Supply Chain Startup: Digitizing the paper trail

I cut my teeth in the materials handling industry. Heck, I grew up in the industry. So, when I think about automation, I think of the mechanical side of things. That’s why some of the companies I’ve written about in this blog are in the robotics space, where there’s a lot of startup activity. But there’s another side to automation in the supply chain – that’s bringing Artificial Intelligence to digitize and automate document processing. That’s the side of supply chain management that Michael Young is tackling at Photon Commerce. “The supply chain today is where the customer relationship management industry was before Salesforce,” he says. “People are still managing their suppliers and their paperwork manually. We’re the Salesforce for your suppliers.”

The company is working with over 100 e-commerce customers. Since going to market, Photon Commerce has processed some 8,150,000 documents, a number that is updated regularly on its homepage. The company is backed by the Nasdaq Entrepreneurial Center, Hike Ventures and Village Global, a venture firm funded by Jeff Bezos, Bill Gates, and other leaders of industry. The company recently inked a soon-to-be-announced deal with one of the country’s largest payment companies, allowing customers to seamlessly integrate payments into supply chain workflows.

This is not Young’s first startup venture. A subject matter expert in computer vision and supply chain management, Young dropped out of a Ph.D. program at Stanford to co-found Smart Focus, an AI and retail supply chain company, and Innova Dynamics, which was acquired by a major supplier to Apple. In his career, he says he came to realize “that supply chain is still old school in many ways. There’s still a lot of paperwork.”

Based on interviews with dozens of companies, he also realized the number of errors related to all that paperwork. The shipping industry, for instance, experiences a 30-to-40% exception rate, including containers that are dropped off at the wrong port or even the wrong country; and an estimated 5-to-6% of parcel deliveries don’t make it to the right destination. “We believe you have to bring in automation to what is now a very manual process of managing suppliers and shipping detail, and the lowest-hanging fruit is to go paperless,” he says.

So, how does it work? First, let’s start with what it isn’t: Robotic process automation. Young says the platform can process a pile of invoices if you want it to do that, but that is not its purpose. Photon Commerce brings AI to not just process the documents, but to clean them up, analyze them for errors, patterns and trends, export them into relevant systems, like a WMS, LMS, ERP or procurement system, and share them as needed with partners across the supply chain. “We can speed up throughput and cycle times by about 100%, which reduces labor and speeds up turnaround times,” Young says.

Like many of the startups I’ve covered in this blog, it’s a cloud-based platform, with a SaaS business model. However, it can be deployed on premises if that’s what the customer prefers. At the receiving or shipping dock – or wherever the work gets done – an associate scans a barcode, digitally captures an image with a smartphone or tablet, or drags and drops a PDF of documents like an invoice, packing slip or bill of lading.

The system follows three steps with digitized documents.
1. Pre-extraction: Performs image pre-processing to increase the quality of the scanned document, captures, data, and indexes and classifies the documents into categories
2. Extraction: Captures relevant data leveraging Natural Language Processing for further processing
3. Post-extraction: Validates the extracted data with the help business logic, validation rules, and enterprise databases
The information is returned in the format most useful to the end user, such as a spreadsheet. “Once you digitize the document, you can apply AI and machine learning to catch exceptions and errors,” Young says.

So, why supply chain? It’s a question I ask every startup entrepreneur. “One of the things we’ve learned during COVID is that companies are dependent on their supply chains,” he says. “The Apples, Walmarts and Amazons of the world are really supply chain companies. We’re focusing on a very specific operational workflow, but when you digitize the paper trail, you can reduce waste significantly.”

SCMR’s Supply Chain Startup Blog is published every Friday. If you’re a startup, a venture capitalist or a supply chain practitioner working with startups, and want to share your story, or have startup news to share, email me at [email protected]. Remember that the purpose is not to promote any one firm – and a blog shouldn’t be interpreted as an endorsement of a firm or its technology. Rather it’s to start the dialogue between me, my readers and the people creating the NextGen Technologies that will power tomorrow’s supply chains.