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?
A: Think basic. Think outside the box. Think efficiently. Think simple. Think excellence.
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.