© CalcuQuote Business | July 30, 2021
Shortages, strategies and the future - a Q&A about a crisis
Following a number of articles and analyst reports covering the current ongoing semiconductor crisis, Evertiq reached out to Chintan Sutaria, president of quoting and supply chain software provider CalcuQuote, to pick his brain on the topic.
In a previous conversation with Chintan, which took place almost a year ago, both of us agreed on the fact that unpredictability was the main culprit in the then current crisis – which has now developed into a different beast. This time, the word that keeps resurfacing is "transparency". Working in the “backend” of semiconductor procurement, what kind of trends are CalcuQuote seeing now that the industry is going through this shortage? “Supply chain professionals feel the pain of inefficient processes more when there are shortages in the market. If they are manually sourcing all of their components, it is more difficult to make time for the hard to find components. However, implementing an automated sourcing process allows for supply chain professionals to focus on what matters and be strategic with an automated approach, CalcuQuote sees accelerated growth during a disruption in the supply chain. have grown by 65% compared to this time last year. Procurement automation through CalcuQuote products like ShopCQ is possible due to real-time, accurate information about stocking levels and API based ordering,” Chintan Sutaria says. Lead times are increasing in general when it comes to components, however, with the tools that you have at your disposal, do you see any particular component category that sticks out in comparison to others? “At CalcuQuote, we do not aggregate data to do macro-level analysis. We respect the relationship between the EMS company and their suppliers. However, some suppliers do ask us to give them insights about their own performance. To be clear, we only offer analysis and observations based on a supplier’s own data - we do not share competitor’s information between suppliers.” He continues to explain that in cases where the company has evaluated supplier performance, CalcuQuote have observed a 9% drop over the last two years in MPNs with sufficient stock. “In layman’s terms, EMS companies are not able to fulfill demand due to low stock from their primary suppliers. Last quarter, only 78.5% of MPNs had sufficient stock to meet the demand compared to 85.1% this time last year.” the president continues. You have previously stated that real-time visibility is key if supply chains are to become more agile and resilient to disruptions. With that in mind, what do you think should be done from the semiconductor manufacturers side of things (besides continuing to increase capacity) to alleviate the situation? “We have arrived at this problem based on a combination of reduction in supply and increase in demand. Real-time visibility up the supply chain is certainly important so a supply chain professional can know that there is going to be a problem sooner. But it is also important for the manufacturers to invest in more accurate demand forecast. Most of the demand increase could have been predicted with the information we had on hand.” “One way to gather relevant information is by collecting and analyzing information up and down the supply chain, especially for leading indicators such as stock checks. The data shows that from the 200+ EMS factories using QuoteCQ, our end-to-end RFQ management system designed specifically for EMS companies. CalcuQuote customers are processing more RFQs through the system. We have observed an increase of 135% in total Request for Quotes (RFQ) and an average increase per company of around 22% RFQs.” Chitan then provides an example of how this set of information could be used. “If a particular component category is seeing a steady rise in stock checks (number of checks and total order size) then it could be a good indicator that the components are being included in more early-stage designs, which may mature into mass production. While tracking stock checks might not completely cure the issue because there is still a ramp up period for the factory to meet that demand, at least the factories can get a good start. This information already exists if the supply chain starts transacting through integrated systems instead of phone calls/emails,” Chintan explains Usually while in the middle of a shortage we see two things; a shift in allocation strategies and methods as well as an increase in counterfeit components. How would you say that this current crisis compares to previous ones? “From an economics perspective, the incentive to counterfeit a component is higher in the current market compared to 2018. Back then, we were talking about parts that normally cost a fraction of a penny, that were selling for 10x that price. But it was still just pennies. In the IC market, parts are already more expensive, so a small multiplier is much more significant in value. Also, the timeline for the shortage to continue is longer this time. Most estimates say that we are in this allocation market for a year or more. This means that a counterfeiter is incentivized to invest in the infrastructure to create more and higher quality counterfeits, whereas if this was a short-term circumstance, then it would not be worthwhile for them to invest in sophisticated counterfeiting processes.” Looking to the future, how would you speculate this current situation will develop? “Perhaps this is because recent scars feel more significant, but it seems to me that we have one supply chain crisis after another. Supply chain professionals do an excellent job of reacting to these volatilities. However, it is important that we comprehensively address the root causes of these recurring problems. The best way of addressing them is placing a focus on transparency in supply and demand. We need to create more of a cushion in the supply chain, utilize better forecasting tools, and adjust our expectations to reflect the changes we see around us,” Chintan Sutaria concludes.
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