross Cut vs High Security Most all shredder types are available in a variety of sizes, styles, configurations, capacities & speeds just because it s big, doesn t mean it can handle volume. Consult with an expert to select the machine which will be best for your business. Comparison Pros and Cons: To make the best decision, we need to look at the pros and cons of each option. Shredding Service: PROS Documents are recycled Large quantities are disposed of quickly No front-loaded investment Eventually your confidential documents are mixed with others before, after or during shredding causing document reconstruction even more unlikely Certificate of destruction can be provided CONS On-going cost continues for as long as there are documents to be shredded An unknown individual (with no loyalty or concern for your business) is handling your confidential documents Documents can be destroyed days, weeks or even months after being determined unnecessary for the business and necessary of destruction Secured containers may in fact be not so secure locks for bins from a certain service are all keyed alike; locks can be missing or broken; bins overstuffed can leave documents exposed Confidential documents can be transported across miles or counties prior to destruction Chain of custody lengthened Confidential documents typically are not shredded past low security (Level 1) requirements Outside personnel need access within your facilities to perform their work (of collecting documents deemed for destruction). Often companies need to provide an escort to follow the service representative through the company.

8 Liability of document destruction does not fully transfer with the documents the originating company may still be held liable Integrity of shredding service s personnel may not be there. Documented cases exist of third party employees having stolen and sold confidential documents and information, or documents ending up missing. The service may pass along Fuel and other surcharges Shredder Purchase: PROS Minimized chain of custody by immediate destruction of documents witnessed by company personnel Single/limited personnel accountability Minimizes opportunity for document theft due to immediate destruction optimizes security of documents no longer needed Manageable, limited term expense Fixed cost does not increase with moderate variations in volume Properly sized, quality shredder has limited service requirements (<10 minutes hour per year of use) Negligible supplies expense No outside personnel entering facilities and handling confidential documents Shreddings may have recycle value CONS Disposal of shreddings must be handled Ordering supplies (shredder oil & bags) Up front cost (purchase or lease) Large quantities take time and personnel to shred Cost/Value: Shredding service charges vary immensely based on variables that the consumer mandates for example on-site destruction and frequency of service as well as variable beyond both the consumer s and the service provider s control. The largest uncontrollable variable is the recycling market for the shredded paper. Currently, shredding services are charging an average of $25 to $65 per bin, per pick-up on smaller placements (ie: 1-4 bins). A typical scenario would be a business having three bins, picked up weekly at a price of $85 per pick-up. Over the course of a year, the business would expend $4,420. Hit with this price tag, the business may opt for fewer pick-ups, say two per month, costing the organization $2,040 each year. For the purposes of this paper, we will use weekly pick-ups in the calculations after all, how long does one want confidential data to hang around after being deemed no longer useful? Over the course of seven years (a conservative life expectancy of a commercial-grade shredder), the total expense would be $14,280 (or a present value (PV) of $11,637 (monthly payments at an annualized interest rate of 6.0%). Conversely, the shredding requirement could be handled by two to four appropriately sized shredders. Using an average cost per shredder of $2,350 for three shredders, the total expense would be $7,050. Shredders, like other business equipment may also be leased to offset the upfront cost and amortize it over a period of time.

9 The above scenario would represent a PV savings of $4,587 or 39% in favor of purchasing shredders over using a shredding service. Naturally, varying any of these factors will significantly affect the calculations. A local, reliable shredding service as well as a professional provider of shredders will be able to work with an organization in determining the specifications and requirements and provide exact pricing for the service and equipment respectively. Conclusion o To shred or not to shred is not an option it s a practical requirement for all businesses. For businesses with reasonably level document destruction requirements, owning a commercial shredder has significantly greater cost and security benefits than using a shredding service or other method of document destruction. Brad Lewis is the owner of F&E Check Pros, an independent company located in Northern Ohio providing process improvement solutions to financial institutions and accounting operations. From secured document generation to retention and transmission to destruction solutions, they are an industry leader in providing hardware & software solutions. F&E Check Pros provides both shredder & shredding service solutions to its customer base.

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