How Logistics and the Supply Chain Industry Can Benefit from OCR?

Posted by:
Jay Madheswaran
October 7, 2022


Logistics and supply chain companies constantly strive to ensure prompt delivery and consumer satisfaction amidst rising competition. In addition, the logistics and supply chain industry needs to handle large volumes of data that must be processed amid tight deadlines. 

Document processing is a crucial yet tedious and costly task in logistics operations. Traditionally, the process involves manual data extraction and paperwork. 

However, it is a complex method and also vulnerable to errors if handled manually. Moreover, industry regulations make it practically hard to systemize document processing end-to-end through traditional methods. 

Using AI-powered OCR in the supply chain helps the industry to make document processing easier and more accurate.

OCR technology expedites the supply chain workflow with accurate information. From commercial invoices to bills of lading and customs documents, OCR helps handle the high data volume and format complexity.

The research report by Transparency Market Research states that the global OCR market is estimated to grow at a CAGR of 15.2% from 2020 to 2030. It also mentions that the increased use of OCR tools in the logistics industry is driving the significant market growth.

Overall, OCR significantly minimizes human intervention in document processing. As a result, it minimizes downtime as well as reduces operational costs. Furthermore, automation streamlines critical document processing and accelerates tedious tasks, saving both time and money.

In the upcoming sections of this article, you will get a brief outlook on OCR in the supply chain. We will also discuss the implications, benefits, and use cases of OCR technology in the logistics and supply chain industry. 

First, let us understand what OCR is in the supply chain.

What is OCR?

OCR is an acronym for Optical Character Recognition. It is primarily a tool with text recognition technology backed by AI capabilities. 

The tool flawlessly extracts text from images, handwritten or printed copies. It also converts the data into searchable, machine-readable, and editable formats that can be processed to gain insights.

OCR reads everything from the scanned material, such as characters, letters, words, phrases, and patterns. 

However, OCR captures the data following the below four steps:

  • Pre-processes scanned images/doc to provide more precise and more accurate information and automatically fix the errors. This step encompasses operations like De-skewing, Binarization, Zoning, and Normalization.

  • Recognizes every single line of scanned material simultaneously, involving two processes - Word and Text Line Detection and Script Recognition.

  • Identifies characters by breaking down the scanned material into various parts. OCR executes this step in two formats - Matrix Matching (pixel by pixel) and Feature recognition (patterns).

  • Performs data extraction techniques and runs the data through algorithms to generate optimal results. The step is known as post-processing.

OCR can help businesses across all industries in optimizing their supply chain and logistics operations. 

Undeniably, warehousing, shipping, trucking, transportation, and other industries involving large volumes of paperwork can benefit from OCR and AI-based tools. 

OCR in supply chain management allows businesses to effortlessly overcome the gridlocks of document processing:

  • Directly uploads the critical information of bills, invoices, and customs declarations in the centralized cloud ERP system.

  • Assures the correct loading, transportation, and shipment of the ordered consignment to the delivery partner and the consumer.

  • Enhances consumer experience through hassle-free management of the refund system and timely shipment updates.

  • Smoothly supports end-to-end logistics management from order to inventory and post-sale services.

  • Easily scales to meet the growing industry needs and implements software upgrades without disrupting the current operations.

7 Benefits of OCR in the Supply Chain and Logistics Industry

OCR improves document processing in the supply chain industry by creating high-quality digital versions of essential documents. In addition, it makes data access and sharing easier for all stakeholders. 

The key benefits of using OCR in supply chain and logistics businesses are:

  • Automate Data Extraction:  One of the biggest bottlenecks and error-prone tasks is data extraction from various documents. However, deploying OCR in the supply chain processes automates data entry through data extraction and speeds up document processing.

  • Simplify and Save Storage Space: The paperless approach for online data storage in servers substantially minimizes manual labor. In addition, it saves warehouse space for other repositories.

  • OCR in Supply Chain Boosts Productivity: Document processing via OCR enables faster information retrieval and centralized data maintenance.  Logistics businesses can focus on their core operations while making document processing hassle-free. 

  • Reduces Operating Cost: Manual document processing requires hiring multiple experts with no guarantee of 100% accuracy and data recovery. Wherein, OCR surpasses all these problems by saving printing, copying, shipping, and warehouse space costs. 

  • Delivers High Precision Results: The top advantage of OCR in the supply chain and logistics operations is error-free and consistent data with negligible staffing support.

  • Streamline Communications: Centrally managed data channelizes internal (inter-departmental) and external (customers and delivery partner) communications with the latest updates.

  • Guarantees Data Security and Disaster Recovery: OCR protects logistics businesses from data loss and disaster circumstances by securing data in a cloud-distributed system. As a result, the data recovery and restoring process becomes much more convenient. 

According to a case study by Deloitte, DHL Supply Chain increased productivity by automating their invoice processing for 124 vendors. The technology helped extract 98.9% of characters from Dutch and English documents correctly.

9 Applications of OCR in Logistics and Supply Chain

OCR uses AI and cognitive technology for automatically reading and capturing data from logistics documents. It streamlines various processes, including generating accurate reports, tracking shipments, and even processing payments. 

The typical applications of OCR in the supply chain and logistics industry are

  1. Packing Lists: A packing list is used to identify the packages transported using coding and information on the weight, volume, and quantity of packages in each shipment. 

When the seller creates the invoice, it is a crucial tool for confirming the packages are in line with the order placed. 

  1. Bill of Lading: Three crucial pieces of information are combined in bills of lading, namely the title of the products, the receipt of the merchandise, and the terms and conditions. 

It serves as a binding legal agreement between the shipper and the carrier. According to the terms and circumstances of this legal agreement, the shipment must arrive at its destination.

  1. Proof of Delivery Documents: Proof of Delivery (POD) documents provide evidence that a shipment has been delivered to the intended recipient and can help to avoid disputes between parties involved in the shipping process. 

POD documents typically include information such as the date and time of delivery, the name of the recipient, and a description of the items that were delivered. Some POD documents may also include signatures from both the sender and the recipient and witnesses.

  1. Certificate of Inspection: A Certificate of Inspection (COI) is a record that certifies that products have been examined before shipping and are following the requirements of the sales contract. 

Customs authorities require it before they allow the shipment to enter the country. In addition, COI may be mandatory for a few specific categories of products like industrial equipment, perishable goods, and meat.

  1. Certificate of Origin: A Certificate of Origin (CO) is a crucial document shippers use for international shipments. It attests that all the products in a specific export shipment were entirely acquired, produced, manufactured, or processed in that nation. 

The certificate serves as a declaration by the exporter to satisfy trade or customs requirements, as well as a declaration of the product's nationality.

  1. Insurance Certificate: An insurance certificate is a written record that contains the details of a particular insurance policy. The logistics company can take coverage against possible product damage, loss during shipment, theft, or other associated risks. 

The insurance firms or authorized brokers that provide the required risk insurance coverage issue the insurance certificate as proof of coverage.

  1. Advanced Shipping Notice: A document known as an Advance Shipping Notice (ASN) contains comprehensive information regarding an upcoming delivery. 

An ASN is used to inform the receiver when shipping occurs and to provide physical details about the cargo. The recipient can then get ready to accept the delivery that is on the way.

  1. Delivery Docket: A delivery docket is a formal record of the products' nature and quantity. It is a document that lists the details of the buyer, seller, and kind of shipment. It goes along with the delivery of goods and lacks pricing information. 

A delivery docket gives the seller a better understanding of the shipped goods and enables buyers to verify if they have received the goods for which they have made payment.

  1. Dangerous Goods Declaration: A Dangerous Goods Declaration is a form that a sender creates to attest that the hazardous materials being transported have been packaged, labeled, and declared in line with standard shipping rules. 

By signing the Dangerous Goods Declaration, the shipper certifies that the packaging complies with all local, state, federal, and international regulations regarding the transportation of dangerous goods.

4 Best OCR Tools for Logistics and Supply Chain

OCR tools can automate document processing in the logistics industry and improve data handling. Several OCR tools are available in the market, each of which fulfills a specific purpose. 

Depending on your business needs, you can pick from the best OCR tools for the supply chain industry:

  1. Butler Labs

Butler Labs combines OCR and AI to make it feasible to extract information from any logistics document reliably. The tool accurately extracts data from printed text and even scans handwriting using recent developments in NLP and computer vision. 

Butler Labs offers the best tool with OCR in the supply chain to easily manage files with many variations and those containing tabular data.

  1. Klippa

Klippa is an Intelligent Document Processing (IDP) system that blends cutting-edge AI technology with OCR. It can extract, classify, anonymize, and scan data from logistics documents. 

Klippa DocHorizon helps extract data, categorize documents, anonymize sensitive information, and turn documents into searchable files. 

  1. AWS Textract

Amazon Textract transforms handwritten papers into electronic format and matches handwritten notes with digital alphabets and characters. 

It automatically extracts data from scanned papers using the Amazon Textract machine learning service. 

  1. Google Document AI

Document AI (DocAI), one of the products in the Google Cloud AI suite, is a document processing interface. It utilizes machine learning to identify, extract, and enrich data from documents automatically. 

Users can get insights, apply data validation, add human reviews, and use custom parsing features to increase the precision of data extraction for AI models.

Final Thoughts

OCR in the supply chain brings automation to document processing and helps logistics and supply chain companies witness exponential growth. It allows faster processing of semi-structured and unstructured documents. 

Besides saving resources, the high levels of precision lead to more satisfied customers and lesser compliance issues.

The innovative technology offers a competitive advantage by automating end-to-end management and minimizing human efforts. 

Leverage the cognitive abilities of OCR to bring about significant improvements in your supply chain business. Try Butler Labs Document AI tool for free today.

Build document extraction into your product or workflow today!