It's a corporate nightmare: a tainted product and potential recall. At Korbel Champagne Cellars, a Sonoma County, Calif.-based winery founded in 1882, CIO Robert Barnes has been preparing for the worst-case scenario: bioterrorism in one of the company's bottles.
When the Food and Drug Administration proposed that food and beverage makers must be able to trace all the ingredients in a product within 24 hours, as part of the 2002 Bioterrorism Act, Korbel ran a fire drill. Pulling all the information together took well over 24 hours -- and took a lot of personnel off other jobs, even though Korbel had all the data in an (aging) Wine Production System (WiPS). It included information on such aspects of winemaking as where the glass, cork and grapes came from, what casks the wine had been stored in, the kind of yeast that had been used.
"The industry is highly regulated," Barnes says. "We have to monitor everything in that bottle. We had all the data, but it would take us a couple of days."
Across the sector, wineries struggle with the same compliance problems.
"It's a terrible headache for the industry," notes Mack Schwing, a former consultant at Deloitte & Touche and now director of the Wine Business Program at Sonoma State University. "The FDA says a winery has to have that information available within hours. The wine industry has never had to deal with the FDA before."
Besides complying with the 2002 Bioterrorism Act, Barnes also had his hands full trying to revamp the company's core technology. Korbel was struggling with a troublesome enterprise resource planning (ERP) deployment and an error-prone business intelligence (BI) system.
To meet the new federal requirements, which took effect this year, Barnes realized that the winery needed to upgrade its WiPS, made by Indianapolis-based eSkye Solutions Inc. Once the new WiPS system, which included software designed to make collecting and reporting compliance data easier, was in place, the bottle-tracking fire drills became dramatically faster, making compliance a snap.
"Now we can do it in hours," Barnes says. "Our goal is to get the information faster and faster. Making sure we're totally compliant is a big challenge. The problem with compliance is that an edict comes out and there isn't really anything that tells you what you have to do to be compliant. It's a work in process. It takes up an awful lot of my time."
A Vintage Business
Vintage wine is good; vintage technology isn't. Winemaking may start with farming, but, increasingly, IT is there every step of the journey, from planting grapes to decanting the finished elixir.
The business is fiercely competitive. In a Nielsen study, a major supermarket averaged 588 different wines on its shelves, the biggest category in the store. Some 5,000 wineries in the U.S. fight for that space. While a handful of large holding companies have enterprise-class IT systems in the industry, such as Constellation Brands, owner of the Robert Mondavi Winery, most wineries remain small, family-run businesses where information technology is harder to pronounce than Gewurztraminer.
"The wine industry is a relatively immature industry in the IT world," Schwing says. "Capital expenditures haven't been a high priority. I used to see the same thing in the manufacturing/financial world 20 years ago. It's very difficult to communicate among the packages; there's a lot of Band-Aids and baling wire tying all these things together."
Barnes has been wrestling with these issues since becoming Korbel's first CIO four years ago. He has presided over a major overhaul of the company's technology, replacing legacy systems, beefing up infrastructure and putting down a foundation for the winery to finally leverage its IT investments as a competitive advantage. Over the years, Korbel had invested in technology, but it wasn't well integrated or managed.
"Our previous data center was basically a converted office," Barnes says.
For the new data center, Korbel upgraded to a new redundant uninterruptible power supply (UPS), enhanced the electrical systems to provide better circuit loads for the servers, and implemented a new air conditioning system designed to provide stabilized cooling temperatures and improved environmental conditions. The new data center provides 33% more capacity than the old facility and is designed to meet the company's needs for several years.
"The industry as a whole has been behind the curve, but I've seen that change a lot since I've been here," Barnes says. "Korbel is a midsized winery but feels very strongly about technology."
Four years ago, Barnes drove through the redwood forest lining the Russian River and pulled into the driveway of Korbel, where a 19th-century brick building covered with ivy sat in the center of a sprawling estate of terraced vineyards stretching into the nearby hills. "When I drove into the main gate and took a look at the place," he recalls, "I fell in love and said, 'I want to work here.' "
In the 19th century, a refugee from Bohemia named Frantissek (Francis) Korbel and his brothers founded a building-materials business in San Francisco. Eventually F. Korbel & Bros. Inc. moved into the lumber business, buying a sawmill in the Russian River town of Guerneville a couple of hours north of the city. The brothers also tried their hands at farming, cultivating the Pinot Noir grape used to make Champagne. Before long, winemaking was the family's main business.
In 1954 the family sold the winery to Adolf Heck, a third-generation winemaker. Heck invented a riddling machine, which turned fermenting bottles automatically; previously, this was done by hand. His son, Gary Heck, took over as president in 1982. That decade, the company enjoyed double-digit growth, acquiring other properties such as Kenwood Vineyards and Valley of the Moon Winery. Today, Korbel sells more than 1.3 million cases a year and posts about $150 million in revenue.
"Champagne pays the bills," Barnes says.
Barnes to the ERP Rescue
It was 2002 when Korbel decided to hire its first CIO; it found Barnes through a search firm. Barnes had an MBA in finance and a background at IBM, where he rose from computer operator to project manager. When Korbel called, he was CIO at a New York equipment distribution company, which had recently gone through a JD Edwards rollout. (JD Edwards has since been acquired by Oracle.) Korbel, too, was deploying a JD Edwards ERP system -- but not without trouble. It was trying to replace its unsupported, legacy Pansophic ERP system, and the project was a mess. Barnes was hired to fix things.
"The JD Edwards implementation was not going well," Barnes says. "We were behind budget and timeline. They were trying to implement too many modules. I said, 'Let's take a step back and see what needs to be done.' My philosophy is take it off-the-shelf, tweak it but don't enhance it because when you upgrade you have a potential nightmare. I like a phased approach, not a big bang."
Barnes found that the financial and HR modules were working well, but order entry and pricing needed work. Distribution and manufacturing apps were still on the drawing board.
Korbel had hired a consulting firm to handle the deployment, but Barnes realized he needed more control of the project, so he took it in-house. "The biggest challenge was taking control of the project back from the consulting firm and being responsible for running it ourselves," he says. "I had full management support. It just required a little direction, a lot of support and putting a plan in place. We had a situation where we had outside consultants running part of the project and internal staff handling other tasks. Since we were ultimately going to be responsible for this software, we felt it made a lot more sense to take responsibility for the project as a whole. We changed some internal staff responsibilities, sent internal staff for training, and people quickly embraced the fact that this was 'their' system. Since then, we have never looked back or had any problems supporting or upgrading our JDE ERP system."
BI on the Vine
While Barnes was straightening out the ERP mess, Korbel president Gary Heck handed him another problem. The company's business intelligence system didn't seem all that, well, intelligent. Heck would sign on daily to the Cognos BI system and often the number of cases of wine that were bottled was different than the number being stored in the warehouse. "How'd I lose 500 cases in 50 feet?" Heck would ask.
"We had reconciliation issues," Barnes says. "The numbers didn't match. Our legacy BI system was an outdated reporting system that had been modified and updated considerably by previous internal staff." Fortunately, the new JDE system and a BI upgrade (to Cognos 8i), which went live in August, solved that problem, Barnes says.
Now reconciliation problems are a thing of the past and the winery has a powerful tool for evaluating how the business is going. "We still bring in grapes [and] process and blend and bottle them," says Korbel's wine quality manager, Lisa Russell, who has been at the company for 20 years. "But tracking has gotten a whole lot more detailed. I have a bigger picture of how the business runs, how costs flow through the company from grape contracts to finished goods."
Indeed, IT is seeping into every corner of the winery, including the barrels used to age various kinds of wine (different oak imparts different flavors and needs to be periodically retreated). These days, Korbel uses eSkye's barrel-tracking system, which automates the process of charting a barrel's working life. The winemaker can see what kinds of oak barrels are available, what wine is being stored where, how many times a barrel has been refilled and when it's due for retirement. "Barrel tracking has proved to be an enormous success," says Barnes, "allowing us to better manage our wine aging process and track barrel costs while improving the overall quality of our product."
Even the fermenting of grape juice into wine can be monitored on the Web; Korbel uses Acrolon Technologies Inc.'s TankNET system to precisely track what's going on in storage tanks.
The telecom infrastructure also needed beefing up. The Russian River area may be scenic, but winter storms are hard on phone lines, which fail annually, cutting off email and Internet access at the winery. So Barnes built a wireless satellite network to link its headquarters with its warehouse at the nearby Santa Rosa airport and other facilities.
"It's reduced our cost and improved bandwidth," Barnes says. "We implemented new redundant broadband wireless data circuits to connect a number of our facilities in Sonoma County. This reduced data circuit 'connect' costs considerably from our previous copper connection costs. Since a healthy amount of the data circuits in this part of the county required upgrades, our reliability increased as well."
After two years at Korbel, Barnes found that he had pretty much revamped the company's entire technology platform.
"Things weren't totally desperate," he says. "I inherited a good group. What we really needed was some good training. I just helped them turn the corner."
Most business days, Korbel's executives gather at the estate's pool house for a catered lunch -- one of the perks of the winery, but also a valuable forum for communication about the business. "At large corporations, if you have an IT idea, you have to write it up in triplicate and send it up to God-knows-how-many levels, and by the time it gets back to you it's out of date," says Barnes. "Here I can talk to Gary and tell him something and get an answer right away."
Still, Barnes has tried to introduce more formal governance processes. One of his first initiatives was to start an IT project steering committee. And every quarter Barnes publishes an IT update, telling the rest of the company what his department is doing.
Nothing, he says, was more important than building credibility within the organization -- first by smoothing out the ERP deployment, then by reconciling the BI discrepancies. "All you really need is a couple of successes and that opens the door," he says. "Now we can't do enough. A little of that goes a long way. We've stabilized a lot of the operations and allowed them to have an integrated system to do their job a lot more effectively."
Korbel is now upgrading its ERP (JD Edwards release 8.12) and BI systems, deploying dashboards and looking to share sales information with distributors and retailers to better understand what is selling, at what price and where. Bar codes allow individual wines to be tracked with optical scanners from the bottling line to the checkout line, providing real-time sales data.
"The first two years were just 'Solve the problems and get things right,' " Barnes says. "Now it's about being a more efficient and productive organization. I see us getting into a lot more analysis of what we sell and who we sell to, what's profitable, who's buying what, making projections and accurate forecasting.
"It's a fascinating business," he says. "You put a plant in the ground and have to figure out what kind of grapes will be selling in several years."
Michael Ybarra is a contributing writer for SearchCIO-Midmarket.com. Write to him at email@example.com.