Here's a base R approach:
## define input data.frame
data <- data.frame(Code_1=c('M201','O682','S7211'),Code_2=c('','','Z966'),Code_3=c('M2187',
'O097',''),Code_4=c('M670','Z370','Z501'),Code_5=c('','',''),Code_6=c('','O48',''),Code_7=c(
'','O759',''),stringsAsFactors=F);
## coerce to a matrix to speed up subsequent operations
data <- as.matrix(data);
## solution
im <- which(arr.ind=T,data!='');
u <- unique(data[im[order(im[,'row'],im[,'col']),]]);
res <- matrix(0L,nrow(data),length(u),dimnames=list(NULL,u));
res[cbind(im[,'row'],match(data[im],u))] <- 1L;
res;
##      M201 M2187 M670 O682 O097 Z370 O48 O759 S7211 Z966 Z501
## [1,]    1     1    1    0    0    0   0    0     0    0    0
## [2,]    0     0    0    1    1    1   1    1     0    0    0
## [3,]    0     0    0    0    0    0   0    0     1    1    1
Benchmarking
library(microbenchmark);
library(reshape2);
library(dplyr);
library(tidyr);
library(data.table);
akrun1 <- function(df1) table(droplevels(subset(melt(as.matrix(df1)),value!='',select=-2)));
akrun2 <- function(df1) data_frame(rn=rep(1:nrow(df1),ncol(df1)),v1=unlist(df1)) %>% filter(v1!="") %>% group_by(rn,v1) %>% summarise(n=n()) %>% spread(v1,n,fill=0) %>% ungroup() %>% select(-rn);
akrun3 <- function(df1) dcast(data.table(rn=rep(1:nrow(df1),ncol(df1)),v1=unlist(df1))[v1!=''],rn~v1,length,value.var='v1')[,!'rn',with=FALSE];
bgoldst <- function(data) { data <- as.matrix(data); im <- which(arr.ind=T,data!=''); u <- unique(data[im[order(im[,'row'],im[,'col']),]]); res <- matrix(0L,nrow(data),length(u),dimnames=list(NULL,u)); res[cbind(im[,'row'],match(data[im],u))] <- 1L; res; };
harmonize <- function(res) {
    res <- as.matrix(if ('table'%in%class(res)) unclass(res) else res);
    res <- res[,order(colnames(res))];
    res <- res[do.call(order,as.data.frame(res)),];
    res;
}; ## end harmonize()
## OP's example
data <- data.frame(Code_1=c('M201','O682','S7211'),Code_2=c('','','Z966'),Code_3=c('M2187','O097',''),Code_4=c('M670','Z370','Z501'),Code_5=c('','',''),Code_6=c('','O48',''),Code_7=c('','O759',''),stringsAsFactors=F);
ex <- harmonize(akrun1(data));
all.equal(ex,harmonize(akrun2(data)),check.attributes=F);
## [1] TRUE
all.equal(ex,harmonize(akrun3(data)),check.attributes=F);
## [1] TRUE
all.equal(ex,harmonize(bgoldst(data)),check.attributes=F);
## [1] TRUE
microbenchmark(akrun1(data),akrun2(data),akrun3(data),bgoldst(data));
## Unit: microseconds
##           expr      min        lq      mean   median       uq       max neval
##   akrun1(data) 1155.945 1287.2345 1356.0013 1356.301 1396.072  1745.678   100
##   akrun2(data) 4053.292 4313.7315 4639.1197 4544.664 4763.408  6839.875   100
##   akrun3(data) 5866.965 6115.4320 6542.8618 6353.848 6601.886 11951.178   100
##  bgoldst(data)  108.197  144.1195  162.6198  162.936  180.684   240.769   100
## scale test
set.seed(1L);
NR <- 1374439L; NC <- 145L; NU <- as.integer(11/7*NC); probBlank <- 10/21;
repeat { u <- paste0(sample(LETTERS,NU,T),sprintf('%03d',sample(0:999,NU,T))); if (length(u)==NU) break; };
data <- setNames(nm=paste0('Code_',seq_len(NC)),as.data.frame(matrix(sample(c('',u),NR*NC,T,c(probBlank,rep((1-probBlank)/NU,NU))),NR)));
ex <- harmonize(akrun1(data));
all.equal(ex,harmonize(akrun2(data)),check.attributes=F);
## Error: cannot allocate vector of size 1.5 Gb
all.equal(ex,harmonize(akrun3(data)),check.attributes=F);
## Error: cannot allocate vector of size 1.5 Gb
all.equal(ex,harmonize(bgoldst(data)),check.attributes=F);
## [1] "Mean relative difference: 1.70387"
microbenchmark(akrun1(data),bgoldst(data),times=1L);
## Unit: seconds
##           expr       min        lq      mean    median        uq       max neval
##   akrun1(data) 101.81215 101.81215 101.81215 101.81215 101.81215 101.81215     1
##  bgoldst(data)  30.82899  30.82899  30.82899  30.82899  30.82899  30.82899     1
I don't know exactly why my result is not identical to akrun1(), but it appears his result is incorrect, since he has non-binary values in it:
unique(c(ex));
## [1] 0 1 2 3 4 5 6 7 8