Time-Driven Activity-Based Costing for Inter-Library Services: A Case Study in a University

Although the true costs of inter-library loans (ILL) are unknown, universities increasingly rely on them to provide better library services at lower costs. Through a case study, we show how to perform a time-driven activity-based costing analysis of ILL and provide evidence of the benefits of such an analysis. INTRODUCTION Ever diminishing university funding by the government urges university library management to provide better library services at a continuously lower cost. To cope with these cost pressures, library management needs to improve its understanding of the relevant cost drivers. To date, most studies on university library costs have relied on traditional activity-based costing (ABC) systems. Although these studies foundABC both providing librarymanagementwith a more detailed cost analysis of activities and services, and assisting management in understanding what actually causes certain costs, ABC also appeared to cause two significant problems. First, setting up an ABC system can be very costly, especially if the current accounting system does not support the collection of ABC information. Second, the system needs to be regularly updated, which further increases its cost. These limitations motivated Kaplan and Anderson to develop timedriven activity-based costing (TDABC), a revised version of ABC, solving these problems, without losing the benefits. The most important characteristic of this technique is its simplicity, as only two kinds of parameters need to be estimated: the number of time units (e.g. minutes) consumed by the activities related to the cost objects and the cost per time unit. Hence, TDABC systems cannot only be implemented quicker (and thus cheaper), but also updated easier, than traditional ABC systems. Since services constitute the ideal setting to implement a TDABC system in order to improve the service’s cost management, we performed a case study at the Arenberg library of the Catholic University of Leuven (KULeuven). Although we argue that TDABC could improve the cost management of all library services, as identified by Ellis-Newman and Robinson, EllisNewman, and Goddard and Ooi, we only concentrated on the inter-library loan (ILL) service, for several reasons. First, ILL is directly linked to the increasing cost pressures on university libraries. Indeed, Nitecki and Renfro confirm that library management relies more and more on ILL, in order to provide good library services in times of decreasing library buying power. When books or journals are not available in the library of choice, readers can request them from other libraries via the twodirectional ILL system. Second, an accurate cost calculation is important for ILL services. On the one hand, the processing costs for an inter-library loan are higher than for an internal loan, because inter-library loans require higher-level staff and are Eli Pernot is aspirant of the Fund for Scientific Research, Flanders. Katholieke Universiteit Leuven, Naamsestraat 69, 3000 Leuven, Belgium [email protected]; Filip Roodhooft, Katholieke Universiteit Leuven, Naamsestraat 69, 3000 Leuven, Belgium Vlerick Leuven Gent Management School, Leuven Campus Vlamingenstraat 83 3000 Leuven, Belgium [email protected]; Alexandra Van den Abbeele, Katholieke Universiteit Leuven, Naamsestraat 69, 3000 Leuven, Belgium [email protected].