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The savings that could be made by UK public libraries through the use of electronic data interchange (EDI) are demonstrated. The findings stem from a one-year research project funded by the British National Bibliographic Research Fund during the period 1998 through to the end of August 1999. The results suggest that wider adoption of EDI could potentially save the sector somewhere in the region of L2 million per annum. Cultural barriers, however, and the lack of resources present 2 major barriers to these savings being achieved. Further research is needed to qualify such estimates. However, the research does demonstrate that, for those authorities examined, cost savings have been achieved.
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Keywords
Public libraries, Electronic data interchange, Cost reduction
Abstract
This article demonstrates the savings that could be made by UK public libraries through the use of electronic data interchange (EDI). The findings stem from a one-year research project funded by the British National Bibliographic Research Fund during the period December 1998 through to the end of August 1999. The author of this article (who comes from a business/economics background) worked with a prominent academic (in the field of economics, particularly in the book trade) Dr Frank Fishwick, to investigate where cost savings could be made in elements of the library supply chain. The results suggest that wider adoption of EDI could potentially save the sector somewhere in the region of L2 million per annum. Cultural barriers, however, and lack of resources present two major barriers to these savings being achieved. The author acknowledges that further research is needed to qualify such estimates. However, the research does demonstrate that, for those authorities examined, cost savings have been achieved.
Introduction
The public library sector has undergone profound changes in official perception over the last few years and has come under increasing scrutiny from government departments. Important recent developments have included the Audit Commission's Due for Renewal report (1997) and the Library and Information Commission (LIC) report (1998), New Library: The People's Network. The findings of these reports support the Government's policy objective to modernise the service. It might be argued that technology will be a key agenda item, and likely that modernisation of administrative and clerical functions through the use of IT will be a high priority.
A major study was undertaken by KPMG (1998) on the book supply chain. Libraries were omitted from this study. Many library stakeholders felt that the public library sector was hardly more efficient than that of the book sector as a whole. Research into various elements of the public library supply chain, therefore, seemed timely. EDI was selected as an area of study, as good practice could already be referred to, and it was felt that wider adoption by the sector as a whole would lead to substantial savings. However, there were, at the time of the project, no figures available for suggesting how much could be saved. Working within certain constraints (see "Methodology" below), Muir and Fishwick (2000) attempted to investigate this element of the supply chain with a view to providing estimates of cost savings[l].
Introduction to EDI
EDI (Electronic Data Interchange) can be defined as:
... the direct communication of trading messages between computer systems, using national and international telecommunication networks... trading messages can be as basic as orders and invoices, but EDI can also develop into much more sophisticated information exchange, so that trading partners manage their whole supply chain more effectively (Book Industry Commission Web site, 2000).
This can be applied in a variety of commercial situations but it applies equally in the information world, where a library can order books using standard fields and messages from a supplier. The message will be sent and the details will be input directly on to the supplier's system without manual intervention from the supplier. There will be no requirement, therefore, for the rekeying of details on to supplier systems. There is also the potential for suppliers to send invoices via EDI, to libraries, once books have been sourced. All bibliographic details, classification, etc. are then transferred on to the library's system, again without the need for further rekeying. In summary, EDI operates just like posting a letter except that you are sending a file with requested orders rather than a letter. Each library and supplier has a mailbox. Usually one file per day is sent to each supplier in EDI format by dialling up to the Network and orders to suppliers are posted via the Network. Already, through this simple definition and example, it should be clear that there are potential cost savings to be made through the adoption of EDI.
Methodology
The research findings consist of information gathered by means of both primary and secondary research sources combined with the analysis of a questionnaire. (A copy of the questionnaire is available on request from the author.) A total of 165 questionnaires were mailed to acquisition managers from the National Acquisitions Directory (NAG). A total of 78 usable responses were received. Given the relatively large number of respondents contacted, the questionnaire consisted of mainly closed questions, although some open-- ended questions were also included. These proved useful in adding background to the closed questions. In-depth interviews were held with ten public libraries, four library suppliers, as well as four EDI providers, the Audit Commission and other sector consultants and researchers.
Secondary sources included data from First Edition and Whittaker, trade press articles and available related reports, mainly published through NAG.
A steering committee was established by Book Industry Communication to oversee the research. This included representatives from the public library, library supplier, library system suppliers, publishing and bibliographic agency representatives.
One of the key objectives of the research project was to provide some hard facts supported by numerical data and analysis. However, in the event, such data were hard to establish. A key problem encountered was that libraries themselves were not identifying how much they were saving by using EDI and, in some cases, how much it had cost them to implement. Indeed, the 1998 Annual Library Plans (Department of Culture, Media and Sport, 1998b) states that ". .. the lack of adequate costing data will hamper authorities when they are seeking to decide priorities in the face of such (budget) reductions."
Three case studies are provided which indicate to the reader the areas for greatest savings. The final case is used to compute an estimate of potential savings to the sector as a whole through implementation of EDI.
Why should libraries use EDI?
A major study was undertaken by KPMG, specifically on the book trade supply chain (1998). One of the key areas researched in this study was the area of EDI. KPMG's conclusions identified that opportunities for electronic commerce are not being seized. Within the book industry supply chain as a whole, it suggests that cost savings in the region of 20-25 million could be made through wider use of EDI messaging. Such savings would come from: reduced invoice and purchasing process costs; reduced settlement costs; particularly through automatic invoice matching; reduced costs of small order transactions; elimination of distribution errors and stock wastage caused by double keying; reduced returns and debit note processing costs; and a reduced query burden. Research undertaken by the Audit Commission (1997) and Edwards (1998) suggests that these kinds of savings are equally available to the library sector.
The Audit Commission (1997) recommended that EDI should be seen as a vehicle whereby authorities could cut costs by simplifying the administration of orders, deliveries and payments. In more general terms it can be advocated that EDI benefits organisations through:
reduced costs from greater speed and accuracy of trading communication;
access to better and more up-to-date information on which to make decisions;
closer links between customers and supplier that will benefit all parties in the supply chain
In 1998, Book Industry Communication (BIC) undertook a study of the use of EDI within the book industry. A leading player was taken from each sector including libraries. Simon Edwards, undertaking the work on behalf of BIC, reported in The Bookseller (Edwards, 1998) his findings on two libraries. A simple example of cost savings was identified from Westminster Library. Reported costs of L25 per month were matched against the cost of postage for the same time period of L32.50-- L65 (using minimum postage rates). Lead times could also be cut by up to two weeks. Labour savings (although not quantified) could also be made as the whole process of ordering was much quicker. Edwards (1998) noted in his research that there might be a perception that EDI is only for the bigger player and those suppliers are the real winners. This can be somewhat disputed by looking at the Westminster case in which any supplier to that authority has to be capable of offering EDI.
Who is using EDI in the public library sector and for what purpose?
Evidence from our research shows that the use of EDI remains at very low levels in the public library sector.
Data from First Edition (the leading provider of EDI services to the library community) shows that only 64 public library authorities are (at the time of undertaking the research) current subscribers, though this excludes those that are ordering through a consortium (a consortium is where two or more libraries come together to purchase their books in order to gain economies of scale and thus secure bigger discounts from suppliers. As such they represent a single subscriber in terms of EDI). Of these subscribers, four were not active and ten were at the stage of installation or testing. In addition, estimates suggest that there are a further 18 authorities whose orders were being transmitted via EDI, but not directly from themselves.
Survey results from the research project showed that 36 of the 78 authorities responding had the capacity to use EDI but only 22 of them were actually using it (the major barriers to use are discussed in a later section of this article). The survey also revealed that it is the larger authorities that are currently using EDI. The 36 authorities that had the capacity to use EDI accounted for about 60 per cent of total spend, but represented less than half the number of authorities. In spite of this, the use of EDI still applies only to a minority (41 per cent) of total book spend by public libraries.
Personnel from First Edition provided the information shown in Table I on the use of various messages via EDI (data as at June 1999 when the interview was undertaken).
Analysis of questionnaire responses from the research project bears this pattern out: of the 22 public library authorities using EDI, all are using it for ordering but only eight for order acknowledgements and two for invoices.
First Edition do, however, estimate that, of those libraries not using EDI, about 50 per cent would have the capacity on their management systems to use it if it were higher on their list of priorities. It is clear from interviews with librarians that the development and implementation of EDI is something they are considering for the future.
What's in it for library suppliers?
Three out of the four suppliers interviewed stated that the main benefit of using EDI was the saving in resources in not having to rekey information received from customers: these savings have been estimated on the supply side in different ways ranging from L30-40,000 to 0.05 per cent of turnover in staff time, with equivalent savings from error reduction. Transaction speed was also quoted as a major benefit for both suppliers and their customers.
One problem identified was that not all libraries are able to use the established standard because of inefficiencies in their systems. This results in additional software development for the suppliers and additional costs in the supply chain. Incorrect use of message fields is also a problem, requiring manual intervention and interpretation, thus defeating the value of EDI.
However, suppliers tended to be in agreement that, as EDI became established, there would be substantial benefits to be gained for both suppliers and libraries.
How much will it cost libraries to implement EDI?
In implementing EDI, libraries will be faced with four key costs:
(1) translation software to enable the messages to be sent and received;
(2) a subscription to the EDI provider;
(3) an annual software maintenance and support charge;
(4) character charge according to the number and length of messages sent.
There are also telecom costs and charges, while training is normally provided in the initial sale.
Although specific prices are confidential, one authority quoted its subscription as C900 plus L250 for software maintenance. These figures alone suggest that the savings to be made from, for example, reduced stationery and postage costs, would easily pay for the subscription and character charge (this is also suggested in previous research by Edwards (1998) (see earlier section of this article, "Why should libraries use EDI?"). The capital costs of software may be less easy to justify. However, there are also likely to be staff savings in terms of time and resources.
Research findings - case studies
(1) Library authority with book fund of L525,000
Prior to using EDI, book orders would come in from different sites to one central location. These would be printed out, signed off by the librarian in charge and sent off by second-class post to the five or six different library suppliers.
Orders are now sent by EDI via Talis, the system supplier. As explained previously, traffic charges using Talis are paid by the supplier; consequently, the authority has not had to invest anything extra to use EDI. Users of this value-added service estimate that the ordering process is about 30 per cent quicker, less paper work is being generated and the error rate is reduced. The authority is now using Talis's cataloguing services and there has been a saving of L12-14,000 per annum in staff resource as a result. Staff have been redeployed from administration to a more customer-facing role within the library.
This authority is now giving consideration to moving to EDI order acknowledgements and invoices.
(2) Library authority with book fund of L400,000
This authority has been a keen advocate of EDI for many years. When EDI was first introduced it was immediately possible to save about 20 per cent of a staff member's time. This figure will now have increased substantially as it is one of the few libraries to use EDI not only for ordering, but also for receiving reports and invoices. It is clear in this case study that use of all the relevant EDI messages provides libraries with the real benefit of the service.
Many authorities when interviewed or surveyed expressed fears about the audit trail and loss of jobs caused through the adoption of EDI. In this example no such problems have been encountered. Although certain tasks became redundant because of EDI implementation, it has been possible to free staff to undertake more productive activities and improve service levels in other areas.
(3) Library authority with book fund of L300,000
This library authority attempted to calculate the savings achievable through the application of EDI to ordering, order acknowledgements and invoicing. There is an estimated saving in staff costs of L5,850 per annum.
In addition, suppliers to this authority have indicated that they would offer 1 per cent extra discount on all orders to which EDI applied. Assuming that the current discount from recommended retail price is 20 per cent, this extra 1 per cent would yield a saving of 1/80 of the current cost of book purchase or L3,750.
On the assumption that the authority has access to the necessary computing hardware, investment in relevant software and a subscription to First Edition would amount to a one-off payment of L2,250. If this is capitalised at 10 per cent for five years to allow for obsolescence it is equivalent to an annual cost of L594. Other annual costs are a L900 fee, L250 for software maintenance and L150 for telecommunications transactions.
The net gain in the specific case would be some L7,700 per annum, which equates to 2.6 per cent of the book fund (this can be summarised as in Table II).
It should be stated that the researchers are not treating this authority as a model for the entire public library community. If this percentage saving were made, however, on the national expenditure by public libraries on books (about L90 million), the financial saving would be around L2.3 million.
However, the survey from the research project shows that authorities using EDI at all account for only 41 per cent of book spend (and most of this for orders only). This indicates that most of the potential savings are still to be realised.
What are the barriers to using EDI?
A review of Library Annual Plans (Department of Culture, Media & Sport, 1998b) comments on the IT provision in libraries. The review states that funding, replacement and improvement of outdated systems is a major concern. The author's own research confirms this as a concern of those practitioners within libraries. Primary interviews revealed recurring comments such as "inability of library system should change soon"; "moving to a new system and will then use EDI." Lack of technical standards or sophistication of systems can be seen therefore as a major barrier. A further barrier is almost certainly the amount of change required to internal routines and procedures that the implementation of EDI may cause. Staff in public libraries have been required to change many routines and working practices over the last few years. Resistance to further changes that EDI might require could be viewed by staff as one too many. Carrying the cost of EDI may also be an issue as annual budgeting may make the cost too great, even if savings flow through in subsequent years.
Primary interviews identified some confusion and concern as to who is, and who should be, taking the lead in developing EDI transactions. Some libraries commented that they wanted to be able to use EDI for ordering but their major supplier did not have the necessary facilities in place. Smith (1997) undertook a survey, which identified a large number of library authorities intending to use EDI. However, this intention, respondents stated, was dependent on the ability of existing library suppliers to implement it.
By the same token, system suppliers might question the right time to develop EDI transactions if many of their potential customers are not currently adopting, or are not in the future going to adopt, EDI practices. Such issues as this, and those outlined above, can be seen as key barriers to more widespread use and development of EDI.
Conclusion
Although 22 of the 78 respondents use EDI for ordering (representing about 41 per cent of aggregate book spend), much smaller numbers are using it to its full potential. Grossing up from one case study (i.e. using the percentage savings from one authority and calculating that across the public sector book fund as a whole) the research estimates that potential savings of around L2 million could be made. Any more accurate measurement would require a greater number of studies of more diverse cases. Other studies of public library economics have stressed the desirability of greater use of EDI in acquisitions, but hard data remain difficult to obtain. Although inevitable, only a partial view of the potential for EDI has been provided in this article. It can be suggested that wider adoption and implementation of EDI within the public library sector could provide valuable cost savings for all involved. The overall conclusion from this research is that the cost savings available to the public library sector in adopting EDI are valuable and substantial. However, most of these are yet to be realised. It is clear, as advocated by the Audit Commission, that information technology, either through the use of EDI or through new developments via the Internet, will have profound cost saving potential for the purchase of books by public library authorities.
First published in New Library World, Vol. 101 No. 1157, 2000, pp. 222-227.
Note
1 For more information on this research report see Muir, L. and Fishwick, F. (2000).
References and further reading
Audit Commission (1997), Due for Renewal: A Report on the Library Service, Audit Commission.
Book Industry Communication Web site (March 2000), http:/lwww.bic.org.uk/infopak.html
Department of Culture, Media and Sport (1998a), New Library: the People's Network: The Government's Response, HMSO, London.
Department of Culture, Media and Sport (1998b), Appraisal of Library Plans, HMSO, London.
Edwards, S. (1998), The Bookseller, April.
KPMG (1998), The UK Book Industry: Unlocking the Supply Chain's Hidden Prize, The Publishers Association and The Booksellers Association.
Library and Information Commission (LIC) Report (1998), New Library: The People's Network, LIC, London.
Muir, L. and Fishwick, F. (2000), "Key issues in public library book supply", Library and Information Commission Report 46, British National Bibliographic Research Fund Report 99, ISBN 1 873671 26 1.
National Acquisitions Group (1997), Directory of Acquisitions Librarians in the United Kingdom and Republic of Ireland, 6th ed., National Acquisitions Group, Leeds.
Smith, G. (1997), "Public library book purchasing without the Net book agreement and library licence", Taking Stock, Vol. 6 No. 1, May, pp. 1-7
The author
Lindsey Muir is Senior Lecturer in Business Strategy, Liverpool John Moores University, Liverpool, UK.
Copyright MCB UP Limited (MCB) 2000