Spirit Group - 220,000 fast track OCR invoicing project shows a return in under one year

Spirit Group acquired S&N Retail for 2.5 billion in November 2003 and became the UKs largest independent managed pub operator with over 2,400 outlets. About a year ago at S&N Retail, the Financial Control Departments staff and key stakeholders brainstormed ways to make their financial processes more efficient. This produced a total of 600 ideas, of which processing invoices using Optical Character Recognition technology was just one.

After investigation and a reference site visit, Paradatecs OCR software was identified as being the best solution for achieving dramatic productivity improvements.

The companys main financial application is PeopleSoft and the OCR project involved interfacing Paradatecs OCR Invoice Data Capture to the Oracle database tables within PeopleSoft. IBMs Content Manager was identified as an efficient way to store the images of the invoices.

OCR complements our existing financial application, PeopleSoft, says Spirits Application Development Manager, Ian Teague, We felt that the technology was good enough and flexible enough to be used throughout the organisation. However, using it in Finance showed significant savings so this was a good starting point.

S&N Retail had been working to move the suppliers for its 2,400 pubs to EDI, but local pubs use many small suppliers for services such as cleaning, gardening and repairs, most of which cannot handle electronic invoicing. Even for the larger suppliers, EDI development work was often difficult to justify due to the relatively short contract periods. OCR offered an alternative to EDI which could cut through much of the labour-intensive work of capturing invoice data and the softwares components could easily be adapted without any programming.

Id been in IT for 20 years and was very sceptical about OCR, says Ian Teague, so we undertook a short proof of concept to make sure the OCR read rates would be good on our own invoices. Our scepticism very quickly evaporated when we quite easily achieved read rates of over 70%, and then raised this to 90% by tuning the system for key volume suppliers.

Spirits acquisition of S&N Retail took place just as the proof of concept was starting. The impact of the OCR project and the benefits it would bring to the combined business were so significant that it was decided to fast-track the full OCR implementation in an aggressive 7 weeks. Implementation commenced in February 2004 and went live at the end of March 2004. The integration between PeopleSoft and the OCR system was carried out by Digital Vision of Northwich.

The Solution
The heart of the OCR system is Paradatecs Prosar-AIDA, an OCR engine using neural networks technology and bordering upon Artificial Intelligence. This reads both structured and unstructured documents and makes decisions on unclear document characteristics in much the same way as a human being, only faster. It is thought to be the fastest OCR engine in the world, capable of reading thousands of documents per hour at one PC, and can also be configured to process a variety of documents such as the incoming post in a mailroom environment.

Between 70% and 90% of Sprit Groups invoice data is captured automatically before it is transferred to PeopleSoft. The web-based invoicing package, Contempus, is used to remove bottlenecks, for example to hold invoices with no order number. Invoices with queries are routed to the appropriate Accounts Payable person who specialises in a particular area, making their role far more interesting than the pure data entry work they had been doing previously.

Our idea was to be pragmatic and let the users help develop the application as their business process evolved with the new product. This enabled us to reap the benefits of the product much faster. says Ian Teague. The administration of the business rules within Paradatec and the day-to-day running of the system are done by a specially trained member of the OCR department. Users are encouraged to feel part of the programme and to help with identifying good and bad words for the OCR system. In turn, this refines the reading process and further increases the percentage of documents processed automatically, improving efficiency and making their jobs easier.

Results
Spirit Groups OCR system will give a payback in under one year which is most unusual for a finance system. It is being shown to deliver real benefits.

Financial processing systems are notoriously difficult to justify. Processing departments support a business by providing good service and minimising operating costs, says Mike Foster, Director of Financial Control. OCR delivers on both of these fronts; information gets into our systems quicker, providing more timely and accurate accounts and there are fewer supplier queries. Also, we need substantially fewer staff to process the invoices and the remaining people can focus on more profitable activities such as chasing up credit notes.

And the sceptics? Mike Foster says: we were all sceptical when we started to investigate this, but seeing is believing! Everyone who sees OCR in action is immediately impressed and we cant understand why there arent more businesses using it. Our volumes of manually processed invoices were not huge just 35,000 per month - and well achieve a payback of less than a year.