Supply Chain Opportunities - Art Loans
Slow moving asset situations offer opportunities for an increase in revenue or other payoff achieved by increasing "turns." The world of art offers such potential through the streamlining of the artwork "loan" process - focused primarily on the creation of "special exhibits." The primary goal would be to expand the number of successful events by making it easier to conceptualize such an exhibit and bring it to fruition.

The associated "business-to-business" (b-to-b) art loan supply chain environment is not well automated, so as described below there is an opportunity to package technology to enhance the processes involved in putting together exhibits.  Below is a general proposal - which is still a work in progress.

Background

There are a lot of museums - in the thousands. Museums typically are are "icebergs" in that what one sees on display is a small percentage of their holdings.

Each museum has its own central theme or themes, and their inventories include objects that range in perceived value from cherished masterpieces to inherited embarrassments. Within a given institution, over time changes in theme and focus can reshuffle preferences - perhaps moving what were "embarrassments" into the masterpiece category, while former cherished masterpieces may no longer be cherished.  However decided, many objects end up in storage, some because they are precious or delicate, but others being eminently suited to exhibit.

Exhibits create value, because a work that in one museum ends up in storage might be a highly sought after display item in another venue. Therefore the proposed loan process can create value by moving items from the warehouse in one institution to active display in another (or perhaps from warehouse to active study if the "event" is research-oriented).

Museums need to offer events that will interest repeat visitors and recruit new audiences, andmMuseums also have a mission to expand horizons. Sspecial events can help address all these needs - even more so if individual events are positioned within a stream of events that  reinforce or complement one another. Unfortunately, creating one event, let alone a stream of events, is no easy task.

However, if as proposed below the "special event" loan management process is streamlined and substantially automated, the event calendar can expand. First, streamlining will reduce the administrative "drag" and overhead effort per loan - and one event might depend on a dozen loans. Second, using appropriate technology there is an opportunity to cut cycle time - the elapsed time between concept formulation to "day 1" opening. Third, there is the potential to draw on more sources, including cross-disciplinary sources (e.g., not only to borrow a particular Picasso on exhibit, but also perhaps to borrow an associated letter or an associated piece of furniture).

Therefore, art "loans" - roughly equivalent to automobile rentals except that explicit rent is typically not charged - would seem to present opportunities for supply chain "streamlining" using business-to-business eBusiness models.

Prerequisites - Leveraging Existing Systems and Information

A helpful prerequisite is that a critical mass of museums and other art work inventory holders have internal inventory management systems environments - otherwise there is nothing to serve as a b-to-b information source. That seems to be the case, certainly for the larger museums. Indeed, a number of museums are progressing from first generation mainframe or PC-based systems to alternatives that are more networkable.

Also, the recent focus on "art provenance" is adding to museums' need for asset cataloging and tracking.  The art world has built systems to help address the identity and title issues with respect to "looted" art (stolen by Nazi Germany) and "red listed" art (protected relics). As a byproduct, museum-level inventory data management has been improved.

Of course, museums face difficult "knowledge management" problems involved in the management of art - which does not come with "part numbers," or "serial numbers" or even ISBN numbers, so whatever is proposed has to adapt to an imperfect world. There are some "early adopter" efforts to use RFID tags, and some museums are also progressing with respect to eBusiness capabilities - however, primarily within the business-to-consumer model.

These existing systems and the ongoing efforts to expand inventory management have fostered technological awareness as well as systems infrastructure, so there are resources on which to build. In turn, this proposal, if implemented, adds a positive motivation for museums to expand their cataloging, by creating a new means for gaining value from their information management efforts.

Driving Forces for the Art Loan Process

The "loan" business is the result of three driving forces: 1) "pull" from borrowers to strengthen their special events,  2) "push" from holders to get their unused inventory out on display or otherwise into useful service, and 3) for all concerned, the need to work at a more dynamic "MTV" generation pace - offering fast-developing, creative special events.  Additionally, there is also the need to expand "reach" - to establish museum-to-museum exchange relationships across national and continental boundaries.

Successful special exhibits can help to build museum traffic and entrance fees, memberships,  in-museum store sales, etc.

Additionally, museums' management face non-monetary pressures from their funders, art donors and other stakeholders to "do something" - to put noteworthy accomplishments on the record, build the institution's name recognition and brand, and demonstrate to prospective art donors that their holdings will be given the visibility and prestige that they deserve (or even more than they deserve).

Today, the process of taking an exhibit from concept to realization is very labor-intensive, takes many months or even years from concept to realization and is very dependent on personal knowledge and contacts. Although relationships, knowledge and trust will always be important, streamlining much of the work can increase the pace and diversity of exhibits can expand without a commensurate expansion in labor hours.

What is Proposed

What is proposed is to adapt "best practice" supply chain approaches from the business-to-business world to serve the art events/loan process. What will be familiar to most readers is the notion of a "catalog," but what would not be equally familiar would be b2b capabilities and processes such as "workflow" and "availabie to promise."

As a comparative benchmark, in the unlikely prospect that a museum wanted to set up an "exhibit" of today's printers and copiers, the person pulling together such an exhibit could use b2b capabilities now in common use in industry to consider hundreds of products and configurations, order the selected items, and have them shipped to the exhibit site, with automated links to the exhibitor's internal systems, the suppliers' systems, and to third party logistics systems. The elapsed time from exhibit conceptual planning to opening day could be a matter of several weeks. If the budget were, say, $100,000, the expenditures could be automatically tracked and capped, and if the transaction need to be approved workflow is available. The suppliers would typically have "available to promise" capabilities to advise whether the selected items can be provided and delivered on time and to track commitments so that a given item is not overpromised.

What is proposed is to repackage and adapt such capabilities to fit museum "best practices" and to accommodate the important differences between the art world and the commercial widget world.  As an initial set of requirements, one view of museum loan "best practices" can be found on a UK
National Museums' web site. In effect, this document can serve a starter kit of requirements that an automated process would need to accommodate.

As prescribed by the National Museums' document, the prospective "lenders" need to provide prospective borrowers with convenient information access about what might be borrowed - not only a conventional catalog, but further information about the item-by-item applicability of  packing, shipping, insurance and security requirements.  If the prospective borrower picks one or more items, the lender then needs to provide a convenient ordering process, which also necessitates a scheduling or "available to promise" process - e.g., the borrower needs to know if the item is available during period X. Approved, actionable orders then call for bringing in various third parties - shipping services, courier services, and others who participate in the supply chain from lender to borrower (and back).

Inherent to "ordering" is the need for "workflow" - some process that moves the request from initial inquiry to two-sided "commitment" stage - at which point the lender is obligated to honor the request and block out other requests and the borrower is committed to fulfilling his/her obligations. Note that the workflow is inherently two-sided.

On the lender's side, there is need for an approval process regarding the item (is it sufficiently rugged to ship), the borrower, and terms and conditions.

On the borrower's side, there are similar approval issues - do we want to accept liability for the item, does it fit with the exibit theme, does it fit the budget?

The person "borrowing" a few items from one museum is most likely putting together an event involving hundreds of items - some from other museums. The organizer may be "shopping" around the world - perhaps trying to line up ten "great" impressionist works from a wish list of twenty-five. What is important to the organizer is to keep track of each request, as it progresses from initial inquiry to ironclad commitment - and also to track the costs of each request as well as the display space "budget." If one needs ten great impressionist works, it is of course a problem to get only five, but it is also a problem to get fifteen.

In this borrower/lender view of the world, a given museum is likely to play both ways - borrowing to fill gaps and run its events, while loaning to get more value from its holdings.

An event necessarily has to have some theme or twist that will build interest, so search capabilities are important. One can imagine an events built around "great picture frames" or "provocative works in Vermont marble," and therefore assembling the necessary artifacts requires access to unstructured information or to "structured" information in unstructured ways.

The Necessary "Building Blocks"

The process described can be implemented using three principal "building blocks."

1. Lender b-to-b environment

The lender side of the process needs an environment that can authorize institutions and individual institutional employees to access the "loanable inventory," display catalog information and other descriptive materials, identify availability over time, list prerequisites (e.g., bullet-proof displays), and define logistics processes. Support for images is of course essential.

The nature of the business makes "punchout" support a necessity. (Fot more on "punchout" see
"OBI.")

The lender environment would certainly leverage a museum's existing inventory management cataloging capability, either through interfaces or database replication. However, smaller institutions and perhaps some larger ones might create catalog records purely for this activity. Note that in the b-to-b world,  in a pinch a spreadsheet can serve as a catalog data source.

2. Borrower b-to-b event  module

The institution (and person within that institution) running an event are seeking to borrow items that fit the larger context of that event.  An application (or set of applications) is needed to support them in the borrowing process.

To a degree, this building block could be repurposed "eProcurement" software - supporting "punchout" to catalogs, the selection of desired items, the workflow processing of those requests, and the issuance of commitments. An eProcurement platform, such as that offered by Ariba Technologies, could perhaps be adapted.  Additionally, the software could have the extra features needed to be an event workbench - tracking and reporting on various other logisitical and space planning processes.

3. Search environment/exchange process

The person designing an event faces a chicken and egg problem, because he or she does not necessarily have an easy way to determine whether a given event "theme" or focus is sustainable, before getting so deep into the project as to incur risk and cost.

For example, an event built around the "house cat" as represented in "great art" (a sure traffic builder) depends on there being enough available and suitable artifacts to justify an event (e.g., >100, with a few true heavy hitter pieces).  A search environment would be an assist in validating the general premise and targeting the lenders.

Although a search of a given museum's catalog would help, it might be more useful to be able to search an unstructured aggregation of information regarding potentially available items. Creating a "private" Internet search environment (restricted to museum event organizers) might be helpful, and is pretty easy to implement given that the inventory-holding entities provide data feeds.

Also, some central communications hub environment would be needed to mange the interaction of the various players in the museum community. Note that there are a wide range of available services.

Who Is the Customer for this Proposal?


To whom would one turn to as "customer" to get these building blocks built and deployed?

Model 1 - the Internet Way:


All of what is described could be done by individual initiative. Museums that "lend" would define, pay for and deploy building block #1 and contribute to building block #3, while museums that "borrow" would design, pay for and deploy building blocks #2 and contribute to building block #3.  All that would be needed centrally would be some advocacy and some general "standards."

Model 2 - the neutral "exchange" model:

Alternatively, one could create an "exchange" - a middle player entity (non-profit or perhaps for-profit) and be the provider of all three building blocks - compenstated through use fees, donations, etc. The advantage of a strong "hub" in a hub and spoke arrangement is that evolution can be more coordinated and the model would have an advocate. The weakness is getting to critical mass.

Model 3 - A variant of the exchange and a "natural" extension of the "National" museum model.

A given large museum (or several as a consortium) could elect to be a "hub" linked to smaller correspondent museums through "spokes." The advantage is that the community can be brought up fairly quickly, with a powerful museum at the center, and with smaller museums as the "spokes," but of course some of the value is lost if the communities are "closed."

In the "real world" of eBusiness the successes have been mostly of the first or third model.

Non-traditional participants

Various entities other than museums could be either lenders or borrowers of art works, and one benefit of automation is to enlarge the potential number of players.

Private holders of art (both collectors and artists), corporations, and various other entities could "loan" out their art to museums, while those same entities might want to borrow art for "events." There are also "non-traditional" variants of art ranging from the "virtual" (which not only could be ordered via eBusiness, but in some cases delivered over the Internet) to various "industrial" artifacts (e.g., an early stove) to go with some mid-Nineteenth Century-themed exhibit.

The auction houses necessarily hold inventory - e.g. from the time the owner delivers it until it is sold. Potentially such items could be "loaned" rather than just warehoused, presuming the process is sufficiently agile to work in tighter time frames.

As illustrated, if there is a convenient, efficient b-to-b environment, the overall level of lending activity could grow substantially - far beyond what can be sustained based only on phone calls and faxes.

Related Benefits

As noted above, the tracing of ownership and legitimacy of art works is creating new stresses on art property management systems. In firming up matters of ownership, it is also necessary to improve catalog descriptions - given that what is found in general descriptions can mistakenly impugn the legitimacy of a given object.

There is a level of synergy between what is described above and what is needed to validate legitimacy. One prospect is that the both the buyside and sellside modules could incorporate "web services" calls that validate the legitimacy of "provenance." Some "loans" have become one-way transfers because the artifact got caught up in a legal debate over provenance.

Funding

Typically, museums turn to external sources for funding such initiatives, such as the U.S.'s Institute of Musuem and Library Services (IMLS) or various foundations. The funding mechanism is the "grant." and one option is to seek grants to fund the building blocks listed above as well as to fund a program management effort to manage this proposal.


TBD
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