Amkor Technology Philippines, Inc. & Japan Tobacco International: Leveraging A Data-Driven Approach To Enhance Manufacturing & Supply Chain Operations, Part 1

Guests: Jonathan Mondero, Ph.D., Senior Director, Head of IT Operations, IT Division Manager, and Executive Staff at Amkor Technology Philippines, Inc., and Miks De Cadiz, Service Delivery Director of Order to Cash, Global Business Services, Japan Tobacco International (JTI)

Join us in this first of a two-part episode, where we have the pleasure of welcoming Jonathan Mondero, Ph.D., Senior Director, Head of IT Operations, IT Division Manager, and Executive Staff at Amkor Technology Philippines, Inc., and Michael (Miks) De Cadiz, Service Delivery Director of Order to Cash, Global Business Services, Japan Tobacco International (JTI). Drawing on their extensive knowledge and experience, Dr. Jonathan and Miks share their invaluable insights on the opportunities and challenges in data analytics, including managing data security risks and establishing robust frameworks for privacy and governance.

Stay tuned for the second part, where they will shed light on the buy/build conundrum when it comes to technology investments. Furthermore, they will reveal the emerging technologies that excite them within the semiconductor and tobacco industries, as well as key market trends in the dynamic Philippines landscape.

Amkor Technology, Inc., listed on the NASDAQ stock exchange, has a market capitalisation of approximately USD 6.09 billion as of June 2023. Its subsidiary, Amkor Technology Philippines, Inc., plays a vital role in the semiconductor packaging and test services sector, contributing to the overall operations of Amkor Technology, Inc. On the other hand, Japan Tobacco International (JTI) is a global tobacco company dedicated to delivering exceptional tobacco products while prioritizing sustainability and responsible practices in the industry. JTI's primary listing is on the Tokyo Stock Exchange, with a market capitalisation of USD 44 billion (JPY 6.11 trillion).

Transcript

Voice Over: 0:02

The AIBP ASEAN B2B growth podcast is a series of fireside chats with business leaders in Southeast Asia focused on growth in the region. Topics discussed include business strategy, sales and marketing, enterprise technology and innovation.

YY - AIBP: 0:28

Hello, and welcome to the ASEAN B2B growth podcast where we sit down with individuals responsible for driving growth within their organizations here in Southeast Asia. My name is YY and I will be your host for today. This is the first of a two part episode, where we have the pleasure of welcoming Jonathan Mondero, Senior Director, Head of IT Operations, IT Division Manager and Executive Staff at Amkor Technology, Philippines, and also Miks De Cadiz, Service Delivery Director of Order to Cash, the Global Business Services of Japan Tobacco International. Welcome, gentlemen.

Dr. Jonathan Amkor: 1:06

Welcome. Thanks for having me here today.

YY - AIBP: 1:09

Very good to have both of you here. Perhaps let's start off with Jonathan. Can you give us an overview of yourself, you know, your career trajectory, and some of the work that you do for Amkor Technology?

Dr. Jonathan Amkor: 1:24

Okay, so I am Jonathan Mondero, they call me Jomon for sort. I have been in the industry for more than 23 years. Basically 15 years of that is spent on engineering and operations and manufacturing. And after 15 years, I was appointed to head the IT for Amkor Philippines. So yeah, I have been experiencing the problems and pain points of manufacturing operations. So it brings me a unique perspective about how we're going to solve the problems in the operations. Now I am here in IT for more than seven years. And I've been doing this data analytics, I've been converting our factories to smart factory, implementing industry 4.0. And big data analytics is one of the biggest things I did for Amkor because it helps our operations and organizations to improve in many areas. And I'm very happy to share that with you today. So again, thank you for having me here today.

YY - AIBP: 2:31

Thank you, Jonathan. You're quite a rare unicorn in the world of manufacturing and IT, right, because many of times some of the conversations that we have, it's about the disconnect between the IT and the business units, but you spent your time the start of your career really going deep into the manufacturing operations before going into IT. We'll touch a little bit more on that later on. Because I think you would uncover many of the insights that are crucial to the enterprises facing this disconnect right now, right. But now, I would like to point the spotlight on Miks. Miks, tell us a little bit more about yourself, the role that you do at Japan Tobacco International.

Miks - JTI: 3:13

Okay, again, good afternoon, everyone. So I am Michael De Cadiz, this you can call me Mike or Miks. It's my nickname. And I currently hold the Order to Cash Group here in the Global Business Services of Japan Tobacco. This is a new entity here in the Philippines, which we actually launch in the middle of pandemic so we actually brought up GBS virtually, and the order to cash faces a two-function organization. So, that covers the global supply chain customer services group, and I have the bit of the cash side which is the finance organization, which completes the entire cycle of order to cash, and these are services related to credit management, accounts receivable and even cash application space. So these are circular order to cash. I've been in the corporate world related to business process outsourcing, BPO, for almost 20 years, initially for the first seven years in the contact centre, and I joined the shared services organization of supply chain in the companies of Lexmark International in Cebu City. And before joining JTI, I was with Capgemini Philippines, consulting as the head of Unilever supply chain for Asia Pacific. So in Japan Tobacco International we cater services, not just order to cash activities here in the Philippines, we actually have five major functions which includes the other side of the finance house, which is procure to pay, record to report, or accounting and finance. We also have the pillars of marketing and sales, which is very close to supply chain group, specifically on new product development in marketing and sales reporting. Of course, HR services in some global processes related to travel and expense. So I've been in the company for just barely now three years. So like what I said, we started in the middle of pandemic, we transition all of the activities coming from the market, a total of six plus concessions, virtually. So it's it's record breaking, you can imagine most of the transactions in the past, we need to be face to face with the market, but we did it all 100% virtually. So now we are opening up again, the world is opening up. So it's a good time to connect face to face. And I think there is still opportunity for scaling up. So in the space of data analytics, in innovation, there is a lot of activities on board right now, as you can imagine, transitioning processes and activities in the last two years, virtually, it was in an approach of a lift and shift. Because you cannot transform if we cannot do more than just the bridge was. So now we have the opportunity. And I'm more than willing, I'm happy to share to all of you how we're going to approach this. And at the same time, what are the learnings in this space as well. Thank you for having me here.

YY - AIBP: 6:32

Thank you so much, Miks. Very interesting. You know, people say that you get thrown into the deep end of the ocean, and you learn to sink or swim, right. But in your case, you had to kind of sink or swim with sharks, because that seems like a really intense three years where you had to do multiple functions. Going back to what we talked about data, right. As the shared service function of such a large organization, what are some of like the areas that you see, moving quite a bit, like moving the needle quite a bit, in terms of the data that you see in the shared service function and proving impact into some of the functions that you look into?

Miks - JTI: 7:14

Well, in the shared services space, especially in the Global Business Services, one of the key things, we are very interested when it comes to data. And the use of data transforming this to insight, is on the space of demand management. And this can be related to supply chain as well. But this is more on resourcing at the same time. How do we ensure that demand is quantifying objectively, that we are able to calculate productivity up from the demand and we're talking about services this time and not just processes, and translating it into something that can be matched into a platform, or today I can share later on what are the different technologies and platforms that we're able to use. Because this is one way of we're able to match the capacity and the resources that we need to put up from a Global Business Services standpoint, at the same time, how is technology baked into the equation so we can actually add value to the

YY - AIBP: 8:18

You've mentioned this thing about like the initial business. phase is lift and shift, and then now is really moving to transformation. Jonathan, on your end, transformation is nothing new, right? It's something that you have led in your over 20 years journey at Amkor. Can you share with us a little bit more about how data is being used to transform the organization, whether it be smart factory, industry 4.0, or some of the initiatives you're running?

Dr. Jonathan Amkor: 8:46

Yeah, I think for data and AI is very important primarily for our manufacturing, because every step of the way when we produce the product, we are creating data, right. Here in the Philippines we do have more than 7000 machines or equipments that have 1000s of IoT. So, every movement of the machines, we collect data. Every measurement, we collect data. Every transactions that being inputted to our manufacturing execution systems are being logged on. So, you know, when you look at the process for creating an integrated circuit, where I see, it goes to a lot a process from from die attach to wideband to laser marking, imagine the kind of data that we collect for each of these processes. Now, even when it comes to understanding the output of all the equipments, so I think this are very important for us because, you know, we use the data to look at our operational results and basically align it with what are the requirements from the business perspective. And so I think for data, when we look at data for smart factory, that's very the core of everything we do here. Because I think not only to improve the financial performance, but we have to innovate and create new products or services, primarily to satisfy our customers needs. And the other thing about it is we need to be guided, you know, when we make decisions, we need to be guided, because we are a manufacturing that is operating 24/7 365 days, 365 days a year, so we cannot afford any disruptions, because disruptions will mean, bad business for us. Because not only we are wasting our money, but we might be able to impact our customers. So again, yeah, for me, I've driven a lot of this data efforts, I call it the data strategy. And starting with how do we connect the machines to our backbone? How do we create the processes that capture the data from man, machine, to processes, to the type of materials that comes in? And how do we use this data to provide us this insights, not only from the improvement of you, not only for looking at the downtime of the equipment, not only in terms of what's the output, but we're looking at it in terms of the revenue, in terms of how much how much of the cost that we spend, because I think in terms of our business, the profit is something that we look every day in our life, because, you know, we we look at the assets, when we look at the cost to produce this kind of products, I think the margin is very limited. So we have to optimize it in such a way that we take engineering, an innovative approach, because you can adjust, try to negotiate with your supply chain vendors that they are to lower the cost. But you know, we have to look at our internal cost to see, you know, where we can be able to reduce it. And that's the power of data. That's why it's smart factory, this is not only about providing you the kind of intelligence, but it gives you a way to make strategies based on the data that you captured historically, and also use the data moving forward to be able to predict what we can do about it. So I think, yeah, it's a big task for us. It's a big, big avenue for us, too, on how are you going to utilize this data assets to improve our organization.

YY - AIBP: 12:44

I love that. We were talking about data driven insights, right, that is outcome driven. There's an outcome that you're trying to achieve. And in your case, Jonathan, you're saying that for Amkor, the outcome is really maximizing revenue, right, to make sure that the thin margins are getting fatter, based on data inputs, I think, a couple of things that both of you have mentioned, both Miks and also Jonathan, was around the fact that you're looking at the supply chain, you're looking into data. Miks mentioned that he's looking into demand management. While Jonathan, you talked about like really the improvement yield and like to manage the overall area. Can dive down a little bit more into some of the data sets that you collect along the supply chain. Maybe we can start with you first, Jonathan?

Dr. Jonathan Amkor: 13:34

Yeah, I think the use of data analytics can greatly optimize supply chain management. For Amkor, there are several ways that we utilize this. One is the demand forecasting, right? We can analyze historical data or customer orders, and other relevant information to accurately forecast demand. This helps us to optimize production planning, inventory management and order fulfillment, ensuring that we are the right amount of products are produced and delivered at the right time. We minimize our inventory costs and avoid stock outs or over stocks. So I think now, what we did, I think three years ago is to create this system for Amkor, in such a way that we integrate the data from our ERP, going to our manufacturing execution systems, and also incorporate our data from our operation in terms of the constraints or our bottlenecks to be able to model it. You know, how much capacity how much output we can produce, so that we could make some adjustment whether we have to buy new equipment, we have to hire more people. The other one is about monitoring our shipment and revenue performance in our operations. We are running three factories here in the Philippines, and we're talking about 10,000 employees and the number of equipment is so many. Primarily, we have hundreds of customers with the demand is very complex, they have a different processes, and we push them to different equipment machines, and it goes to different processes. So I think the challenge for us is, how are we going to how do we measure whether we are making the right decisions when it comes to optimizing our revenue, you know, we do we produce a lot, but the money is very low, right, or we produce little but the margin side, so we monitor the output very machines, and we compare it against our targets, and basically translate that numbers into some kind of dollar. So we can monitor how much revenue actually in any given time. So that's one thing that we develop to be able to imply or to serve our supply chain or improve our supply chain. The other one that's been important to our customers, because we are semiconductor manufacturing is the quality of products, you know, this is one of the biggest thing remotely for our business unit, the Philippines, we are majority is going to automotive business. And you know, automotive is we look at the quality should be zero defects parts per million. Okay. And the challenge for us is because we have a lot of data, we have a lot of processes, you know, our engineers are having difficulty analyzing, so what problem there might be some cases that products could be shipped with, with some defects. So yield, utilizing that yield system that we developed, utilizing the data, then it helps our engineers to identify what are the problems are basically, do we have a budget problem? Do we have a material problem? Or do we have some kind of exclusions? Now we can be able to prevent those products that are going out of the factory. Now with that, with that thought being the product in terms of yield, then we could be able to ensure that when we commit to our customers, when it comes to delivery, there, we can be able to ship them ahead of time on time without any holes in the process. So I think those are some of the supply chain management systems. As far as data analytics is concerned, we have done several more. But I think those are the key things. And what we learned here is that the use of data analytics, in our process can enable us to be more informed in decision making it improve our operational efficiency, and enhance supply chain resilience, leading to optimize supply chain management, and improve our business outcomes.

YY - AIBP: 17:45

That's perfect. You know, I see Miks nodding his head vigorously. Does that resonate with you, especially looking at too many of the functions that Jonathan mentioned in your role?

Miks - JTI: 17:58

Yep. So I'll connect that Jonathan mentioned about in the planning side, in the distribution side, and in the warehousing side. I think from a service perspective, I'll give an example, I'll also give an example from a logistics management perspective because this is where most of the customer services and global supply chain in the GBS engages more, right. So you can imagine a total of 63 markets, we transitioned into the hub of GBS. So from a data perspective, the first point that we can get right away, even without deep analysis, is just the comparison how each of the countries are using or performing processes. Just bringing the process in one house, we can already see different countries. Who does it better? Who uses automations versus countries who doesn't use automation? So for me, that's a quick win, to create the harmonization. Okay, can I apply this automation that Korea is doing that Philippines is not doing? Well, for my case, or the Philippines, the Philippines processes that I have for order to cash is more expensive. It's wide in range, that we're able to actually use it to share the best practices that we do in the Philippines to the other markets where you're still doing order processing on a manual basis and not using automations. So in this space, we can easily use data and translate it to even speed up efficiencies on how the GBS is going to service the different markets we're lagging behind when it comes to automation. Now, in the last two years, I'll move to logistics because I think everybody will agree with me that in the last three years though, we're only a few people who knows supply chain but when the pandemic came, everybody was interested about supply chain, because deliveries are not coming in on time. Then the container war, the Ocean trade and all of the challenges we have with all of the deliveries, right. But at the GBS, we provide services to the market in terms of ensuring the transport management in terms of documentation, it's delivered with no issues. But the middle of the day, the last two issues very unprecedented. One of the things that we provided insights to our market partners was that we were actually monitoring the turnaround times of every carriers that we use to transport our products in Japan Tobacco from either from market to another market, or from a vendor to the factories that we support, we have a big factory here in the Philippines, we also manage the factory in Taiwan, we manage the factory in Bangladesh, and Nepal and all of this, everybody was was looking at what is the best way for us to transport our goods. Fast. And fast is a little bit of a little bit of arbitrary description already. Because it was so challenging for us to go back prior to pandemic of what what the definition of quick service transport management, so we were actually monitoring how our carriers are able to fulfill the turnaround time, and bringing this inside store partners that okay, we've been using five carriers, two of them, we're hitting based on the contract agreement with them in turnaround time being able to deliver the goods versus the other three, that they have been having issues, so on and so forth. And it allowed us to actually make our market and our customers change in decisions in terms of okay, to whom do we renew our contract in terms of transportation and, and that was just a journey. Now we're moving into a different space 3PL to 4PL, where we are looking at creating and building our own layer of solutions where we're not depending to 3PL's and 3PL's solutions, we want our 3PL to execute based on our requirement. And it was very difficult from a tobacco business because we operate with multiple commodities. And you can imagine the non tobacco materials, the leaf transportation, which itself with so many restrictions and policies that we need to consider. And at the same time ensuring that at the end of the day, we will not have any out of stock in any of this market, you know, out of stock become the key indicator of performance during the pandemic. It's like nobody really knows what the ship on time anymore because we don't know what is on time because of you know, everything was late, right. But what we wanted to make sure is various products on the shelves, then our customers and our our market will not be out of stock. So it led us to another layer of data that we want to bake in into GBS which is how will we know if there is a potential out of stock in one country or in one market. And this is so challenging because that data usually isn't an exchange of emails. And it's not integrated into any of the platform. So we initiated a simple way of like digitalization of all of these insights, okay, Korea, Taiwan, I want you to make sure three months in advance, you tell us if you'll be out of stock, so we can actually, we can mitigate. And I think we're moving into the space already that we're after pandemic and hopefully we can bring into solutions that are more integrated, not just from a logistics perspective, but even down to the planning phase, like what Jonathan was saying a while ago.

YY - AIBP: 23:57

That's perfect. You know, when we talk about digital transformation and talking about data, unfortunately, we always have to talk about the flip side, right? When we have more data when we collect more digital assets. That's always the fear of data privacy, data breach, cybersecurity, I believe now, you know, when we talk about cybersecurity, the initial organizations you look at what like banking frauds, right, all of those cybersecurity breaches, but now I think late last year, Japanese manufacturers car manufacturer Toyota was actually found to have a data breach where they had leaked customer details. So that was something that was very interesting. And we looked at that. In your organizations, how do you will look into this issue of data security, of data governance? Maybe we can start with you first, Jonathan, I guess in Amkor and in the semiconductor industry, this must be a very big sector that that you look at.

Dr. Jonathan Amkor: 25:04

Yeah, the data privacy or data security is one of our priorities when it comes to our strategy forward, forward how we manage our data. Now, actually for Amkor, we have an information security group that are responsible for monitoring and ensuring the compliance of our policies. But for Amkor here in the Philippines, you know, we have a very good strategy around how we manage our data and who can access it. We rely on a good framework, we have an information security framework that we have for Amkor and all in the Philippines. We have penetration tests to look at our capability as far as cybersecurity is concerned. And we follow those controls that we put in place that we believe that will provide us the data security. So we trust that kind of strategy for our company. Not only from the infrastructure or technology side, but we also educate our people around how do we ensure that when it comes to cybersecurity, then we could be able to prevent any problem that it goes to our factory. Now, going back to data security, because, you know, here in encore, primarily in the Philippines, we produce some sensitive data. Okay, so that's why most of our strategy for data are in house because we cannot afford to have the data going outside of the company. Now, we found some product, we follow the policies, we do have information policies around how are we going to manage the access towards those, our infrastructure, we look at the logs, we have some checking of the log to ensure that we have that, and we have the access control lists, who can be able to access what because there are some sensitive data that cannot be shared to other organization, for example, our revenue, so our finance team are the only people who can access that. So yeah, we build a very strong policy and governance around that, and ensuring that only, only the people that are allowed to see it are there. Now when it comes to data retention, when it comes to security data, we follow a very good framework for our cybersecurity, and we do some testing to ensure that we never have some kind of problems. And the other one is in terms of compliance, we have a regular audit, you know, external audits to ensure that we are within the compliance primarily on how are we going for what's the data flow, what data retentions are? So yeah, we have three different eyes, or different perspective that we're looking at. Internally, we need to ensure that we have strengthened our cybersecurity posture, we have indication to our people, and we need to ensure that we continue to identify who can be able to access this data. I think that's what here we are doing at Amkor.

YY - AIBP: 28:21

Thank you, Jonathan, can I dive a little bit deeper, you've mentioned about how poor at this stage of your transformation is even creating new products and services based on the data that you're looking at. We had some discussions when we talk about cybersecurity, it's kind of like the brakes to a car. In order to transform even faster to go about about your digitalization journey faster, you need to have really good brakes. You've mentioned a few areas. But can we break it down? So like do you see that when you're creating new products and services, the type of say data governance or data privacy that you have to put in place is a bit different? Because I guess that's more agility or more real time information required for something like developing new products and services?

Dr. Jonathan Amkor: 29:09

Oh, yes, I think we do, we produce, I call it the product will be produced is packages, or we develop some kind of packaging solution for our customers. So we do have research and development people that are responsible for creating that kind of solution. But as far as data is concerned, it'd be data for customers are unique. And we have to protect it because some of our customers, our competitors itself, so we can't afford that somebody's looking at the Hours data center and looking at all the data. So yeah, we built a very strong governance around that mechanism and provide the mechanism how are we going to support that from the operational perspective, from the IP infrastructure perspective, and from the governance perspective, so we are operating that kind of model to ensure that, hey, the customers are strong and confident within how we manage this kind of data.

YY - AIBP: 30:08

So competitors can work with you because they have the confidence that their information are well protected. Yes, understand that. Thank you very much, Jonathan. How about you, Miks? Because on your end, you handle a large, should I say, a large geography, that comes all to you? And I'm sure that there are some segments of data that have different requirements from the other sets that you receive. Can you walk us through? How do you view this say, data privacy or data governance roadmap within your organization?

Miks - JTI: 30:42

Okay, so similar to Jonathan's organization, of course, we we have an already we have a committee that that is responsible for this. But I think from a Global Business Services standpoint, the accountability, most of the controls sits in the market in the countries, however, there are there are processes that's actually moved to the GBS side, for us to execute that control. Being a tobacco business, I don't want to start off talking about the number of audits that we go into the number of compliance that we need to ensure we are we are we are compliant. And at the same time, know your customer know your suppliers, preventing financial crime, this is more or less because you know that our product can be subject to misuse or, or illicit trade, and the work that we are able to take care of that information. And similar to what Jonathan also mentioned, I think from a GPS space, the most important initiative, when it comes to cybersecurity is really on awareness from the people. Most of the incidents in my experience, not in JTI, you go down into the root cause, if it's a misstep of somebody, maybe clicking on a link in the email, or, or opening an attachment they're not supposed to. And the awareness campaign, this is something that we've magnified not just in the GBS space, but all across JTI. Because one point, it will just take you one click, and it will cost you a lot.

YY - AIBP: 32:30

Those are very good reminders. You're only as strong as your weakest link. And if somebody within an organization clicked on a link that you're not supposed to, that goes all the data governance and everything that has been set in place. Thank you so much, gentlemen, for your invaluable insights on the opportunities and challenges in data analytics, including managing data security risks, and establishing robust frameworks for privacy and governance. This brings us to the end of the first of a two part episode. To our listeners, stay tuned for the second part, which will be released a week later, where Dr. Jonathan and Miks will shed light on the buy or build conundrum, when it comes to technology investments. Furthermore, they will reveal the emerging technologies that excite them, within the semiconductor and tobacco industries, as well as key market trends in the dynamic Philippines landscape.

Voice Over: 33:29

We hope you've enjoyed the episode. For more information about business growth in the ASEAN region, please visit our website www.iotbusiness-platform.com