Automotive OEMs Might Soon Contract 'BRAIN' Damage
- August 12, 2002
all eyes and ears have recently been on WorldCom's bankruptcy,
another insolvency under way is sending shockwaves throughout middle and
lower tiers of automotive suppliers despite its insignificant financial
magnitude in comparison to the WordCom's.
July 5, the board of BRAIN International AG, a German provider
automotive and industrial business solutions, filed for provisional insolvency
proceedings with the Local Court of Freiburg, Germany. Included in the
application are BRAIN International AG itself and both its subsidiaries
BRAIN Automotive Solutions GmbH and BRAIN Industries Solutions
GmbH. After carefully reviewing the business and financial situation,
the board cited insolvency was looming as a result of the difficult market
situation in Germany.
substantial drop in sales especially in Germany reportedly exacerbated
the situation in the second quarter. Intensive discussions with potential
financial investors and strategic investors still continue with the aim
of continuing the company as a going concern and of launching further
restructuring measures. Business trends, particularly in the USA, nonetheless,
continue to be positive for BRAIN North America, a wholly owned
subsidiary of BRAIN AG.
best example thereof would be the August 1 announcement of the release
of SupplyWEB 6.0, marking the second upgrade for the product this
year, with enhancements including advanced global capabilities and expanded
functionality in key areas such as demand management and releases, purchasing,
advanced shipping notice (ASN)/supplier shipping, and invoicing. SupplyWEB
is a comprehensive, ERP independent, web-based Supply Chain Management
(SCM) procurement and supplier rating solution, designed specifically
to improve relationships and efficiencies between automotive manufacturers
and their suppliers. It should allow automotive suppliers to deploy e-commerce
strategies to reduce inventory, speed the flow of supply chain information,
and increase operational efficiencies, as by deploying it manufacturers
should be able to achieve 100% electronic communications with all their
suppliers, even if some of their suppliers do not have EDI capability.
To that end, SupplyWEB includes fully integrated machine-to-machine EDI
transactions as well as web-based methods.
Futhermore, since just accessing the supply chain is not enough, through
the use of 5 procurement methodologies, including SMI (Supplier Managed
Inventory), and Kanban, users should be able to manage their suppliers
according to their needs. For instance, SupplyWEB allows suppliers to
respond quickly to the exceptions that occur, such as defective material,
delivery issues, excess inventory, critical Kanban, etc. It also allows
manufacturers to rate the performance of each supplier and focus on resolving
and preventing the exceptions.
is Part One of a two-part analysis of the impact of a recent announcement
concerning BRAIN. Part Two will continue the Market Impact and make User
would be yet another object lesson on what conundrum might result for
a customer neglecting the vendor's liability. The market had already witnessed
the anguish of former Baan Co. and SSA customers, which have both eventually
been resolved favorably with subsequent buyouts (see ERP
Belle poque Officially Ended With the Demise of Baan and SSA).
this stage, speculations are the most one can come up with until BRAIN
AG officially announces the outcome of negotiations with creditors and
investors. In its recent address to North American customers, BRAIN AG
stated its commitment to existing systems and implementations, and continued
selling new systems, which has likely been received only as a crumb of
comfort in light of ever-sinking investors' and users' sentiment and trust
in corporate rhetoric. Some writing on the wall could have already been
sensed from a difficult 2000, when the company had to plead with the banks
for a rescue package. Eventually, a bank in Munich stepped in, assuming
around a third of the shares and the majority of the voting rights. One
should wait and see whether the company can pull a similar feat in today's
much-changed reticent investing climate amid scandals and business failures-ridden
NA's parent company, headquartered in Breisach, Germany, was formed a
few years ago from the merger of German ERP software developers BIW
and Rembold + Holzer. BRAIN AG further gained the TRANS4M
solution when it acquired a US-based CMI-Competitive Solutions
in September 1999 with a view to become the leading provider of ERP and
SCM solutions to the North American automotive industry. As a result,
BRAIN continued to compete with its two automotive-focused ERP packages,
which are Xpert Manufacturing System, which runs on IBM's iServer
(formerly AS/400) platform, and TRANS4M, which runs on UNIX and
Windows server platforms.
The two products differ in their fit to different types of automotive
suppliers, in addition to platform support. Xpert is better suited to
mixed-mode manufacturing requirements (with EDI being an integrated component
of materials requirement planning MRP), whereas TRANS4M should appeal
to manufacturers with a lean/repetitive production environment (with its
work-in-progress (WIP) visibility, pay-point operations, multiple backflush
methods, and other industry endemic functionality).
BRAIN's difficulties can still largely been attributed to the fact that
the company has never produced a cogent strategy to bring the two dissimilar
product lines together, finally resigning to having a two-pronged product
strategy. Moreover, hefty R&D expenditures in German HQ to unify the products
and spread into other vertical industries will have also been the likely
reasons that left the company financially vulnerable for the revenue slump.
to BRAIN in Germany, BRAIN NA has long been focused on Web-based software
capabilities and domain expertise in automotive supply chain communication,
as opposed to traditional ERP systems in various industries. The automotive
industry has unique characteristics that make it highly conducive to Internet-based
supply chain optimization and collaboration. A car's or engine's intricate
bill of materials (BOM) results in many entities being involved in its
making. Information transparency and supply chain integration are, therefore,
the name of the game, and e-business technology, while not causing these
requirements, is at least providing for their enablement. To that end,
BRAIN has long been offering a suite of automotive-focused supply chain
communication applications that integrate with multiple ERP systems. The
platform agnosticism stems both from the need for stronger market competitiveness
and from the homogenous back-office population within the customer base.
While many existing customers may run on one of BRAIN's ERP solutions,
many others have legacy systems or systems from another vendor that they
are not planning to replace any time soon.
a result BRAIN has developed its e-Automotive Suite of B2B communication
and collaboration applications, which also includes SupplyWEB Enterprise,
a Web-based system for communicating procurement, shipment, payment, supplier
performance, and many other types of information, catering thereby for
almost every type of communication an automotive company has with its
suppliers. In fact, BRAIN NA had achieved a notable traction with its
SupplyWEB replenishment system, with a recent large wins and momentum
with other prospects, giving thereby a pause to archrivals like QAD
(with its eQ and MFGx.net collaborative offerings, in addition
to the flagship MFG/PRO ERP product) and to the likes SupplySolution
and Future Three.
is a product to manage supplier relations, procurement, performance, and
keep manufacturers compliant with automotive industry requirements. Many
automotive suppliers have reportedly felt stuck with the traditional methods
of using just electronic data interchange (EDI), which is demanded by
their original equipment manufacturers (OEMs). BRAIN claims SupplyWEB
Enterprise makes communication and managing their suppliers much more
efficient and affordable and helps the tiers keep in contact, since suppliers
can communicate via EDI or through the Internet to receive releases and
send Advanced Shipping Notices (ASNs) in XML, HTML, and spreadsheet formats,
as well as communicate performance issues and payments. The supplier can
also download release data into a spreadsheet for manipulation.
SupplyWEB Enterprise, suppliers can log-on via the web for access to suppliers'
latest inventory levels, allowing for supplier-managed inventory (SMI).
Suppliers can view releases and purchase orders, view and respond to quality
and delivery performance issues like Delivery Performance Reviews (DPRs)
and Production Parts Approval Process (PPAPs), view overall supplier ratings,
enter invoice detail and view payment information. Moreover, with the
latest SupplyWEB version 6.0, BRAIN has expanded the Internet-based product's
appeal by merging European and US/Canadian functionality to better support
manufacturers with plants on both sides of the Atlantic.
extensible mark-up language (XML) holds great promise, the automotive
industry has already invested heavily in electronic data interchange (EDI)
and will not dispense with an investment in something that has been working
well. Perhaps, new e-commerce business practices such as MRO (maintenance,
repair, and overhaul) components procurement in some other complex manufacturing
industries will adopt XML right away, while in other cases, EDI might
simply be moved onto the Internet.
SupplyWEB therefore eliminates the need for all of the company's suppliers
to install and maintain expensive and complex EDI connectivity. While
sophisticated suppliers may still use their EDI investment, smaller suppliers'
communication needs can be handled via SupplyWEB. As a matter of fact,
the company deploying SupplyWEB may even be under the impression that
all its suppliers have EDI, as BRAIN leverages the Internet as the means
to mask complexity and help lower-tier, small suppliers get beyond manual
re-keying of EDI transmissions.
concludes Part One of a two-part analysis of a recent BRAIN announcement.
Part Two will continue to discuss the Market Impact and make User Recommendations.