Will blockchain become the source of truth in the steel market?

Tom Meulendijks: “SteelTrace is changing the supply chain!”

 

It takes thousands of hours to manually check a product for customer specifications, legal rules and standards. The result is often a PDF document confirming that the product meets all requirements. But do you really want to take a PDF document as a watertight guarantee? Tom Meulendijks, CEO of SteelTrace, spotted an opportunity and room for improvement.

“A few years ago, I worked on a tool for managing these PDF documents for a supplier to the petrochemical industry. At the time, it was assumed that changes could not be made to such documents. And I thought the control process could be properly secured using blockchain technology. This allows you to store all the data about standards, regulations and customer specifications. You can then translate that data into algorithms with which you can check and secure the data.”

Quality assurance is crucial
To achieve his idea, Meulendijks founded SteelTrace in 2017. The company is active in Asia, the United States and Europe. “We focus on the market for the high-end steel used in the (petro)chemical industry.” The quality of the steel and its associated certification is crucial in this market involving vast sums of money. “You can’t tell the difference between good and bad steel just by looking at it. In addition, steel often only arrives at the end user’s location from the factory after travelling through various suppliers.” With paper documents, this is a process that’s wide open to fraud. “Suppose someone buys high-quality steel pipes from a good steel manufacturer. They can then buy cheaper pipes of inferior quality and easily copy the certificate and heat number of the high-quality pipes. They can then use this certificate and send it with the inferior pipes that they resell.”

Platform for transparency and certainty
From steel manufacturer to end user, SteelTrace makes the supply chain transparent. “Our platform has four certainties built into it: real-time structured data, traceability, protection against fraud and automation.”

Real-time structured data: efficiency
Control processes can be slow. “I know of cases where ships were unable to sail because the quality manager was only able to review the paper documents a week after the lab tests, and then a few problems appeared.” When the supply chain works with SteelTrace, things are different. “Control activities take place in one go. Quality managers, labs and inspectors enter the data directly into the platform and sign it digitally in real time. If test values deviate from the specifications and/or standards, this is immediately detected and logged.” Reviewing paper documents is no longer necessary, all platform users can see exactly where the process is at any time.

Traceability: every step is visible
The SteelTrace platform ensures every step is visible. “Who conducted the test? Was the person certified to do that? Was the machine certified and calibrated? Was the inspector authorised to sign? Everything is visible. In addition, all the data is secured with blockchain technology and can always be traced back to the source.” Data can be easily checked via a smartphone. “Every platform user has a secure digital identity to identify them.”

Protection against fraud
The identity of everyone who plays a role in the control process within the supply chain is checked in advance and their powers established. Quantity tracking and transfer of ownership are other built-in protections against fraud. “During sales, certificates are simultaneously transferred with the ownership of products. Certificates are always linked to products. There are always as many certificates as there are checked products within the SteelTrace platform. This removes the financial incentive for fraud.” See the example in the insert for more information.

Unnoticed fraud is not possible
A manufacturer makes 1,000 high-quality steel pipes. They are entered into the SteelTrace database. The 1,000 pipes are certified and checked. Whenever the manufacturer sells a pipe from this set of 1,000, ownership of it passes to the buyer along with the certificate. Suppose someone buys 19 inferior pipes on the black market and one high-quality pipe from the set of 1,000. This person then requests the certificate for the high-quality pipe from within the SteelTrace platform. The step is digitally registered. If they then mark the 19 inferior pipes with the heat number of the high-quality pipe, they’ll have a buyer for each pipe. But before the transfer of each pipe can occur with a certificate, each buyer must request the digital certificate in SteelTrace. Once they do, the 19 buyers will receive a message from SteelTrace informing them that the certificate is no longer in the seller’s possession. They’ll then know that something is wrong.” 

Automation: compliance by design
All the standards, requirements and data supplied by suppliers are automated. As a result, all the control and monitoring processes are automated and the data is immediately available in its entirety. Tests and test values can be checked automatically. Manual, error-prone checks are no longer necessary. Meulendijks: “The result is that customers save tens of thousands of man-hours, which equates to millions of euros. That’s our business case.” But even more savings can be made. “Because the company’s risk profile is improved, the insurance costs go down. A reliable supply chain also pays for itself in incident reduction: there will be less premature perishing of materials. As part of due diligence, assets will be valued higher.” Meulendijks has long since ceased to receive sceptical reactions to the blockchain technology. “Our target group is interested in any secure, digital solution that makes it possible to work even more effectively.”

SteelTrace is changing the supply chain
Meulendijks sees many more applications in the steel market. “We can also make processes and additions to the base steel material transparent and secure. These include welding, forging steel or adding plastic to pipes. We can also make information about the carbon footprint and ESG scores visible.” He also sees another useful application: “Making the country in which the steel operations have been carried out visible. This allows you to demonstrate in which tax bracket your company falls, which means you can avoid excessive tax assessments.” And Meulendijks looks even further ahead: “SteelTrace’s ambition is to become the single source of truth for the entire steel supply chain.”