Illinois Heartland Library System Delivery, in conjunction with IHLS finance staff, has released its projections for item volume and costs for the next ten years. 

Current Materials Sorted by Consortia Type

Chart 1. IHLS Materials Sorted by Consortia: SHARE or Standalone

Projected Delivery Volume Was Estimated Using IHLS Historical Data.

To determine the historical average change in delivery volume­—the number by which future projections would be made—IHLS began with the known historical data for the last 12 fiscal years, FY2013 to FY2024 (this year). The outlier years of the COVID pandemic, during which interlibrary lending mostly halted, were then removed. The current year, FY2024, has shown unprecedented growth in delivery volume, at 28% (accurate through February 2024 and estimated through June 2024). Working under the assumption that FY2024 is the year that patrons are finally back in libraries at pre-pandemic levels, and thus FY2024 is also a pandemic-related outlier year, the growth data from this year was also excluded.

Using the remaining data, IHLS was able to determine that delivery volume grew a year-over-year average of 7% from FY2013 to FY2024.

Delivery Volume (Item Count) Is Projected to Grow 7% Each Year.

Chart 2. IHLS Estimated Item Counts (Delivery Volume) FY2026-FY2035. 

Over the next ten fiscal years, delivery volume is projected to grow 7% year over year, resulting in projected rise in delivery volume from 3.5 million items to around 6.9 million by FY2034.

Alternate Projections. Projections are also provided for more conservative 3% and 5% increases, as well as a larger 10% increase. A 10% increase is the average with the COVID pandemic decreases removed while leaving in the 28% increase in growth in FY2024.

Delivery Sorting Personnel Costs Are Projected to Increase, But an AMHS Greatly Impacts That Increase.

Chart 3. IHLS Estimated 10-Year Sorting Personnel Costs FY2026-FY2035.

IHLS also projected costs for IHLS Delivery sorting personnel for the same period, using the 7% volume growth plus considering factors such as inflation and minimum wage rates. Estimated costs of IHLS Delivery sorting personnel are expected to increase between approximately $1.6 million and $3.4 million over the next ten years, FY2025 to FY2034. (See chart 2.)

Alternate Projections. Again, projections are also provided for more conservative 3% and 5% item volume increases, as well as a 10% increase. Projections were also calculated using a 0% item volume increase, demonstrating the increase in costs not associated with item volume. (See chart 2.)

The AMHS Variable. IHLS is investigating the purchase of an Automated Material Handling System. As of March 25, 2024, the acquisition of the system was yet to be determined. Therefore, comparisons were created accounting for personnel costs both with and without the acquisition of an AMH system.

Projected Savings in Sorting Personnel Costs Under the Condition of an AMHS.

Chart 4. IHLS Estimated 10-Year Sorting Personnel Savings with AMHS FY2026-FY2035.

Finally, IHLS graphed the difference in the IHLS Delivery sorting personnel costs under an assumption that an Automated Material Handling System was to be required—differences that became apparent during the 10-Year Sorting Personnel Costs projections analysis. Again, the 7% historical average delivery item volume increase was used for the projection, as were the additional conservative estimates of 0%, 3%, and 5%, and a high estimate of 10%. The projections were made under the secondary assumption that savings would not be seen during the first year of the installation of the AMHS. (See chart 3.)

Should IHLS acquire an Automated Material Handling System, estimated savings in IHLS Delivery sorting personnel costs are expected to be between approximately $1.3 million and $1.9 million over the next ten years, FY2025 to FY2034. (See chart 3.)

Automated Materials Handling System Acquisition Costs

IHLS will bear the expenses related to the one-time purchase, implementation, and maintenance of the machines. The IHLS General Fund Reserve balance and the possibility of future grants will fund the project. The one-time purchase includes bid price and add-on features at an estimated $725,000, while implementation costs cover barcode duplication, legal review, and electrical and data work estimated at $127,990. The projected expenses for maintenance outsourced to the AMHS vendor are anticipated at $519,377 over the next ten years. (See chart 5.)

Chart 5. IHLS Projected Costs and Savings with AMHS Purchase FY2026-FY2035 with Vendor-Purchased Maintenance agreements

 **Numbers listed in the chart above include vendor-purchased maintenance contracts. IHLS staff estimate in-house maintenance to cost approximately $200,000 over the next ten years, and maintenance costs would decrease by approximately $319,377.

Member Library Costs

The only possible costs that we anticipate for libraries are the materials and labor involved in barcode duplication of items if (and only if) libraries:

• Are SHARE members 
  
  • and have item barcodes on the inside of the item,
  • and do not have an RFID (Radio Frequency Identification) tag. (To take advantage of an AMHS, barcodes must be on the outside of the item if they do not have RFID tags.),
  • and those items are circulated outside SHARE member libraries (we will only need to duplicate barcode items as they are circulated outside of a SHARE library)

IHLS staff are currently evaluating how many libraries this will affect. Some libraries have indicated that they would like the help of IHLS staff to duplicate barcodes on their items using barcode duplicator equipment. And other libraries have indicated they would like to borrow the barcode duplicators for their staff to accomplish this task. Of the libraries that replied to the duplication survey, the largest percentage of members indicated that they would like IHLS to complete this for them. We have included these estimated costs for the barcode duplication project in the one-time implementation costs above.

Chart 6. IHLS Survey Results on Barcode Duplication Preferences.

Return on Investment (ROI)

The projected return on investment will vary based on how item volume count growth continues for IHLS delivery staff. At a 0% volume growth over a current fiscal year, a return on investment would be seen in 9.81 years; if volume growth continues at 7%, as historically shown, a return on investment would be seen in 7.82 years. (See chart 7.)

Chart 7. IHLS Projected ROI on AMHS purchase with Vendor-purchased maintenance

If IHLS staff determine that maintenance should be completed in-house versus the vendor-purchased maintenance contracts, the ROI projections would be sooner than eight years. (See chart 8.)

Chart 8. IHLS Projected ROI on AMHS purchase with in-house maintenance

FY2024 Request for Proposal (RFP) Responses

IHLS Automated Materials Handling System costs are currently included in the proposed FY2025 General and Capital Projects fund budgets for $852,990. The RFP for this project was posted in January, and we received three total bids at the bid opening on Tuesday, March 19, 2024. The bid results are listed below:

Recommendation

Above, please find the detailed list of bidders and their proposed pricing for your review. IHLS staff recommends awarding Lyngsoe Systems for the Automated Materials Handling System project as they were the lowest responsible bidder. The one-time purchase includes bid price and add-on features at an estimated total of $725,000. Please consider this recommendation to present to the Executive Committee at their April 2024 meeting. The awarded bid will need final approval at the May 2024 board meeting.

Thank you for your careful review of our project proposal, and please let me know if you have any comments or questions.