In response to remote working due to the effects of the novel coronavirus, companies are looking for electronic contracts that can be completed online without paper or stamps. In the manufacturing industry, companies large and small have also begun efforts to digitize internal documents in order to digitize contractual documents such as outsourcing contracts, manufacturing contracts, and confidentiality agreements. We will provide an easy-to-understand explanation of the benefits of digitizing internal documents and key points for implementation.
What is Digitization of Contract Documents (Electronic Contract)?
Due to the revision of the Civil Code that came into force in April 2020, requiring remote working and various contract revisions, it is becoming increasingly difficult to conduct business using traditional paper documents. In addition, due to revisions to the postal law, postal services will be reduced in October 2021 and companies sending paper contracts will have to move forward their shipping dates, which will cause an alarming increase in workload. Therefore, every company is currently encouraging the Electronic contract documents.
electronic contract documents means that various contracts can be created, sent, received and managed online, rather than on paper.
Important contract documents in the manufacturing industry include:
Examples of important contract documents in the manufacturing industry.
- Confidentiality Agreement
- Cooperative Research Agreement
- Consulting Agreement (Technical Guidance)
- Manufacturing Agreement
- Manufacturing Agreement
- Outsourcing Agreement
- Manufacturing Partnership Agreement (OEM Agreement)
- Basic Transaction Agreement (Purchase)
- Main Transaction Agreement (Sales Agency)
- Individual Worker Dispatch Agreement
- Contract for Maintenance of Goods
Digitizing contract documents in the manufacturing industry allows these various contracts to be completed online instead of traditional paper-based exchanges.
Advantages of Digitizing Contract Documents
Digitizing contract documents is not just a trend of the times, it actually has several benefits. Let’s compare the flow of paper contracts and the flow of electronic contracts.
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1. Closing the labor gap by going paperless
A paper-based contract flow requires a lot of time from document creation to contract conclusion. In production facilities where speed is essential, the time required to create contracts is extremely detrimental to business efficiency. In addition, if the approver or signatory is traveling or working from home, time will be lost before the contract is established.
In this respect, by transferring contract documents to digital media, it is possible to reduce unnecessary man hours in the contract flow and to manage the contract area with fewer personnel.
2. Better operational efficiency (faster closing of contracts)
Another problem with paper-based contract documents is that they take time to mail. If your business partner is far away, you will need to allocate extra time, and if you use express delivery, shipping costs will be higher.
In this context, if you digitize or Electronic contract documents, everything from contract creation to contract signing can be done online, which becomes paperless and super fast. You can also reduce the number of working hours that sales staff have to visit to close a deal. In addition, contract-related documents such as draft documents, estimates, and drawings can be centrally managed and checked from anywhere, which significantly increases work efficiency. You can also see the storage location at a glance, saving you the trouble of finding the storage location of your documents. It is also possible to notify before the renewal of essential contracts with suppliers.
3. Cost reduction
Paper contracts incur various costs such as paper cost, printing cost, stamp cost, etc. in addition to labor cost for employees performing the work. These costs can be reduced by digitizing contracts and making them paperless. You also do not need more space to store documents, so you can make more use of your limited office space.
4. Reduce the risk of contract loss.
The fear of paper-based management leads to the loss of important contract documents. By digitizing contract documents, you can reduce the risk of losing important contracts among the numerous documents that come every day.
5. Encouraging remote work
You can check, send and receive documents online, so you don’t have to go to the office to prepare or send documents. No need to go to work with stamps. Even when the officer cannot come to work, the contract relationship can be easily established.
Problems before digitalization of contract documents
Many companies encounter problems with contract documents. Let me give an example of a company.
A case study of manufacturing company
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1. Problems in basic contract operations related to transactions with suppliers
There are about 200 to 300 purchasing contract companies, and the contract specifications are reviewed and renewed every year, so basic contract operations related to transactions with suppliers are a time-consuming task. In addition, since the contract term, contract personnel, contract details and contract documents vary from business partner to business partner, it is necessary to create a document on paper and exchange it by mail when the contract is renewed.
2. Problems with basic contract functions related to sales agency transactions
We have around 200-300 companies with which we have sales agency agreements, and the format of the agreement varies from company to company. We review and renew the agreements every year, but each time we have to recreate the documents in each company’s format, which is extremely complicated.
3. Individual worker dispatch agreement problems with dispatched workers
The company employs a lot of temporary workers, especially during busy seasons, but the agreements vary by dispatch company or worker, making it extremely difficult to manage each individual.
4. Application/approval work issues in preparing contract documents
New contracts and contract renewal applications and approvals are done on paper, which is problematic because it takes hours. Coordination between departments and divisions is also difficult, as documents are passed back and forth between the parties involved. There are so many documents that you may not know where the contract is.
Although the company faces the challenges described above, it now achieves operational efficiency by digitizing and centralizing the contract document preparation process from internal application to approval and finalization.
Advantages of combining electronic contracts with document management
Electronic contract documents and linking them to document management has the following advantages:
- Reliable storage in accordance with the Electronic Bookkeeping Law is possible.
- “Easy to search” with folder hierarchy and free search elements
- You can manage contract terms.
- “Security” can be preserved and saved (access rights settings/log management)
- No loss (access rights settings/recycle bin)
- In addition to contracts, it can also perform document management for the entire company.
Otsuka Shokai provides solution services that connect Adobe’s electronic signature service “Adobe Acrobat Sign” and Bengo4.com’s “Cloud Sign” with OSK’s integrated groupware “eValue”.
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Summary
Digitizing contract documents is an important step in reducing field labor involved in contract processes, reducing costs, and creating a system that allows companies to focus on production. At Otsuka Shokai, by combining e-signature services with document management, we can digitize and assist with pre-contract legal review, contracting with external parties, contract storage after signature, and contract expiration date management. Create systems that can be managed. If you are interested, please do not hesitate to contact us.