While 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.
On 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.
A 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.
The 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.
Owing to the functional attractiveness of the SupplyWEB product, there are indications that some automotive suppliers have recently committed to using BRAIN (e.g., Volkswagen (VW), both in European and US plants), despite the current diminished spending pattern, and even after the insolvency announcement. As usual in these situations, there might be several possible scenarios for BRAIN's fate.
One of the more favorable scenarios would be that someone, possibly a direct competitor, steps into the picture and acquires at least the more attractive parts of BRAIN offering. The likelihood of that happening might not be high (30%), given that many competitors, even the most powerful one, have been licking their own wounds. There is however a 20% chance that private investors/venture capitalists may step in and keep BRAIN alive.
Another, also favorable option and more likely option (40%), would be that the profitable wholly owned subsidiary BRAIN NA spins off and sustains as a separate entity, supporting the most viable products, i.e., TRANS4M and SupplyWEB. Fortunately, the most unlikely scenario would the most unfavorable one -- that the company's assets get liquidated completely (10%). In any scenario, it is quite implausible that BRAIN will sell many major deals until its products' future is more certain.
The events will therefore likely hamper BRAIN NA in its quest to fend off QAD (see QAD Seemingly Nearing The Corner) in their battle for dominance in midsize automotive market. Also, MAPICS, IFS, Glovia, Geac/JBA, SoftBrands, SSA GT, ROI Systems and Lilly Software are some of the Tier2/Tier3 vendors that have viable solutions for mid-sized automotive manufacturers in their quest to eliminate complexity and streamline operations and contain costs, which will jump at the ensuing opportunity. One should never forget about the large players like SAP, Oracle, J.D. Edwards, Baan and PeopleSoft that are entrenched within the automotive original equipment manufacturers' (OEMs) and Tier 1 suppliers' corporate offices, and have recently started addressing the required product lifecycle management (PLM) and engineering change management (ECM) functionality. While they may still lag the above smaller brethren in their support for a day-to-day plant-level execution functionality, it is very likely that they will not sit idle in that regard either.
On 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.
A 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.
The 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.
Owing to the functional attractiveness of the SupplyWEB product, there are indications that some automotive suppliers have recently committed to using BRAIN (e.g., Volkswagen (VW), both in European and US plants), despite the current diminished spending pattern, and even after the insolvency announcement. As usual in these situations, there might be several possible scenarios for BRAIN's fate.
One of the more favorable scenarios would be that someone, possibly a direct competitor, steps into the picture and acquires at least the more attractive parts of BRAIN offering. The likelihood of that happening might not be high (30%), given that many competitors, even the most powerful one, have been licking their own wounds. There is however a 20% chance that private investors/venture capitalists may step in and keep BRAIN alive.
Another, also favorable option and more likely option (40%), would be that the profitable wholly owned subsidiary BRAIN NA spins off and sustains as a separate entity, supporting the most viable products, i.e., TRANS4M and SupplyWEB. Fortunately, the most unlikely scenario would the most unfavorable one -- that the company's assets get liquidated completely (10%). In any scenario, it is quite implausible that BRAIN will sell many major deals until its products' future is more certain.
The events will therefore likely hamper BRAIN NA in its quest to fend off QAD (see QAD Seemingly Nearing The Corner) in their battle for dominance in midsize automotive market. Also, MAPICS, IFS, Glovia, Geac/JBA, SoftBrands, SSA GT, ROI Systems and Lilly Software are some of the Tier2/Tier3 vendors that have viable solutions for mid-sized automotive manufacturers in their quest to eliminate complexity and streamline operations and contain costs, which will jump at the ensuing opportunity. One should never forget about the large players like SAP, Oracle, J.D. Edwards, Baan and PeopleSoft that are entrenched within the automotive original equipment manufacturers' (OEMs) and Tier 1 suppliers' corporate offices, and have recently started addressing the required product lifecycle management (PLM) and engineering change management (ECM) functionality. While they may still lag the above smaller brethren in their support for a day-to-day plant-level execution functionality, it is very likely that they will not sit idle in that regard either.
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