Executive Briefings

Creating Value in a Price-Sensitive World

Companies in a true supply-chain partnership are a bit like couples who have lived together for years and find themselves completing each other's sentences. A good provider can anticipate the customer's needs - often before the customer knows what they are.

Or so believes Amkor Technology Inc., which recently linked up to its biggest customer, Texas Instruments, via business planning and collaboration software from i2 Technologies. As a result, Amkor can gauge TI's need for additional semiconductor product before TI discovers that it needs more, said Ernest Maune, vice president of strategic planning with Amkor Wafer Fabrication Services (AWFS).

In the same manner, said Maune, Dallas-based i2 has built into its software a feature that anticipates phased improvements in the supply chain, as the user becomes more comfortable with the system. Gone are the disappointments when a complex and expensive application doesn't start showing maximum results on Day One.

"A true partnership is when you agree to share a significant portion of information real-time, where in the past you kept it
hidden like a deck of cards."
- Tim Dimbero of i2 Technologies

Westchester, Pa.-based Amkor thrives in a highly specific and demanding field. With 1998 revenues of $1.57bn, its reputation has been built on packaging, assembly and testing of integrated circuits. The product then moves to semiconductor producers such as TI.
Two years ago, Amkor decided to extend its services to include basic manufacturing of digital processing chips. It made an exclusive arrangement with a Korean subcontractor, Anam Semiconductor Inc., which fabricates wafers at a foundry in Buchon on the outskirts of Seoul.

Wafers are becoming more of a commodity as their price plummets. So Amkor, a newcomer to the business, saw the need to differentiate itself from the pack. Its plan was to tightly integrate business processes with those of its account base - "to become a virtual extension of our customers," said Mike Scott, director of business planning.

The company decided to capitalize on its inexperience by building a world-class system from the ground up. It turned to i2 in part because the software vendor had already installed systems at TI.

In addition, said Scott, i2's suite of applications, dubbed Rhythm, had features that were specific to the semiconductor industry. For example, Rhythm allowed for the re-entry of semi-finished product into the plant. Unlike most manufacturing, where product comes off the assembly line and goes out the door, wafers travel back and forth between production and testing. The company's off-the-shelf product also contains a number of information templates designed specially for the semiconductor business.

The fact that Rhythm required minimal configuration was especially attractive to Amkor. Maune decries systems that call for constant tinkering with each new release of the software. "Customization is a support annuity for software providers," he said.

The Irving, Tex.-based company's software falls into the category of electronic business process optimization (eBPO), according to Tim Dimbero, director of the semiconductor business unit. Elements of eBPO include supply-chain management, advanced planning and scheduling, customer management and collaboration, and product lifecycle.

Amkor was most interested in two modules of Rhythm, Factory Planner and Supply Chain Planner. The first handles forecasting and production planning at an individual plant. The second ties that information back into a company's enterprise resource planning (ERP) system to permit long-range planning across the entire supply chain, including closer collaboration with customers.

In Amkor's case, it receives production and sales data directly from TI, then uses that data to construct its own production plans. The results are relayed back to TI.

Through better communication with its customer, Amkor can reduce the need for inventory, which it would otherwise have to carry on its books until shipping to the customer. In place of expensive product, Amkor gets a real-time picture of work in process, committed delivery dates, and detailed information on product yield and cycle time.

Amkor can respond more quickly to changes in consumption, said Maune. Moreover, any production capacity that isn't currently dedicated to TI can be used to serve another customer.

On the other hand, the visibility afforded by Rhythm allows Amkor to take certain calculated risks with regard to future demand, Maune said. The company might order what appears to be too much product, then bank on either selling it, or later scaling back production and bleeding off the excess stock.

That's better than being caught with too little inventory by a demanding customer, said Maune. "You can only start so many lots a day. If you pass up the ability to start on a lot of wafers, you lose it forever."

Amkor's next step is to install an ERP tool in its Boise office. As of mid-May, the system was in the prototype stage and expected to be live within four months. Yet Amkor already was seeing measurable results from implementation of the i2 software.

According to Scott, it was able to take an order for integrated circuits on one day, and start the manufacturing process on the following day. TI, meanwhile, was seeing reduced cycle times and inventory levels, and a greater number of stock turns.

Collaboration isn't just the goal of the Rhythm software - it's a hallmark of the relationship among Amkor, TI and i2. Dimbero said the parties communicate freely to avoid problems stemming from differences in their respective planning cycles. "A true partnership is when you agree to share a significant portion of information real-time," he said, "where in the past you kept it hidden like a deck of cards."

Companies in a true supply-chain partnership are a bit like couples who have lived together for years and find themselves completing each other's sentences. A good provider can anticipate the customer's needs - often before the customer knows what they are.

Or so believes Amkor Technology Inc., which recently linked up to its biggest customer, Texas Instruments, via business planning and collaboration software from i2 Technologies. As a result, Amkor can gauge TI's need for additional semiconductor product before TI discovers that it needs more, said Ernest Maune, vice president of strategic planning with Amkor Wafer Fabrication Services (AWFS).

In the same manner, said Maune, Dallas-based i2 has built into its software a feature that anticipates phased improvements in the supply chain, as the user becomes more comfortable with the system. Gone are the disappointments when a complex and expensive application doesn't start showing maximum results on Day One.

"A true partnership is when you agree to share a significant portion of information real-time, where in the past you kept it
hidden like a deck of cards."
- Tim Dimbero of i2 Technologies

Westchester, Pa.-based Amkor thrives in a highly specific and demanding field. With 1998 revenues of $1.57bn, its reputation has been built on packaging, assembly and testing of integrated circuits. The product then moves to semiconductor producers such as TI.
Two years ago, Amkor decided to extend its services to include basic manufacturing of digital processing chips. It made an exclusive arrangement with a Korean subcontractor, Anam Semiconductor Inc., which fabricates wafers at a foundry in Buchon on the outskirts of Seoul.

Wafers are becoming more of a commodity as their price plummets. So Amkor, a newcomer to the business, saw the need to differentiate itself from the pack. Its plan was to tightly integrate business processes with those of its account base - "to become a virtual extension of our customers," said Mike Scott, director of business planning.

The company decided to capitalize on its inexperience by building a world-class system from the ground up. It turned to i2 in part because the software vendor had already installed systems at TI.

In addition, said Scott, i2's suite of applications, dubbed Rhythm, had features that were specific to the semiconductor industry. For example, Rhythm allowed for the re-entry of semi-finished product into the plant. Unlike most manufacturing, where product comes off the assembly line and goes out the door, wafers travel back and forth between production and testing. The company's off-the-shelf product also contains a number of information templates designed specially for the semiconductor business.

The fact that Rhythm required minimal configuration was especially attractive to Amkor. Maune decries systems that call for constant tinkering with each new release of the software. "Customization is a support annuity for software providers," he said.

The Irving, Tex.-based company's software falls into the category of electronic business process optimization (eBPO), according to Tim Dimbero, director of the semiconductor business unit. Elements of eBPO include supply-chain management, advanced planning and scheduling, customer management and collaboration, and product lifecycle.

Amkor was most interested in two modules of Rhythm, Factory Planner and Supply Chain Planner. The first handles forecasting and production planning at an individual plant. The second ties that information back into a company's enterprise resource planning (ERP) system to permit long-range planning across the entire supply chain, including closer collaboration with customers.

In Amkor's case, it receives production and sales data directly from TI, then uses that data to construct its own production plans. The results are relayed back to TI.

Through better communication with its customer, Amkor can reduce the need for inventory, which it would otherwise have to carry on its books until shipping to the customer. In place of expensive product, Amkor gets a real-time picture of work in process, committed delivery dates, and detailed information on product yield and cycle time.

Amkor can respond more quickly to changes in consumption, said Maune. Moreover, any production capacity that isn't currently dedicated to TI can be used to serve another customer.

On the other hand, the visibility afforded by Rhythm allows Amkor to take certain calculated risks with regard to future demand, Maune said. The company might order what appears to be too much product, then bank on either selling it, or later scaling back production and bleeding off the excess stock.

That's better than being caught with too little inventory by a demanding customer, said Maune. "You can only start so many lots a day. If you pass up the ability to start on a lot of wafers, you lose it forever."

Amkor's next step is to install an ERP tool in its Boise office. As of mid-May, the system was in the prototype stage and expected to be live within four months. Yet Amkor already was seeing measurable results from implementation of the i2 software.

According to Scott, it was able to take an order for integrated circuits on one day, and start the manufacturing process on the following day. TI, meanwhile, was seeing reduced cycle times and inventory levels, and a greater number of stock turns.

Collaboration isn't just the goal of the Rhythm software - it's a hallmark of the relationship among Amkor, TI and i2. Dimbero said the parties communicate freely to avoid problems stemming from differences in their respective planning cycles. "A true partnership is when you agree to share a significant portion of information real-time," he said, "where in the past you kept it hidden like a deck of cards."