The circulation system of the University of Waterloo (Ontario) Library is analyzed. The analysis includes the environment in which the circulation system must function, general objectives and functional requirements of the system, and a description and evaluation of the existing system. Both the automated and manual elements of the circulation system are covered. Major problems are reported in the timeliness, design, and information services of the present system. Replacement of this system with one acquired from an external source is recommended. The new system, to be running by September 1977, should: (1) be self-contained, (2) use optical scanning technology, (3) be capable of being implemented in stages, and (4) have potential for growth. Data tables and a 15-item bibliography are appended. (PF)