shipping no wine before its time: interview with Kathryn Zepaltas
Most logistics directors make it their mission to keep product from aging. Kathryn Zepaltas of Kendall-Jackson Wine Estates has a different challenge: making sure that it does.
Mitch Mac Donald has more than 30 years of experience in both the newspaper and magazine businesses. He has covered the logistics and supply chain fields since 1988. Twice named one of the Top 10 Business Journalists in the U.S., he has served in a multitude of editorial and publishing roles. The leading force behind the launch of Supply Chain Management Review, he was that brand's founding publisher and editorial director from 1997 to 2000. Additionally, he has served as news editor, chief editor, publisher and editorial director of Logistics Management, as well as publisher of Modern Materials Handling. Mitch is also the president and CEO of Agile Business Media, LLC, the parent company of DC VELOCITY and CSCMP's Supply Chain Quarterly.
Though it was more than a decade ago, Kathryn Zepaltas still remembers the sudden shift in the job interview's tone. After months of searching, she was face to face with the general manager of a wine distributor. But it was becoming clear he had qualms about hiring a high-powered recruiter from San Francisco for an order entry job in a tiny office 50 miles from the city. "He looked at my resume and said, 'Do you realize how much this pays?'" Zepaltas recalls. Though she explained that she was willing to start at the bottom for a chance to get into the wine business, the questions kept coming: "Do you realize what the work is? How long are you going to be satisfied? Wouldn't I be taking a very big risk with you?" At that moment, Zepaltas decided to go for broke: "I just looked him straight in the eye and said, 'You won't be sorry.'"
Safe to say he wasn't sorry. He hired Zepaltas, who quickly became the distributor's "operations person." When the company decided to enter the big leagues just months later, he entrusted Zepaltas with the task of creating the necessary distribution infrastructure—hiring the people, choosing the warehouse locations, designing the network, and arranging for transportation.
Six years later, Zepaltas moved over to the distributor's parent company, Santa Rosa, Calif.-based Kendall-Jackson Wine Estates. Today, she is Kendall-Jackson's director of logistics, overseeing everything from warehousing, inventory management, and customer service to transportation and distribution. Zepaltas also remains an active member of the Warehousing Education and Research Council (WERC). She chaired the Metrics track at the group's annual conference in 2004 and the Roundtable track in 2005. This year, she served as chair of the entire conference, which took place last month in Nashville.
DC VELOCITY Editorial Director Mitch Mac Donald recently caught up with Zepaltas to talk about her journey from a small town in Wisconsin to an executive position at one of California's best-known wineries, the challenges of expansion, and life in a business where few of the usual rules apply.
Q: Let's start with your background. How did you come to be in your current position at Kendall-Jackson?
A: I grew up in central Wisconsin, out in the country in a town of 1,036, the youngest of nine children in a great family headed by a very strong mother. My father passed away when I was two and a half, leaving my mom with nine children. … I think a lot of the leadership, a lot of the strength, a lot of the "no fear" that I have in me came from my mom.
After high school, I moved to Madison, Wisconsin, where I attended a technical school. I had no idea what I wanted to be when I grew up. I dabbled a bit, trying a few different things here and there. For example, I worked for the Wisconsin State Senate for several years on the Sergeant at Arms' staff as a page and loved it.
I had planned all along to apply to the University of Wisconsin in Madison after two years of technical school. So after completing two years, I sent my application to the university and was accepted to the school of business. However, we found out that my brother Tom, who was living out in San Francisco, was ill. So I flew out to be with him and eventually moved to California to take care of him.
After he passed away, everyone thought I was going to come back home, but I stayed on in California and worked. I finished my degree at Sonoma State and worked at a couple of different companies. I was a recruiter for a while; then I wanted to get into the wine industry. I started working at Simi Winery on the weekends, where I gave tours and worked in the tasting room.
What I really wanted was to get into this company called Kendall-Jackson because it sounded like the hottest ticket. But it took me awhile, because no one believed that a recruiter from San Francisco would be satisfied doing order entry work. After several interviews for various positions, I finally landed a job with the Regal Wine Co., a Kendall Jackson subsidiary that distributed four brands within the state of California. And that's how I entered the Kendall-Jackson world.
At the time, there were two people in house: There was me—I was "the operations"— and there was an administrative person. We had a general manager and eight sales reps throughout the state of California. I worked with all of the small warehouses. I took all of the orders and processed them. Things went on that way for a few months, and then the general manager pulled me and this other person in and said,"I want Regal to take on the whole thing: the mother ship—the Kendall-Jackson brand— and all else under this umbrella." He turned to the administrator and told her, "I need you to work on all of the reports that we're going to need." He looked at me and said, "I need you to plan out what we're going to need for infrastructure for operations." Up until that point, we had only had four brands—smaller boutique ones—and were handling about 10,000 cases. Now we were going to expand the operation by a factor of 10.
I went home with one of those yellow legal-sized pads. Every night, I wrote until 10: 30 or 11 o'clock, doing the math in my head. I planned it out and then presented [my plan]: If we do this, then this is what we're going to need in terms of personnel, building size, warehouse locations ... that is how I got in. I started hiring customer service reps, and then I hired an inventory person. I opened up [a warehouse] with other parties who did wine deliveries and warehousing. The company literally grew overnight, pretty much exponentially. Today, Regal has about 140 employees.
Q: How long did you stay there?
A: I spent six years at Regal Wine Co. Then, in 2000, an opportunity came up on the supply side for Kendall- Jackson and I moved there.
Q: What are your responsibilities at Kendall-Jackson?
A: For the first few years, I just had the Kendall-Jackson Wine Estates entities. But then I was given responsibility for warehousing, inventory, and distribution for all three company divisions—Kendall-Jackson Wine Estates, Artisan & Estates, and Jackson Wine Estates International. Today I have four departments: customer service, inventory planning, transportation, and warehousing and distribution. I oversee 36 employees and four managers in total. We distribute about five and a half million cases annually worldwide out of Santa Rosa, California.
We have a customer service manager, and she has four employees. Between them they handle the entire world—all international and all domestic accounts for all products.
Then we have an inventory planning department, and a transportation department manager, who has, I believe, 10 drivers. Some of the fleet vehicles are tank trucks, so they are moving bulk wine throughout the year to our various entities. We mainly use our fleet to move product internally, although it does make some store deliveries within the state of California.
Q: So it's a private fleet. But there must be some for-hire carriage, given the scope of your operation?
A: Absolutely. For the majority of our customers, it is not a prepaid situation, so they hire the carriers for their orders.
Q: How much volume does your operation handle?
A: We ship out 5.3 to 5.5 million cases annually.
Q: I assume it's a seasonal business. Are you busiest around the holidays?
A: Yes. We shipped out over two and a half million cases in September, October, November, and December.
Q: How many DCs do you have right now?
A: We have one central DC and 11 feeders, which are storage facilities that our company owns at our wineries or [are owned by a] third-party logistics company.
I don't know if you've read about it, but we acquired 70 brands in the past six months [when Kendall-Jackson acquired three wineries— Arrowood Vineyards & Winery, Byron Vineyard & Winery, and Freemark Abbey Winery—from Legacy Estate Group LLC]. With the acquisition of those brands, we have also acquired distribution facilities all over the place. I am in the process of consolidating facilities in areas where we have duplication.
Q: Do those warehouse-based thirdparty logistics operations fill orders out of the inventory they hold, or do they just send product back to you so you can fill orders from your own distribution center?
A: They fulfill whatever our need is. For instance, let's say that Matanzas Creek produces X amount, and we only have space in our central DC to hold so much.What we would do is move it first to the feeder warehouse, and then move it to our DC as we need it.
Q: What are some of the biggest challenges you face in trying to optimize logistics operations for Kendall- Jackson? You touched on the fact that you're experiencing some "growing pains" because of the acquisitions. Are there other ongoing challenges that you're trying to overcome?
A: I am going to say no, because that is the biggest challenge we have. We are, however, working on a path to consolidation so there will be one large DC and we won't be playing the shell game of moving inventory here and there, trying to keep enough product on the floor to satisfy orders for just-in-time delivery.
Beyond that, our distributors had a little difficulty with the transportation capacity shortage that everybody knows about.We tried to get ahead of the curve by sitting down and asking ourselves, "What can we do to prevent a shipment from being missed because a distributor's carriers didn't have the equipment to pick it up?" Our solution was to form an alliance with a broker and a couple of other carriers, under which we would keep the intermodal equipment that they were having a hard time getting. We struck a deal to keep X number of containers on our property, and when we get calls from distributors saying they can't get product moved because their carrier can't find equipment, we have the solution. We did not miss a beat in the last two years because of transportation capacity issues.
Q: When you began your career, you went in on the administrative end and then found yourself migrating to the distribution/transportation/logistics end. What interested you in a logistics role?
A: I look at this side of the business as the "behind the scenes" part. If you were to equate this with a theatrical production or a play, you would have all of the goings-on behind the scenes: You have the props set up, you have the costumes set up, you have all of what it takes to show your final product when you open that curtain. Maybe it is in my background; I'm the kind of person who loves to get my hands in the dirt. I like to be there from the beginning to help make sure that what is produced at the end is the best it can be.
Q: Do you think logistics is beginning to get the respect it deserves?
A: I think that the importance of logistics for a company is starting to get more attention. I know it is in our company, because our company focuses on the product quality and the production side of it. Then there is the sales portion of it as well. What happens between the time when the product is produced to when it gets to the end user—to the customer—is critical.
I do as much as I can to let everybody know how many cases we shipped and under what conditions. I think that it is important to educate—not to inundate them, but to educate— the rest of the company about this. Otherwise, if there is a problem and you never hear about it, why pay attention to it? I think that instead of waiting until something gets broken for there to be attention given to it, you have to let people know: Here is what we do, and if we didn't do this, you wouldn't have any wine on the store shelves or on the tables or in homes.
I think that in many companies, what happens behind the scenes gets taken for granted, even though what happens behind the curtain is critical for a company to not just continue, but to continue successfully. What happens behind the curtain can also ruin a company, because if you can't deliver it, what good is your product? It can be the greatest product in the world, but if every time people order it, something is wrong with how they get it, they'll get frustrated and say, "You know what, you are too much work."
Q: In the decade-plus that you've been in the logistics field, you must have seen a lot of things change. What has changed the most?
A: The scope of logistics technology, absolutely and with out a doubt. You hear about RFID; we do not use it. Our industry is different because a supplier of wine, gener ally speaking, is not on any "cutting edge" technologically, unless it is a really large house. I will be honest with you— we do not even have bar coding. That is a project I am also working on.
With technology, you're going to see more companies adjusting [time-to-market] because they can. We are not like that because portions of our product need time for aging. It is a different type of product: We don't build it and ship it; we grow it and process it until you are able to consume it. For us, a lot of the usual rules don't apply. For example, some companies have moved closer to their customers in order to service them better. Some have spread themselves throughout the nation for that reason. Our business is different. We are here. They come to us.
I think also the whole transportation scene has changed. Issues have arisen but nobody paid attention to them until they became a problem. Then all of a sudden everybody is saying, "How can we fix this?"
And logistics is becoming a better-known profession. You are starting to see universities focusing [educational programs] on supply chain management. It is becoming a discipline in and of itself because of the incredible importance of global distribution. You can fight globalization all you want, but it's going to be a losing battle. You might as well just step aside and find a different profession.
Q: I've often heard folks say that regardless of what technology does for us, it is still our job to make sure that the right product is where the customer wants it, when the customer wants it, damage-free, and at the right price. Do you subscribe to that idea?
A: Yes, you just do it right the first time. That is really what we maintain. Quality is of the utmost importance for [owners] Jess [Jackson] and Barbara [Banke]— quality not only in the vineyard sourcing, but everything from the type of dirt that they plant the grapes in, the care of the vines throughout the growing season and throughout their life cycle, the production facilities, and all the way through to the people. Quality is what we base our company on, and we take pride in that.
Q: Do the people on your team share that philosophy?
A: I have an incredible management team. They are really great leaders and smart, efficient people. They are also of the mindset that leads them to ask, "How can you do something with excellence and how can you do it smart?" We have a group of people with a great can-do attitude.
Q: Let's imagine for a moment that a young man or woman were to come up to you and ask what skills he or she needs to develop to succeed in the logistics field. What advice would you give?
Q: In other words, don't let the complexities overwhelm you?
A: Yes. I think that we sometimes get wrapped up in so many things in our lives that we forget the basic things we need to do. Well, we need to move this box to that location. It's that simple. And then take it from there.
Congestion on U.S. highways is costing the trucking industry big, according to research from the American Transportation Research Institute (ATRI), released today.
The group found that traffic congestion on U.S. highways added $108.8 billion in costs to the trucking industry in 2022, a record high. The information comes from ATRI’s Cost of Congestion study, which is part of the organization’s ongoing highway performance measurement research.
Total hours of congestion fell slightly compared to 2021 due to softening freight market conditions, but the cost of operating a truck increased at a much higher rate, according to the research. As a result, the overall cost of congestion increased by 15% year-over-year—a level equivalent to more than 430,000 commercial truck drivers sitting idle for one work year and an average cost of $7,588 for every registered combination truck.
The analysis also identified metropolitan delays and related impacts, showing that the top 10 most-congested states each experienced added costs of more than $8 billion. That list was led by Texas, at $9.17 billion in added costs; California, at $8.77 billion; and Florida, $8.44 billion. Rounding out the top 10 list were New York, Georgia, New Jersey, Illinois, Pennsylvania, Louisiana, and Tennessee. Combined, the top 10 states account for more than half of the trucking industry’s congestion costs nationwide—52%, according to the research.
The metro areas with the highest congestion costs include New York City, $6.68 billion; Miami, $3.2 billion; and Chicago, $3.14 billion.
ATRI’s analysis also found that the trucking industry wasted more than 6.4 billion gallons of diesel fuel in 2022 due to congestion, resulting in additional fuel costs of $32.1 billion.
ATRI used a combination of data sources, including its truck GPS database and Operational Costs study benchmarks, to calculate the impacts of trucking delays on major U.S. roadways.
There’s a photo from 1971 that John Kent, professor of supply chain management at the University of Arkansas, likes to show. It’s of a shaggy-haired 18-year-old named Glenn Cowan grinning at three-time world table tennis champion Zhuang Zedong, while holding a silk tapestry Zhuang had just given him. Cowan was a member of the U.S. table tennis team who participated in the 1971 World Table Tennis Championships in Nagoya, Japan. Story has it that one morning, he overslept and missed his bus to the tournament and had to hitch a ride with the Chinese national team and met and connected with Zhuang.
Cowan and Zhuang’s interaction led to an invitation for the U.S. team to visit China. At the time, the two countries were just beginning to emerge from a 20-year period of decidedly frosty relations, strict travel bans, and trade restrictions. The highly publicized trip signaled a willingness on both sides to renew relations and launched the term “pingpong diplomacy.”
Kent, who is a senior fellow at the George H. W. Bush Foundation for U.S.-China Relations, believes the photograph is a good reminder that some 50-odd years ago, the economies of the United States and China were not as tightly interwoven as they are today. At the time, the Nixon administration was looking to form closer political and economic ties between the two countries in hopes of reducing chances of future conflict (and to weaken alliances among Communist countries).
The signals coming out of Washington and Beijing are now, of course, much different than they were in the early 1970s. Instead of advocating for better relations, political rhetoric focuses on the need for the U.S. to “decouple” from China. Both Republicans and Democrats have warned that the U.S. economy is too dependent on goods manufactured in China. They see this dependency as a threat to economic strength, American jobs, supply chain resiliency, and national security.
Supply chain professionals, however, know that extricating ourselves from our reliance on Chinese manufacturing is easier said than done. Many pundits push for a “China + 1” strategy, where companies diversify their manufacturing and sourcing options beyond China. But in reality, that “plus one” is often a Chinese company operating in a different country or a non-Chinese manufacturer that is still heavily dependent on material or subcomponents made in China.
This is the problem when supply chain decisions are made on a global scale without input from supply chain professionals. In an article in the Arkansas Democrat-Gazette, Kent argues that, “The discussions on supply chains mainly take place between government officials who typically bring many other competing issues and agendas to the table. Corporate entities—the individuals and companies directly impacted by supply chains—tend to be under-represented in the conversation.”
Kent is a proponent of what he calls “supply chain diplomacy,” where experts from academia and industry from the U.S. and China work collaboratively to create better, more efficient global supply chains. Take, for example, the “Peace Beans” project that Kent is involved with. This project, jointly formed by Zhejiang University and the Bush China Foundation, proposes balancing supply chains by exporting soybeans from Arkansas to tofu producers in China’s Yunnan province, and, in return, importing coffee beans grown in Yunnan to coffee roasters in Arkansas. Kent believes the operation could even use the same transportation equipment.
The benefits of working collaboratively—instead of continuing to build friction in the supply chain through tariffs and adversarial relationships—are numerous, according to Kent and his colleagues. They believe it would be much better if the two major world economies worked together on issues like global inflation, climate change, and artificial intelligence.
And such relations could play a significant role in strengthening world peace, particularly in light of ongoing tensions over Taiwan. Because, as Kent writes, “The 19th-century idea that ‘When goods don’t cross borders, soldiers will’ is as true today as ever. Perhaps more so.”
Hyster-Yale Materials Handling today announced its plans to fulfill the domestic manufacturing requirements of the Build America, Buy America (BABA) Act for certain portions of its lineup of forklift trucks and container handling equipment.
That means the Greenville, North Carolina-based company now plans to expand its existing American manufacturing with a targeted set of high-capacity models, including electric options, that align with the needs of infrastructure projects subject to BABA requirements. The company’s plans include determining the optimal production location in the United States, strategically expanding sourcing agreements to meet local material requirements, and further developing electric power options for high-capacity equipment.
As a part of the 2021 Infrastructure Investment and Jobs Act, the BABA Act aims to increase the use of American-made materials in federally funded infrastructure projects across the U.S., Hyster-Yale says. It was enacted as part of a broader effort to boost domestic manufacturing and economic growth, and mandates that federal dollars allocated to infrastructure – such as roads, bridges, ports and public transit systems – must prioritize materials produced in the USA, including critical items like steel, iron and various construction materials.
Hyster-Yale’s footprint in the U.S. is spread across 10 locations, including three manufacturing facilities.
“Our leadership is fully invested in meeting the needs of businesses that require BABA-compliant material handling solutions,” Tony Salgado, Hyster-Yale’s chief operating officer, said in a release. “We are working to partner with our key domestic suppliers, as well as identifying how best to leverage our own American manufacturing footprint to deliver a competitive solution for our customers and stakeholders. But beyond mere compliance, and in line with the many areas of our business where we are evolving to better support our customers, our commitment remains steadfast. We are dedicated to delivering industry-leading standards in design, durability and performance — qualities that have become synonymous with our brands worldwide and that our customers have come to rely on and expect.”
In a separate move, the U.S. Environmental Protection Agency (EPA) also gave its approval for the state to advance its Heavy-Duty Omnibus Rule, which is crafted to significantly reduce smog-forming nitrogen oxide (NOx) emissions from new heavy-duty, diesel-powered trucks.
Both rules are intended to deliver health benefits to California citizens affected by vehicle pollution, according to the environmental group Earthjustice. If the state gets federal approval for the final steps to become law, the rules mean that cars on the road in California will largely be zero-emissions a generation from now in the 2050s, accounting for the average vehicle lifespan of vehicles with internal combustion engine (ICE) power sold before that 2035 date.
“This might read like checking a bureaucratic box, but EPA’s approval is a critical step forward in protecting our lungs from pollution and our wallets from the expenses of combustion fuels,” Paul Cort, director of Earthjustice’s Right To Zero campaign, said in a release. “The gradual shift in car sales to zero-emissions models will cut smog and household costs while growing California’s clean energy workforce. Cutting truck pollution will help clear our skies of smog. EPA should now approve the remaining authorization requests from California to allow the state to clean its air and protect its residents.”
However, the truck drivers' industry group Owner-Operator Independent Drivers Association (OOIDA) pushed back against the federal decision allowing the Omnibus Low-NOx rule to advance. "The Omnibus Low-NOx waiver for California calls into question the policymaking process under the Biden administration's EPA. Purposefully injecting uncertainty into a $588 billion American industry is bad for our economy and makes no meaningful progress towards purported environmental goals," (OOIDA) President Todd Spencer said in a release. "EPA's credibility outside of radical environmental circles would have been better served by working with regulated industries rather than ramming through last-minute special interest favors. We look forward to working with the Trump administration's EPA in good faith towards achievable environmental outcomes.”
Editor's note:This article was revised on December 18 to add reaction from OOIDA.
A Canadian startup that provides AI-powered logistics solutions has gained $5.5 million in seed funding to support its concept of creating a digital platform for global trade, according to Toronto-based Starboard.
The round was led by Eclipse, with participation from previous backers Garuda Ventures and Everywhere Ventures. The firm says it will use its new backing to expand its engineering team in Toronto and accelerate its AI-driven product development to simplify supply chain complexities.
According to Starboard, the logistics industry is under immense pressure to adapt to the growing complexity of global trade, which has hit recent hurdles such as the strike at U.S. east and gulf coast ports. That situation calls for innovative solutions to streamline operations and reduce costs for operators.
As a potential solution, Starboard offers its flagship product, which it defines as an AI-based transportation management system (TMS) and rate management system that helps mid-sized freight forwarders operate more efficiently and win more business. More broadly, Starboard says it is building the virtual infrastructure for global trade, allowing freight companies to leverage AI and machine learning to optimize operations such as processing shipments in real time, reconciling invoices, and following up on payments.
"This investment is a pivotal step in our mission to unlock the power of AI for our customers," said Sumeet Trehan, Co-Founder and CEO of Starboard. "Global trade has long been plagued by inefficiencies that drive up costs and reduce competitiveness. Our platform is designed to empower SMB freight forwarders—the backbone of more than $20 trillion in global trade and $1 trillion in logistics spend—with the tools they need to thrive in this complex ecosystem."