Provenance: the $450m Question
The highest price ever paid for a painting was exceeded this week, but how does any buyer know exactly what they are getting?
The big question of the week: is this painting by Leonardo da Vinci, or not? If it is, then maybe it is worth $450m. However, if it is attributed to one of Leonardo’s contemporaries, its value could drop by as much as 99%.
In the art world, this is called “provenance”, being sure that you know the history of a piece of art, from painter, patron through all subsequent owners and restorers, up until the current day. Only if you can prove this can your art command the highest price.
Provenance is also critically important to Supply Chains. There are really three critical areas:
- As a measure of quality or reliability
- As a question of legality
- As a question of ethics
Provenance: a matter of quality
Imagine you are a plant manager and you wish to buy a reconditioned Atlas Copco Compressor, but you need to know all of its previous owners, to make sure that it is an original, legally purchased and properly maintained. Wouldn’t it be great if every physical product came with a digital ‘passport’ that proves its authenticity (Is this compressor what it claims to be?) and origin (Where did all of its raw materials come from?), creating an auditable record of the history behind all physical products.
It turns out that this is one of the prime use cases for Blockchain, the ability to have a secured “ledger” of transactions. Any person interested in the item can inspect the Blockchain to see the full history. In this article, Paul Devlin, GM of SAP Ariba EMEA says
“Blockchain is going to be the way we do things because of the provenance, trust and guarantee that it offers.
Provenance: a matter of legality
In the Leonardo example, the buyer needs to know that the seller is the legal owner of the painting, and the buyer needs to know that the seller has the funds. This same tango occurs in any trade, and a whole variety of documentary evidence may be exchanged between the parties: RFPs, contracts, orders, delivery notes, invoices, remittances.
Up until recently these documents where physically signed, and went through multiple approvals. But now networks like The Ariba Network provide digital equivalents of these paper documents. This provides a full electronic trail, secured by encryption and digital signatures that allows both parties to have full confidence in the trade, even though they never meet.
Ariba Network is a dynamic, digital marketplace where millions of trading partners, operating in 190 countries, conduct US$1.25 trillion in business commerce each year.
Provenance : a matter of ethics
But even if I know what I am buying, and that I have legally bought it there may still be other risks. Maybe the rock drill contains substandard third-party spares, maybe the firmware on the controller has been pirated or hacked. Perhaps the diamonds on the drill bit are “conflict minerals” financing a local warlord.
With SAP Ariba Supplier Risk, you can make smarter, safer decisions before purchase.
Make risk due diligence part of the procurement process
That helps you avoid damage to your reputation. Also, you’ll gain a high degree of confidence that your supplier information is correct and up to date. By being able to prove that your suppliers, and their suppliers are trading ethically you’ll be able to assure your consumers that you are doing your part to improve working conditions around the world.
Of course, most of our purchases don’t cost as much as Leonardo’s Salvator Mundi but if we have access to Blockchain, Ariba Network or SAP Ariba Supplier Risk, we can at least be sure of what we are getting.