Amkor Technology Philippines, Inc. & Japan Tobacco International: Leveraging A Data-Driven Approach To Enhance Manufacturing & Supply Chain Operations, Part 2

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)

In this second of a two-part episode, Dr. Jonathan and Miks take a deep dive into the intriguing world of technology investments, addressing the buy/build conundrum. They provide perspectives on the strategic decisions companies face when choosing between acquiring existing technologies or developing them in-house. Additionally, both gentlemen reveal the emerging technologies that captivate them in the semiconductor and tobacco industries, while also highlighting significant market trends within the dynamic landscape of the Philippines.

If you missed the earlier episode, be sure to catch up on the insightful discussion where Dr. Jonathan and Miks shared their expertise on data analytics, including the opportunities and challenges it presents. They also provided valuable insights on effectively managing data security risks and establishing comprehensive frameworks for privacy and governance.

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 organisations here in Southeast Asia. My name is YY and I will be your host for today. This is the second of a two-part episode, where we have the pleasure of speaking to both 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). In the first part, Dr Jonathan and Miks shared their invaluable insights on the opportunities and challenges in data analytics, including managing data security risks and establishing robust frameworks for privacy and governance. Now, in this second part, both gentlemen will share their perspectives on the buy/build conundrum and how both the Global Business Services (GBS) and semiconductor operations are transforming with applications of emerging technologies. As we conclude this two-part episode, Dr Jonathan and Miks will also provide insights into how organisations need to invest in robust infrastructure and cultivate skilled talent to thrive in the evolving digital landscape. We ended with very good reminders from Miks in the first part. You're only as strong as your weakest link. And if somebody within the organisation clicked on, on a link that you're not supposed to, there goes all the data governance and everything that has been set in place. Well, I'm very interested to find out a bit more from Miks. For yourself, right, when you do global outsourcing, we always have this discussion about what kind of considerations do you go through when you decide what to build internally and what to outsource. So in your role as the global outsourcing within JTI itself, can you give us an idea about maybe some of the functions that makes sense to move to a shared services model, and what are some of the functions that typically is held within the business unit itself?

Miks - JTI: 2:55

Thank you for this question. And maybe I can answer this question not just within the JTI space because JTI in itself is captive when it comes to GBS. So we are we are in-house. So the entire services of GBS is not outsourced. I think if their outsource initiatives in GBS, it's more on the partners like logistics, distribution, warehouse, we decide on having some outsource services, like in logistics side, connecting with this well known 3PL organization, now 4PL, 5PL I don't know if it even exists, with like Kuehne + Nagel, DHL, all of this big companies that we work with. But from a Global Business Services standpoint, it really depends. It really depends on the company and the complexity of the process. And then in JTI, we believe that in-house and captive setup is aligned to the vision of the company. Because we look at our people as investors. They're not just transactions, product transactions, but we look at our people as someone who provides values and insights. In my experience outside JTI, I can say order to cash, you can outsource it to other companies, like we have some good companies like Capgemini like Accenture, who can actually take this process actually, and take in whatever automations or solutions that they have, that they can even speed it up versus if you're doing it in a captive space. So it really depends on the decision maker, I would have to say. There are already a lot of ways how to manage GBS or outsourcing. And I'm not saying outsourcing is better than insourcing or captive. Some companies are even combining this already like a hybrid approach, which processes in-house and some processes that are outsourced and it depends on the appetite as well, especially if you want to go really strong RPA automation. So in all of this GBS services, you may want to look for a partner who has already gold standards and some network already, and how to actually move into that end to end space. In the case of JTI, like what I said a while ago, we applied the lift and shift approach. For some reason, this is something that we have options or choice, because in the middle of pandemic, that was the best approach that we can actually take. So now we are on the second phase. And in this second phase, it could be a combination of getting partners to help us out, automate some of our processes. But at the same time, we're doing a combination because there are some learnings like in the logistics space, we attempted to have it outsourced in 2021 for our logistics operations. But because of the complexity of the process that we have, it only served two countries, which it cannot serve the rest of the other markets. So now we went back into the drawing board and look at it from a standpoint, why don't we work with our ERP systems, create the platform wherein we can just plug any 3PL and 4PL. And that should best serve us in terms of the level of complexity that we have in the tobacco space, and the number of blows that has been changing not to mention the Russia-Ukraine War, where we have to move all our sourcing locations and in this created more complexity on that space as well.

YY - AIBP: 6:34

That makes a lot of sense Miks. You know, thank you very much for the insights. Any shout out to partners, technology companies that has supported you in this journey?

Miks - JTI: 6:46

The biggest one for GBS, I would say is ServiceNow, Miks?

YY - AIBP: 6:49

Thank you very much Miks. On your end Jonathan, you because this helped us on demand management. The first point I mentioned at the beginning, we labeled it as My-JTI here in JTI, where from a GPS services standpoint, it's almost like a similar to a ticketing system, where our partners in the market goes into this platform. And there, we were able to actually manage our demands in terms of the services, whether it's in the order to cash phase, in the procure to pay phase, and then the rest of the function that we serve in GBS. know, having both the background in manufacturing operations and now leading the IT, digital transformation at Amkor. How do you decide what to outsource, what to keep internally? I think makes mentioned about the complexity or you have to customize a lot let's stick it in-house because there's no point outsourcing it and trying to communicate like that. In your case, what do you keep in house? And what do you outsource?

Dr. Jonathan Amkor: 7:54

Yeah, that's a good point. Actually, I wear two hats. Okay. So I think when deciding between building or buying or sourcing and as far as technology is concerned, there are several considerations to keep in mind. I will be speaking from the IT perspective. Okay, the first thing is to do is I look at when it comes to building, like, for example, data analytics, I look at the data expertise from our internal capability to see that, hey, do we have the right talent? Do we have the right expertise? And primarily do we have the right people that could understand Amkor's processes, okay, because the outsourcers cannot, it's very hard for them to great solution that doesn't understand how it's being done in a manufacturing. So that's one thing. As far as data quality integration, that's one thing to be considered as well, because I know there are some several integration solutions. But I think when it comes to quality, the way we collect data from the equipment, the way we clean set, and the way the way we integrate it to our internal systems, then it will be very hard. But there are some outsourcing that you could be able to get because they might offer some pre-built data pipelines or data connectors or data quality tools that can accelerate the analytics process. But when it comes to customization and scalability, so that's one thing, right? Manufacturing has a lot of processes. There's no generic ones, there might be, you can find some simple ones. But when it comes to creating products for customers, there's a lot of designs and research and development. So customization is tough if we have to ascertain that. That's why we have to look at it whether if this is our core, then we have to do it. If not, then we have to let outsourcing come in and do it for us. Data security and compliance is one thing, we cannot afford that somebody will take care of our data for that matter. So I think that's one consideration. But if the data is not, it's not important for us, then we could be able to outsource that. Data governance as well. Yeah, in-house may provide more control. But it also requires defining and implementing governance frameworl. Well, the outsourced could be able to have their own framework. So you could rely on their framework, but again, when it comes to data governance, in-house will be good solutions. Now, integration with existing systems, this is one of the most difficult, you know coming from different manufacturing semiconductor companies. It's basically you know, they have a different homegrown system, they have a different technological solutions here, they are different equipments. It is very tough. I've seen some vendors that penetrate and they will sold it to you. But when they look at what's the diversity of the systems that we have, then his chaos, they will have to come up with some different architecture. So it starts with that. And then the last two things is about the total cost of ownership. Okay, we're looking at we're talking about upfront costs, the ongoing maintenance and support or licensing fees, now we have, I have to consider that from my point of view, so that when I present that I justified it with with my management, then they could be able to see the view, Hey, are we getting some ROI? Are those tangible or intangible benefits? So we have to look at it. And the last thing that I will say is basically, what's the long term strategy? Is this a short term plan that you might greet the officers and do it for you. But as you're talking about the long term strategy, and this record, and you have to look at it when it comes to the in-house solutions. That's from the IT perspective, but for manufacturing, I also came from manufacturing. It depends, okay. Actually, Amkor is an outsourced company, that providing packaging and test solutions to many IBM customers. So, you know, when it comes to internal capability and capacity, if you can produce it, you have to keep a capacity, when you look at the costs, okay? When you look at it more economical, it's more, when it comes to financial, it gives you more financial performance, then you make the decision whether you build it in-house. Now, many of our customers because they have the technology's changing every six months to one year, then they have different products, then it's very hard for them to invest in new equipment. That's why we thought this that so that, you know, we have the equipment, we have this processes embedded here. So they decide whether they have to invest or they have to outsource it. So those are some of the situations, you know, that I've been to, and when I am in the manufacturing. But at the end of the day, you know, it's really important to carefully evaluate the organization's specific needs. But again, consulting with relevant stakeholders, and conducting thorough analysis can help ensure you make an informed decision that aligns with your organization's goals and requirements.

YY - AIBP: 13:23

I love it, I thought about how you know, they are supposed to solve the integration problem, and then they come in and it's all chaos. You know, that's actually the number one challenge that we see among ASEAN enterprises in our annual enterprise innovation survey. The number one challenge is legacy IT, because it's not so easy to connect the multiple disparate systems together and drive data driven insights, right, and action. I'm quite curious, though, Jonathan, has any service provider or product been able to fulfill this holy grail for you?

Dr. Jonathan Amkor: 14:03

Yeah, I think, but the ERP, we do have partners with that, and we use SAP. But for our data, I think, yeah, we just buy the software for us, and then I build my own team for data analytics team to handle that. And basically, we all have our analytics, most of our analytics are built within the framework of one core based on our solution.

YY - AIBP: 14:31

So that's core to the team itself, right? It's an asset that you're building and driving bottom line attribution.

Dr. Jonathan Amkor: 14:38

But let me let me add one more thing because I think the the next thing is about data science now. So yeah, I don't know. For me, if you look at my current capability, I didn't have that kind of talent now. So I am thinking based on my brainstorming, so it could be possible that data science could be a source because you know, they just saw have to give them the data they need. And they make some kind of discovery within it. So that will be the next thing. So who knows, I might be looking at the different dimensions.

YY - AIBP: 15:10

That's very interesting. I'm surprised no one has brought about AI and chat GPT. That's a common topic nowadays, you know, when we talk about a step above data analytics.

Dr. Jonathan Amkor: 15:24

Totally agree, actually we discussed the ChatGPT last week.

YY - AIBP: 15:28

And what was the conclusion? If there is any.

Dr. Jonathan Amkor: 15:32

Initially, we have to block it now. For now. We'll see how that how that policy will change. But again, we're trying to protect IPs, because it will expose a lot of that when it comes to that kind of technology. But again, I'm using ChatGPT outside our office and using it for other purposes, like in the school, you know, it's very, the technology is very important. You imagine that amount of data that being utilized there to create that kind of intelligence, that history, you can be able to get that in seconds. I used to do it in hours, now, you know, I can be able to do that technology could give me the solution in seconds.

YY - AIBP: 16:13

Talks about productivity gains, right, from hours to seconds. On that note, maybe I can get the final insights from the both of you, right? What are some of the new technologies you're really excited about that can move the needle within your industries? Maybe you can go back to you Miks first.

Miks - JTI: 16:34

Yeah. So in the GBS space, of course, the topic on RPA and artificial intelligence, automation still at the top of the list. We looked at, like in JTI today, it's very organic, I would have to say. In my experience before JTI, pretty much we have partners already. But in our space we it's very organic depends on what problems we're trying to solve at this point in time. And if it's about reducing the number of processes like in one market, you do it seven steps. And in other markets, you do it five steps. And then we're using RPA, like UiPath or AA (Automation Anywhere), just to reduce those steps. But at the end of the it's always a question of how do we link all of this from an end to end perspective. Sometimes the investment is so high that it doesn't match into the output that desire. So it is a combination of AI at the same time process re-engineering, still the hardcore concepts of Six Sigma Lean management, and now the new concept of Agile is being introduced, because at the end of the day, there's still tribal knowledge. When I say tribal knowledge, this is the data that sits just in the mind of every person. It's not even in the cloud. It's not even in our system. And like I was talking about out of stock information or insight from the market. It's in 300 emails back and forth. And it's not even processed data. And it's so difficult to put this together and integrate it that it becomes a value insight towards so this is one of the things we are definitely looking at. From a GBS second phase standpoint, we continue to engage on standardization and harmonization of processes. We are also in the phase where I have like maybe 20 processes for one market than just six processes in the market. So this is some of the complexity in the GBS space. So we go into an era of retrofit and ensuring that we we let the markets talk to each other, we become the bridge to all of the different countries that we support. And of course, if they gave the process to GBS. Of course the market wouldn't want to see the things that we do in GBS, it's the same thing that they did like three years ago. They want to see some improvements. They want to see some technologies they want to see efficiencies and not in the space of reducing capacity or headcount, but in the space of what can you do more, now that the processes sit in GBS so this is a continuous discussion of standardization, simplification, harmonization tied to platforms of automations and in the space of P2P. Let me just quote this in the procure to pay. Of course this is something that we want to make sure that in the space of invoice management invoice track, if we can automate this and move the individuals from a transaction type of role to a decision type of role, right. And this is what excites me actually in the journey of digital transformation, because sometimes the spotlight is just on the technology. But actually, the transformation also happens from the people side. We are upskilling are people ready to a point that accountability and ownership of automations move to the people and not just to a centralized group. I'm talking about use of power apps on automations, where people can already do the automations themselves. I know it comes with a risk, but with the right level of governance in place, service and automation is also some of the topics we discussed in GBS, and it will actually expedite and scale up the automation journey much faster than just being reliant to third party vendors or to a centralized groups.

YY - AIBP: 20:54

Understand that, thank you so much, Miks. I love how you've illustrated that, right. So people always think about how automation is taking away jobs, but automation is actually allowing the human to value add and go higher up the value chain, and really do more creative management activities. So I like what you've mentioned, putting a different spin on automation, on your end, Jonathan, in the semiconductor space, or in your specific when you work with your clients, any emerging technologies that you're specific, you're more interested in, that you see a huge interest?

Dr. Jonathan Amkor: 21:35

We need to continue sustaining our business Thank you, Jonathan. You know, you've talked about Philippines. success and continue to stay ahead of the curve and success in this highly competitive industry. You know, when it comes to my industry, my organization, so we are a technology company. Amkor Technology, so we're building technology. But from a perspective of what emerging technologies, we will continue to align with the business direction, we need to anchor our strategy around our business direction. Where does the company go to and look at, you know, what technologies will be able to support that? So one of those technologies or one of the initiatives that we do, or we are doing, is actually continuing on our industry 4.0, you know, there are a lot of mechanisms are on that. There's a lot of pillars, there's a lot of technologies that are involved with that. And we talk about data analytics, how do we bring the data analytics to the next level? Now I'm looking at, primarily we're looking at how do we use the technology to predict maximum predictions or on our operation? One of the use case, we're currently looking into is user core predictive maintenance. The biggest costs of operations is basically on maintenance of the equipment for manufacturing. So it's, it's most of the initiatives are built around that are going to optimize how are you going to reduce downtime, and the use of predictive analytics for preventing it, the downtime, it will provide us the kind of improvement in terms of our performance. The other technology is about the use of machine learning, you know, it's evolving, now it's becoming a big thing for us, because how are we going to improve the quality by reducing the manual inspection with people, and machine learning is, it's a good technology for us. Now, we started to do some pilot or POCs. And then we run some productions, creating some kind of pattern recognition in terms of failures, teaching that to be able to learn and improve the the curriculum that imagine because manufacturing is labor intensive. And most of that is not only on operating the machine, but a lot of quality inspections, because that's what quality is, and machine learning to technology or AI, then you could be able to reduce that ditch that mix mentioned about RPA. So we are heavily adapted to RPA. We get the data from on demand the data from our customers, we put them into our manufacturing execution systems. So we will continue to evolve that, actually we're just trying to look at the different solution providers. Miks mentioned about UiPath now we're coming from IBM Blue Prism. So we're trying to come up with some kind of comparative study around what worked for us because I think the demand for us to automate that and digitize that is really being prioritized because So that will significantly reduce our misoperations because of the data transformation. So that's one thing. And yeah, you mentioned about ChatGPT, hopefully, good. It could it could swing into the manufacturing space to see, you know, how we're going to utilize that. But let's see, but in the semiconductor industry, you know, these technologies are primarily for my industry are very important, you know, because how do we remain competitive? We have a lot of competitors, not only here in the Philippines, but how do we still relevant in such a way that the customers choice will be asked, and we have to bring the value in terms of costs in terms of quality, in terms of on time delivery, and making sure that you know, we have this ease of doing business, we increase, improve our customer experience about how we deal with that. Basically, when we say we can we can do it, we will do it, and we can be able to satisfy all the requirements. So I think, yeah, I think there will be a lot of emerging technologies, but from what I see, you know, in the support that Oh, quality product, Oh, those are the framework or the mechanisms that are very loud now here in the industry in the Philippines. And since both you gentlemen are from the Philippines, any last point that you'd like to highlight about how doing business in the Philippines has changed or improved in the last six months or to 12 months.

Miks - JTI: 26:39

Maybe I can, I can start with this because this is an interesting journey so far. And sometimes when we look at the pandemic, this is one of the bright side that happened, you know, digital inclusion has totally increased with pandemic contactless payments, people are more knowledgeable about the internet, the digital space. And this is one of the things that we need to continue to cultivate. So I'm talking about digital inclusiveness, and continue to increase the number of people who are poor, really educated and savvy on digitalization, because we are in two, we are in the road of creating smart cities already here in the Philippines. And then if the people are not moving with the change, it's going to be very difficult. The other challenge side that I would have to say there are still policies and processes. That's paper based in the Philippines. This is a show stopper in most of our journey in digitalization. As you know, we have this three terms that, that we use the digitisation, it's the conversion of physical to digital, right. And we have digitalisation, the adoption to tools and systems. And we're talking digital transformation, which is actually the combination and the end to end reengineering and use of platforms. But the first bit is not happening, the digitization it's going to be a long journey for us. So I hope both the private and the public sector start looking into this. And I think it's important that the to the tools sectors, combine all their efforts and how we can actually move the space of digital inclusiveness across the board, whether it's private or public.

YY - AIBP: 28:34

Understand that. We're seeing quite a bit of movement from the ICT with like the under secretaries who are driving ICT industry development, and also the E-government initiatives. So I'm definitely excited about that. Jonathan, for yourself? Any interesting insights into Philippines and what excites you about Philippines itself?

Dr. Jonathan Amkor: 28:55

Yeah, for my industry, semiconductor manufacturing, so yeah, you have the Filipino people that are very hardworking, but are from the infrastructure side, I'm sitting in some of the organizations for for our industry, SAP, primarily for SAP. So yeah, we're looking at the drive towards industry 4.0 for our industry, and that will lead to significant trust or initiatives that been put in place because that will enable factories for companies to be more technology centric, more efficient, that will provide more value to our customers, as a thing, that collaboration among industries among our companies, so And part of that is a good initiative that put in place. I'm also looking at, you mentioned about DICT, yeah, I've been, I've been, you know, attending all their sites and some of the sessions and talk about E-government this kind of digitalization around the government. That's a good program set by the administration, basically focusing on that. So now the part of that is to enhance our infrastructure side, not only from the logistics side, but basically our IT side talks about internet, you talk about connectivity. You know, those are one thing, you know. The other thing is there is a strong collaboration among industries, companies to academic. But I think we started to get that kind of momentum we're in, we're trying to match our skill that the needed skills from the industry and make sure that our academics who provide the output or the input for us, you know, and we're trying to help them as far as when it comes to emotions when it comes to on-the-job training. So we're trying to align that to ensure that we have we are continuing to develop and output skilled talent here in the Philippines. And I think, and the other side is the other challenges mentioned, by Miks. Other than that, it's yeah, our electricity costs is still one of the challenges there, right. So although when it comes to our mix of energy, I think the government is doing something about it, hopefully, we can see some results of that. But if that thing is sold, you know, they will become a magnet for us to, you know, cater several industries. But I think I see a positive thing was going on now with our industry. I think I also see the strong partnership and collaboration among companies. And I also look at the initiatives, I also present. And then I also shared what's what are the best practices. So I'm very positive that the manufacturing space in the Philippines will continue to grow and evolve, not only from the technology perspective, but how do we create the people behind it? No, because the people is the most important asset that we could produce here in the country. Agree.

YY - AIBP: 32:06

Thank you so much, gentlemen. And with your help, definitely do cultivate the next generation of it. Individuals within the country itself. Appreciate your time. Thank you

Dr. Jonathan Amkor: 32:19

very much. Thank you. Thank you for having us again.

Miks - JTI: 32:23

Thank you. Thank you very much.

Voice Over: 32:27

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