Paper pushing. It’s synonymous with tedious, slow processes. Yet often, the pushed paper is vital to a company’s business. And contracts are especially important paper.
But digitizing a contract process isn’t as simple as it sounds. As the contract moves between parties, there’s a risk of tampering. Or mismanaging version control.
Many companies continue to use paper for their contracting processes to maintain security and trust. The procurement divisions of Hitachi, Ltd. were no different.
Hitachi is a Japan-based global technology organization. It focuses on digital innovation in the mobility, smart life, industrial, energy and IT sectors. The company has 873 companies across more than 100 countries with 380,000 employees worldwide.
At such a scale, Hitachi’s procurement divisions process thousands and thousands of contracts every month. That’s a lot of paper. That’s also a lot of time managing that paper.
Procurement was looking for a solution to manage their contracts more efficiently. Could their process be digitized and secured on the blockchain?
Hitachi’s procurement divisions followed a traditional processing procedure for their contracts.
Every contract would go through multiple chains of various people before finalization. Physical stamps verified the completed reviews and approvals. The paper process worked well to ensure that documents were original and untampered with. But the process was slow.
Each transfer meant a new person picking up and verifying the documentation. Then they’d do their part of the process. And then they’d have to physically direct the contract to the next person. Sometimes this took hours. If the contract had to be mailed, it took days. Remote work was increasing, and so was mailing documents.
Contracts now took longer to process. Personnel spent time on mundane and trivial tasks, like mailing and verification. Procurement’s contract process got increasingly inefficient.
As you might expect in a company focused on innovation, Hitachi’s procurement division wanted to reduce this inefficiency. First, it wanted to convert the contract transfer process to a digital method to reduce delays from mailing. Then it wanted to digitize other portions of the process.
But there was still the question of ensuring the digital documents remained original and untampered with throughout the many transfers and processing steps.
Hitachi’s Service Delivery Division develops tools to help increase business efficiencies. It saw this as a perfect use case. Ultimately, an improved procurement process would help companies within the Hitachi group and their clients.
“Procurement wanted to digitize its processes while maintaining security and trust,” says Kazuyoshi Masuya, Senior Engineer of the Service Delivery Division. “Blockchain provides an immutable record that provides that trust.”
Kazuyoshi’s team set about creating a secure contract management system. For eight months, they worked with procurement personnel to develop the solution. First, they needed to understand the paper process as it was working. The team considered how the process could be more efficient while also keeping the security and integrity of the documentation in place.
The team chose Hyperledger Fabric, an open source blockchain framework from Hyperledger Foundation. Hitachi had already created blockchain-backed frameworks on Hyperledger Fabric in its financial and industrial areas, so the team members knew it could provide the advanced security needed for critical document processing.