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9/17/2004
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Top Of The List: Recipe For A Better Winery

Equal parts technology and business acumen give winemaker Gallo a better view of its processes, business, and customers

Technology is partly the cause. The wine industry is using technology to drive efficiency, consultant Fredrikson says. And Gallo is leading the way.

Though the company is quiet about its operations, it wants shoppers to know exactly where to find its products. Gallo is achieving this through a new product-accountability system, which has just been implemented at regional distribution centers. The system's purpose is to make inventory accessible in real time to the winery's 630 distribution customers. It includes a complex manufacturing work-order system, also known as a warehouse-management system, that coordinates production, component replenishment, inventory, and shipment. That system interfaces with forklifts and automatic guided vehicles using Wi-Fi and integrates with order- and transportation-management systems. "The value to the business is that we move the inventory closer to our customers," Kushar says. "It has shortened the order-to-door cycle by 10 days." In some cases, orders can be fulfilled the day they're placed.

Before the system was implemented, everything was shipped out of Gallo's Modesto facility. Orders, which often came via fax, would be filled there, put on rail cars, and shipped. That could take up to six weeks.

Now all the orders are electronic. Availability information is provided, invoices are rendered, and payment is taken electronically. "You know exactly what you're going to get, by eligibility, by product, by place," Kushar says. "And we manage it across 50 states and 90 countries because they have different rules."

Different rules apply to Gallo, too, because of its sheer size. It buys roughly 1 million tons of grapes annually, about one-third of the crop produced in California. During the three-month crush, trucks deliver the grapes in 25-ton truckloads. On any given day, you might see 800 to 900 trucks arriving to off-load their cargo. Thanks to the company's transportation-management system, harvested grapes typically get from field to factory in no more than four hours.

Kushar is quick to credit others. He speaks reverently of the support he gets from above--the Gallo family--and from his staff. And it's clear the respect he gives is returned by his colleagues. He talks about "ruthless execution" but leads by consensus and delegation. "People work like fools if they're trusted," he says.

It also helps if you give them effective tools. Winemaking at Gallo involves not just grapes, but BlackBerrys and iPaqs. The company has an affinity for wireless and counts five or six initiatives in varying stages of completion. It relies on wireless communication in its manufacturing facility and more recently in vineyards. Field personnel use handhelds to grade sample grapes, and they're testing links to data that includes global-positioning-system coordinates, infrared satellite shots, and weather pictures. Shop-floor managers use PDAs to track wine volume in storage tanks.

The distributor sales force relies on PDAs as well. "We've got about 1,000 people carrying iPaqs now," Kushar says. "They can do store surveys, they can do order entry, and they can take a look at what that store has purchased."

Wireless technology has had a dramatic impact on the efficiency of "voice picking," a method for dealing with spoken orders. IPaqs transmit recorded voices to the nearest distribution center, where the voice-picking system translates them and directs a person on the shop floor to the requested bottles. A customer might order 10 bottles of different wines to restock a grocery-store shelf. Each of those bottles has to be located in the warehouse so the order can be assembled. Before voice picking, a distribution center might process orders for 220 bottles an hour, says Mike Magoulas, VP of management services. The new system has more than doubled productivity to 450 to 500 bottles an hour. "The innovation has given us a huge competitive edge," he says.

Its next big IT project, due to be completed early next year, is an update to production control, a system Kushar calls Gallo Wine Manager. "One of the things that you want to be able to look at is taste versus cost," he explains. "Because we have wines that cross a huge financial range, from everyday table wines to the very expensive wines, you want the winemakers to understand what the cost of that blend is." The system will offer a cost model that lets winemakers see the cost ramifications of any recipe. Ultimately, it will be integrated with the company's cellar-management and bottling systems.

The scope of Gallo's product line--95 brands sold across 90 countries--demands some degree of information sharing with distributors and retailers to support sales and marketing efforts. The company does more than that. It has a system called Gallo Edge that helps its customers, such as Albertsons Inc. and Wal-Mart Stores Inc., sell more efficiently and effectively. The software helps manage wine placement and profitability, so retailers can look at sales by brand in any of their outlets.

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