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I recently spoke with Chintan Sutaria, the founder and CEO of CalcuQuote, a company that has developed quoting software for the EMS industry aiming to automate a process that had largely depended upon emails and spreadsheets. In this interview, Chintan explains how the company is bringing more supply chain data into the equation, the challenges his customers are facing, and what sorts of inventory he’s seeing today.
Andy Shaughnessy: Chintan, nice to see you again. Would you briefly explain what CalcuQuote does?
Chintan Sutaria: CalcuQuote started in 2014 with the idea of making quoting better for EMS companies. Today, we are a quoting and supply chain software company for electronics manufacturers. That includes OEMs, contract manufacturers, and cable and wire harness assembly. We’ve really expanded our portfolio.
Shaughnessy: You’ve said your aim is to put the same level of functionality and automation that we see in other parts of the process up front in the quoting process, because quoting has always been very old-school. Now, you’ve expanded into supply chain. I guess the supply chain snafu was a good testing ground for you.
Sutaria: Yes; it’s one of those things that whenever the problems get worse, people start looking for solutions. In 2018, there was an MLCC shortage. The past few years has been pulling people in one direction or the other. Either parts can’t be found, or, as we’ve heard lately, we have parts coming in, but we still have parts we can’t find; we flooded with inventory. Whenever the wind blows in a different direction, we’re the solution that people have been turning to.
Shaughnessy: Quoting and the supply chain are inseparable.
Sutaria: Yes, absolutely. Quoting is a leading indicator. About six months ago, we noticed that the wind had changed direction. Lead times were going up. Every month we tracked this index, and it was constantly getting worse. In September, it started to shift; we saw lead times dropping, and inventory coming in again. We had a good leading indicator on that because of the quoting process that we deal with.
Since then, we’ve been working more on the supply chain side. For example, we devised material supply planning (MSP), which looks at big data in your MRP system—what’s on order, and part relationships to find alternates and substitutes. It helps you determine, “What can you build? What can you ship?” You have a lot of inventory on your shelves, and you need to clear it out so you can build more and buy more stuff. That’s new.
Many OEMs have been burned by not being able to find parts in the last few years. We created a BOM health monitoring system: You put in a bill of materials, and it uses several metrics to score each component in the BOM. It relays, “Here are all the risks that you need to consider—lifecycle status, stock on hand, lead time, and diversity of supply.” Then it tells you, “Let me help you make sure that you’re preemptive about solving these risks.”
Shaughnessy: You’re basically giving the patient a prognosis?
Sutaria: Yes, exactly. If you have 100 parts to buy on a BOM, and you work through the first 99, only to find out that the hundredth part is a problem, that’s no good. This tool says, “Let’s start with the hard stuff first, deal with that, and then the easy stuff will be easy.” We’ve already built automation on the purchasing process. That’s automatic. You have to solve the hard stuff first.
Shaughnessy: What other trends are you seeing?
Sutaria: I see our customers across the EMS sector are struggling with very high inventory levels, which means limited work and capital. We’ve seen customers struggle with cash flow more than they have in the past because the “golden screw” is still missing, and all the other parts are here. You still owe money to your suppliers for the parts that did show up, but you can’t ship the boards that you’re supposed to build. I believe this trend will affect us for at least the next six months. Companies have all this capital tied up in the inventory from the customer.
Shaughnessy: Because they don’t want to get burned again?
Sutaria: Absolutely. They don’t want to get burned, but they also can’t afford to keep all these parts on their shelves and not get paid from their customer.
Shaughnessy: They have to pay to store it somewhere.
Sutaria: Exactly. If you get burned once, you will be more cautious going forward. Companies are being more proactive in building resiliency into the supply chain. We have customers at the design phase saying, “Let’s look at lifecycle status.” It’s like the lead time of what we design in, whereas before it was very much saying, “Build it, and I’m sure purchasing will work their magic.” That’s not happening now.
Shaughnessy: One designer told me, “Now we double-source everything. Every part has to have a backup part, and we probably should have been doing that all along, but we never had do it before.”
Sutaria: Exactly. Because of labor shortages, not being able to fill empty seats, we’re seeing a huge investment in automation and integration of data. More than ever, we have customers saying, “We must tie this into our ERP system. We must automate this process that was previously either manual or semi-automated.” The buzzword is “Smart factory.” There’s this smart supply chain concept that we can’t waste time on the easy stuff that’s transactional; that’s low value because we must save our bandwidth for the hard stuff.
Shaughnessy: Are you seeing younger people come into the industry?
Sutaria: Yes, but electronics manufacturing is not what somebody grows up wanting to do. Kids want to be firefighters and astronauts, not a manufacturer or a distributor.
We should do more to show that this is an appealing job. If you tell a college graduate, “You’re going to manually work through a spreadsheet for the rest of your life,” that’s not very attractive. But if you say, “We will give you these sophisticated tools that make you a supply chain data analyst, and you will be in high-level negotiations for large volumes of money,” then it becomes an exciting job.
In general, successful companies are recruiting based on vision: This is a smart, high-tech, high-skill job, not a tedious data entry job.
Shaughnessy: It is indeed. It’s been great talking to you again, Chintan.
Sutaria: Absolutely, Andy. Pleasure as always.