Using Optical Character Recognition (OCR) to Overcome 3 Supply Chain Bottlenecks

Optical Character Recognition (OCR) is software that creates a digital version of a printed, typed, or handwritten document that computers can read. It avoids the need to manually type or enter text. Why not just take a photo? Because you wouldn't be able to edit anything or search the text because it would just be an image. Scanning the document and running OCR software turns the file into something you can edit and search.

OCR is not new technology, it’s been used in Post Offices around the world to speed up sorting operations since the 1960s. Over the decades, OCR has grown more accurate due to advances in related technology, such as, artificial intelligence, machine learning, and computer vision. In recent years we have seen the emergence of low-cost but sophisticated OCR software that can run on smart phones. This has opened up the potential to use OCR in the Supply Chain. Let’s look at how OCR can be used to tackle real Supply Chain bottlenecks.

The diagram below shows a warehouse operation typical of many industries with inbound deliveries from suppliers, product storage and outbound deliveries to customers or field workers (for spare parts). 

Using Optical Character Recognition (OCR) to overcome 3 Supply Chain Bottlenecks  _BLOG Graphic_20191101

Its where the four walls of the warehouse interface with the outside world that we see 3 key opportunities to use OCR:

  • Goods Receipt
  • Loading/Transport
  • Returns
1. Goods Receipt

Goods receipt is a critical warehouse process and unless it’s done well it has a huge knock-on impact on all other warehouse processes. If products are not checked in correctly then stock discrepancies between systems inventory and physical inventory will increase. This reduces warehouse productivity, when time is wasted looking for inventory and correcting errors. In many industries, for example, oil, mining, utilities and industrial manufacturing it’s still uncommon to find suppliers who can bar-code the product with a code that be used in their customer’s warehouse. So, in large swathes of industry we have a critical warehouse process that is completely paper based, inefficient and error prone.

The first step to solving a poor goods receipt process is to replace the existing paper-based process with a mobile application that integrates into the backend ERP system, such as, Innovapptive’s mInventory mobile application. Bar-codes get printed at point of good receipt, applied to products and used for all subsequent warehouse processes. However why not leverage the extra functionality which comes from OCR. mInventory comes packaged with OCR capability from our partner, Anyline, all available on a smart phone: 

  • A Delivery Note or Bill of Lading is the key document which is received from the supplier giving details of all the products on the load. This should contain the Purchase Order (PO) number which is the reference to allow the Goods Receipt process to start. However, frequently the PO number will only be a printed number on the Delivery Note and not in a format that can be read by a bar-code scanner.  OCR capability allows the PO number to be scanned, interpreted and immediately populated on the smart device, with details of the products to be received. This avoids the need to manually type in the PO number, saving time and more importantly reducing the possibility for errors
  • If your Goods Receipt process requires you to track manufacturers serial numbers, then OCR can also help with this process. OCR can read part numbers embossed on equipment - Direct Parts Marking (DPM). OCR overcomes the challenge of inputting long serial numbers with a high probability of errors.    
  • Finally, what to do with all the paperwork which accompanies the supplier delivery, Delivery Note, Bill of Lading, Packing Slips, Certificates, Customs documentation etc? You can use the OCR scanning capability to capture all the paperwork digitally and upload it directly into your ERP system or Document Management System. Automating the goods receipt process improves the 3-way matching used by many companies to approve invoices. It ensures fast and accurate alignment between, PO/GR/Invoice, which can mean a huge administrative saving.                  
 2. Loading and Transport

A second area where OCR can improve warehouse processes is when it comes to loading products for the outbound journey to customers or field workers. The loading process typically involves interfacing with third party transport resources, including, drivers, trucks and containers. Its important that you capture accurate information for control and visibility of outbound deliveries to customers. Some areas where OCR can support the process:

  • Prior to vehicle or trailer loading use OCR to scan the vehicle registration plate and/or trailer number. Ensure the right delivery is loaded on the right vehicle or trailer. The correct vehicle details are then populated in the shipment document, waybill or manifest which accompanies the vehicle
  • Prior to loading an international sea container use OCR to scan the container number. Ensure the right delivery is loaded in the right container. The container number can be populated in the shipping documentation. The benefits are clear, if you don’t have the right container number on the shipping documentation then expect your container to be delayed at customs!
  • Scan the drivers licence as a security control    

OCR can give you much greater integrity and accuracy for your outbound supply chain to the customer or field worker.

3. Returns 

A final warehouse process where OCR can have a big impact is returns. Returns of product from customers or field operatives is notoriously difficult to control. Both the oil and mining industries have big problems with returns through their spare parts operations. Engineers don’t know exactly which parts they will need when they create a workorder in advance of starting repair work. Any parts they don’t need to complete a repair will be sent back to the warehouse as a return, but often without any paperwork. This makes it nearly impossible for the warehouse to identify the parts. However, once you have OCR in place the serial number on the item can be scanned and it immediately comes back with detail of the part. Serial numbers tend to be used for high value equipment so this is a great way of improving control on those items.

If your interested in how OCR can benefit your Supply Chain then talk to Innovapptive……   


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