Can we define document retention or archieval process for documents saved into KC or in any Appian folder.
Can it be retrived also on demand?
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This is something you'll need to build yourself and manage within your application architecture.
Appian's document management not meant to serve those purposes. I would suggest you look into archiving your documents into a document management system (i.e. Sharepoint) once the process is finished.
but if we have to associate those documents with some records processed via Appian then how can we achieve. generally if document is in KC then we just save document id in DB with associated record and then can easily display where ever need to be.
If we need to retrived arcieved document then this how can it be maintened this relation ?
You just need to store the id or reference to the document in the external system in your Record. If you need to retrieve it, you can simply link directly to the file in the external system (this assumes that both systems share the same SSO solution)