Tom Meulendijks looks a little tired but happy as he settles into a chair in the Stainless Steel World office. He’s just come from a prospective customer, and when we’re finished talking, home is a three-hour drive away. But when he starts talking it’s clear that despite three years of development, research and fundraising, his energy and enthusiasm for his groundbreaking steel traceability program is undiminished.
^ Blockchain technology Article by Joanne McIntyre
Understanding exactly how blockchain technology can provide perfect traceability in the (stainless) steel industry is complicated, so I start by asking Tom to give me his short version, well-honed from three years of pitch meetings.
“Steeltrace is a platform for the traceability of steel from melt to end product,” Tom begins.
“Our online platform enables all parties in the entire supply chain to collaborate and work together efficiently. It’s all based on blockchain technology, so let’s begin there.”
Blockchain technology is all about recording transactions between multiple parties in a transparent, secure way. As suggested by the name, a blockchain is a virtual ledger made up of linked blocks. To form a block, a user must initiate a transaction. The transaction can only be completed if the user has the appropriate credentials; a unique ID that grants access to the blockchain. Once a transaction is verified, a block is created containing transaction details and the unique ID of the user who initiated the transaction. Crucially, the new block also contains a link to the block that precedes it, securely embedding the new block on the end of the chain. With each step in a series of transactions, a new block is added to the chain.
One of the benefits of blockchain technology is that blocks cannot be altered after they have been added to the chain. This is where security and transparency come in. There is no way to insert a fraudulent transaction onto the block—remember that a party’s credentials must be verified before a block can be added to the chain—and there is no way to retroactively modify a block, because on creation each block is linked to the block that comes before it. In this way, once a block has been created, it will remain unmodified in the chain forever.
Blockchain technology can be used for any application that requires the secure recording of multiple transactions, and Steeltrace applies it to the stainless steel industry supply chain. After all, the supply chain is, at its basic form, a series of transactions. Steeltrace records the movement of stainless steel between manufacturers, laboratories, traders, and end customers in a blockchain, leading to transparency, security, and efficiency.
Pilot realising potential
Tom is currently overseeing a full test pilot of the Steeltrace system. Across a supply chain linking TOTAL with Inox Tech, SEW, Element and Lloyds Register.
“It was a very complex process to get everybody aligned at the same time,” Tom smiles. “Steeltrace is running in parallel to their traditional system for the pilot. Now that the system is about to go live, other companies are rapidly coming on board, including MEGA and SiTech.”
How does it work in practice?
Enough theory, how is Steeltrace actually working in the pilot? “In our system, every user has a unique ID. On top of this, a unique ID is created for every product as it’s produced.
Finally, all the data generated during the production of the product is recorded on the platform. When it is time for a product to move forward in the supply chain, a block is created that records the initiating user’s unique ID, the product’s unique ID, all the data about that product, and the unique ID of the receiving user. For our purposes, the block also points to ownership, recording the physical transfer of a product between parties in the supply chain. For example, during the pilot, the pipe maker (Van Leeuwen) started by adding all the data required to comply with the TOTAL specifications into the Steeltrace platform as the pipes were made. When the pipes were transported to SEW, who upgraded the material by carrying out additional tests (with Lloyds Register as a witness), the results were entered into the platform and a new block was created, reflecting this transfer of ownership. SEW then cut the pipes to the required lengths, generating a new unique ID for each cut-off piece; these always reference back to the original complete pipe, and all the data is maintained in the system.
This means every single piece of pipe has its own immutable unique ID for perfect traceability, and these unique IDs are passed along the blockchain as they are passed along in the real world. Eventually, the pipes ended up at TOTAL where they have been installed in a plant and are in use. If you wanted to see the entire route of a given product along the supply chain, you could use the Steeltrace platform to track its movement. You would also have access to detailed data on the product, such as its origin, its certificates, and dates of ownership transfer. As you can imagine, there are a number of benefits to this approach.”
Digital ownership transfer
In terms of preventing fraud and human error, the system offers a perfect solution. “A pipe on its own is worth nothing, but once a certificate is issued detailing the chemical composition, for example, the pipe is worth money because the certificate determines the value. However, under the current system, a dishonest person can buy one documented pipe, copy the numbers and the certificate, and then use that certificate to increase the value of any number of pipes falsely. For many years people have tried to find a way to label a physical product to prove that it comes from their factory. The problem is, any physical product can be faked.”
However, you cannot fake a unique ID—which is generated through cryptography—on a computer. “Once a document is cryptographically secured in the blockchain, I need the key to prove I’m the owner of that document.
This means it can never be copied. If I transfer ownership of it to someone, I don’t have it any more. So I can never sell more than I have. The manufacturer creates the certificate as the pipe is being made, so only one certificate can be made for each pipe. Whenever they sell a pipe, ownership of the unique ID transfers with it. Down the track, if somebody claims to have a certain pipe, he will have to prove that he is the owner of its unique ID. And for that, he will need to be present in the blockchain.”
Blockchain is used to manage ownership transfer. “The system is completely safe; that’s why it’s also used for cryptocurrency because money also requires a system that prevents it ever being copied. The same principle applies to material certificates. That’s one of the main insights in Steeltrace.”
Another key characteristic of blockchain is that everything stored on it is unchangeable and kept forever. “Each person entering data into the system has their own unique cryptographic key, typically on their phone. The unique ID records digital proofs of each test, result, and certificate; as well as who entered the information and when. Once these results are in the blockchain, any authorised person can see them. For example, ten years after a pipe has been installed in a plant, if there’s a failure the operator can instantly determine where it was made, who did the tests, if there is more from that batch installed on site etc.”
The other key advantage is timesaving.
TOTAL, the end-user pilot partner
Stainless Steel World spoke to Peter Bierdrager, Inspection & Corrosion Department Manager at TOTAL Exploration & Production Netherlands (TEPNL), about the company’s motivation for joining the Steeltrace pilot program.
“Supply chains are not as transparent and traceable as they used to be and end users can’t be sure exactly where their purchase is coming from. Materials come with certificates, but we have to blindly rely on the information included on them.”
“Safety and asset integrity are the main factors which raised the need for more reliable material certificates. TEPNL decided to look for a digital solution that could help solve the certificate reliability problem. As a result, we decided to work together with Steel Trace, a Dutch start-up.”
“The cloud-based platform was not developed at the time this project started, which meant we could influence in the development of it and as one of the first users, have customized features included.”
“The project’s aim is to have a cloud-based platform where all data related with material certificates can be stored, from the first supplier to the end-user, and every action is registered with the cryptographic signature from the person executing it. The innovation lies on the use of a technology not yet widely integrated in the oil and gas industry that can help us to have more reliable and safe traceability of the certificates we receive.”
“In this supply chain, Total is playing the end-user role. To achieve a consolidated and wide use of digital material certificates, every party of the chain has to agree on the use of the platform. The pilot therefore represents each stakeholder of the supply chain: manufacturer, construction contractor, notified body, external laboratory, end user (TEPNL).”
“The pilot consists of an A/B test using the 3.1 material certification of a duplex stainless steel pipe with additional testing of the material by an external laboratory. The A/B test allows the comparison of the two different ways of working; the usual paper certificates and SteelTrace. The kick-off of the pilot was in May 2019 but the actual testing of the platform will be done during 2020.”
Peter continues: “We are still finding out new advantages that the platform can bring to our industry. The main advantages identified so far are:
Digitalize of specifications: the platform can include a database with the end user material specifications that can be used by the manufacturer to cross check their own material.
Digital transfer of certificates: the handover of certificates is done through the platform. In every step of the process, the certificate has an owner. Therefore, no one can manipulate or falsify the certificate.
Supply chain provenance: this was the main advantage that triggered the project.
Long term storage and organization of certificates: the platform can also be connected with the company ERP system
Faster exchange of certificates and fewer supply chain delays resulting in cost savings.”
“The main benefits for Total are:
Being pioneer in an innovative way of working, taking advantage of new technologies that have been integrated in other industries.
Improving the reliability of our material certificates, ensuring the safety and integrity of our assets.
Involving from the beginning some of our contractors in the development of a new process, facilitating the acceptance and integration of this potential new way of working.”
“Using the traditional system, external parties such as laboratories or notified bodies carry out tests, create their own certificate, then email it to you. If a witness is required, they email it to a notified body to be signed, and it can take days or weeks before that document is processed.”
“In our system, the moment a test is performed the laboratory enters that data into the blockchain using their own cryptographic key. It’s instantly available for you, and for your end customer if you want that.
This dramatically reduces delays in the supply chain. For example, if Lloyds is present as a witness at the test site, they cryptographically sign the certificate at that moment so it’s instantly available. As the cryptographic key is carried on your phone, it’s very easy to sign in.”
Tom explains that all test results are digitally secure and instantly transferred to the certificate owner who always has an overview of the status of his product. He can instantly see the tests that have been conducted, witnessed, and if the product is ready to be shipped.
Understanding how Steeltrace allows everybody in the supply chain to instantly communicate is easiest if you compare it to a similar platform such as Facebook. “Because it’s a platform, not a software package, it is possible to exchange data with outside parties instantly,” Tom explains.
“You don’t need email or any external communication. Each Steeltrace user allocates accounts to their external partners (laboratories, suppliers, customers, etc) who connect with them on the platform.”
“Furthermore, the qualifications of each user can be uploaded into the platform, as well as your company certifications. So when a customer clicks on a signature from your company, they can instantly review all your company’s qualifications. It’s no longer necessary to spend time verifying these or vetting a company because the certificates are uploaded by the actual certifying body. We have created compliance by design.”
Improving safety, continuity, efficiency
The Steeltrace platform system includes the order numbers, line items, and project ID’s to the unique ID, saving time for all links in the supply chain.
“The receiver doesn’t have to number or organize the order; the financial department knows immediately that a product has been delivered; the end-user knows the product is certified to be installed. All the hours formerly required to send and read emails, enter PDFs in the system, confirm invoices, ensure products are checked…all that wasted time will disappear. Furthermore, having a secure, searchable database which can instantly trace the source of a product and where more is installed presents a very different risk profile. We expect insurance companies will look differently at companies using this system and recalculate their rates.”
Furthermore, as the number of qualified Quality Managers in the job market decreases, and those that retire take their tacit knowledge with them, the blockchain system removes the problem of how to replace them. All information is securely stored, forever.”
“Steeltrace is now in the Beta phase; the software is working, the blockchain part is working and we’re about to go live. The reaction when I show people the pilot product is amazing. Now that people can see it in action, they realize it’s a much better, easier system that makes so much sense. It’s going to change the way the industry operates.”
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