Data, Information, Knowledge and the Getting of Wisdom in Wine Business

Mark O’Callaghan

INTRODUCTION

One wine industry matter that continues to frustrate management and winemaking teams is that of software, control systems and the flow of information generally. The implications of getting this wrong can be catastrophic, regardless of winery size. Over the years, our consultants at Wine Network have seen many cases of dreadful information management in wineries – from laboratory and bulk wine records, all the way through to the most bewildering accounting practices. This type of problem has not been restricted to small businesses either. Those of us old enough to remember when BlackBerry was more than a wine descriptor may also recall when some of the largest wine companies in the world suffered breathtaking financial losses through software integration problems. Or when others did not know their COGS or margins when the downturn hit-they simply didn’t know which wines were profitable and which weren’t. Even more recently, there have been very public, spectacular and expensive cases of inventory control problems emerging in very large wine companies. Bad information leads to bad outcomes, regardless of size, and the impact of control problems varies from benign, at best, to (financially) lethal.

“Bad information leads to bad outcomes, regardless of size, and the impact of control problems varies from benign, at best, to (financially) lethal.”

One personal observation is that too many wine people underestimate the level of complexity in a fully vertically-integrated business such as a winery. Thinking through the activities and records involved in maintaining traceability, costs, composition and history from vineyards through to customers’ dinner tables demonstrates this complexity and probably explains why developing a comprehensive system has so far eluded everyone who has tried. For this article your correspondent spoke to wine business managers, advisers and suppliers for opinions on current options and future possibilities.

IN THE VINEYARD: DO YOU SEE WHAT I SEE?

When it comes to vineyard management, the needs and expectations of owners vary considerably depending on size. While smaller operations might only need basic information, such as spray diary records, larger growers are increasingly interested in much more detailed information. For some observations on vineyard information flows, I spoke to Dr David Jordan, of Wine to Vine in New Zealand. For several reasons, including solid profitability over the last decade and being culturally very open to new technology, New Zealand has been impressive. It has modernised quickly and been an early adopter on many fronts.

One interesting example of new information sources comes from the next generation of machine harvesters. Many of them are able to capture live fruit weight data, match it to vineyard position using GPS and relay the information in real time. These features are not rocket science and have been available for several years, but the information they are providing can be valuable in several ways.

The first relates to chain of custody and legal liabilities. With increasing regulatory interest in the transport sector around the world, responsibility for load management (specifically, not overloading trucks) can extend to the receiving winery in some jurisdictions. Given the legal world’s tendency to pursue the party with the deepest­looking pockets, it would be foolish for a wine business to ignore this capability as part of load and risk management.

Legal responsibilities aside, there are also important winery and vineyard management opportunities through real time weight information for press planning, as well as vineyard yield data within a block, rather than averaged across the entire area. Identifying under­or over-productive areas can enable more targeted management if there is the will to do so.

When it comes to vineyard management software systems, there are many different approaches but they really should enable a management team to answer (seemingly) simple questions such as: what were our spray inputs to that block?; how much did it cost me to run that block last season and how did that compare to the long-term average?; and how much did it cost us to get a tonne of fruit from each block to the farm gate? Sadly, we still see too many businesses that can barely answer these questions at the vineyard level, much less know their inputs or profitability by block. Do you really know which blocks make money and which don’t?

In addition to managing spray diaries, withholding periods and costs, there are some good examples of vineyard modules in winery software that simplify winery intake scheduling. Vintrace’s booking system is a good modern example. An example of taking intake management to new heights was presented at a recent ASVO seminar where a winery was using software developed for air traffic control services and applying it to the scheduling of GPS-equipped fruit trucks. This has almost eliminated waiting times at the weighbridge.

Another interesting evolution in vineyard information management is New Zealand’s Sustainable Winegrowing NZ. Touted as a world-leading, whole­of-industry environmental certification scheme, there are estimates that it now covers as much as 98% of the nation’s winegrape production. It has enabled electronic spray recording which can now be benchmarked across regions and seasons to facilitate continuous improvement.

IN THE WINERY: NOW, WHERE DID I LEAVE MY …

In the winery, software systems are nothing new and there are relatively few professional wineries without one. There are still some reluctant sites who remain hostile to the idea of them, presumably because they’re of the view such systems destroy passionate winemaking culture, scare away the wine fairies or some similar nonsense, but the fact is that no modern winery should be without one.

From affordable, no nonsense packages such as WineFile to more sophisticated, cloud-based options like Vintrace, there are options for all budgets and there is no reason why any winery should not have a well-run system in place. Used well, all of the systems are able to track stock, analyses, blend histories, wine compositions and costs. One of the common problems, however, is the user, not the system – garbage in, garbage out.

With robust systems (complaints about interfaces notwithstanding) almost ubiquitous, the future seems to be more about integration of other inputs such as laboratory equipment or temperature regulation. Very much part of the trend towards the ‘internet of things’ (loT), newer software packages such as Vintrace are able to integrate with other systems that manage temperature control systems or measure CO2 flows from fermenting tanks. This is already used in some cellars as a proxy for alcohol conversion which generates accurate, real-time ferment charts and (unsurprisingly) is much more accurate and reliable than the automation systems piloted in the 1990s. With closer integration of laboratory equipment, it is possible to reduce transcription errors and improve information flow and traceability.

“Used well, all of the systems are able to track stock, analyses, blend histories, wine compositions and costs. One of the common problems, however, is the user, not the system – garbage in, garbage out.”

Cynics will deride these trends as robotic winemaking and relish all the cliches that go with them. But, as with all technological advances, they really should make our winemaking lives easier. If they are embraced, managed and used well, these systems offer ways to make the simple things even simpler, freeing us up to finesse other aspects of our winemaking and ultimately get better wines into the glass.

Other examples of better and more modern information flows include things like barcode scanning with mobile phones and touchscreens in grape receival areas but there are more things in the pipeline. The Australian Wine Research Institute has released – and continues to refine – Show Runner, a software package for wine shows which records comments, scores and helps streamline back-of-house management. At the time of writing, the team was working on a similar system that can be used for tastings within private wine companies and not just for important moments like classification tastings. These sorts of systems give the ability to track not just the analysis history of a wine (the numbers) but also tasting notes from the entire winemaking team over time.

TOTAL CONTROL: COMPUTER SAYS ‘NO’

Recently, your correspondent was lucky enough to have a thorough visit to one of the largest Champagne houses and see the inner workings of its new winery (sorry, no photos …). A long way from the glamourous fa<;ades of the Rue du Champagne, the winery has an impressive elegance of its own which stems from the painstaking level of detail and thinking that has gone into every aspect of its development. Of course, the financial considerations are very different to most wine businesses – it showed what can be done with large volumes of profitable wine – but it was still brimful of lessons for winery design everywhere. With respect to software, information flows and control systems, this was just as impressive at the Champagne house as any other aspect. That the temperature control system was automated and highly reliable came as no surprise (temperature sensors can now self-calibrate to ±0.1°C) but the approach to CO2 was impressive. In addition to a ducting system to vent all of the CO2 out of the building, each tank was fitted with a monitor which fed its data to the computer system. These flows automatically generated ferment charts for the winemaking team, alerted them to potential problems, provided reminders throughout and self­regulated temperatures. The most impressive aspect, however, was the oversight role of the system. The winery had been built with a comprehensive system of fixed lines and position sensors on all valves so that the system could ‘know’ if a movement operation had been set up correctly or not. For example, when a tanker of juice arrived at the winery (a legacy of the network of juicing cooperatives in Champagne), the pump would not start unless all connecting valves were in the correct position, sending the juice from the right truck compartment to the right tank. Many readers will recognise that this sort of manufacturing IT is nothing new and has been used for many years in environments such as large breweries. However, the complexity and overlapping movements in winemaking compared with other batch processes such as brewing are what has made systems like this so tricky in winery operations. In the case of the Champagne house, it took a team of winemakers many months to work with system integration specialists to develop and work through the differences between winery and brewery movements. In terms of where this sort of system oversight (as opposed to direct mechanical control) might be headed in the future, I discussed possible uses for off-the-self technology with Warren Bradford, from Deacam, an electrical engineering firm based in Melbourne with many winery and brewery clients. Bradford’s prediction is that the wine industry is probably about 10-15 years away from control systems being more commonplace in a supervisory role – a little like a lower level SCADA (supervisory control and data acquisition) system. An example of how this might work would be a method using Radio Frequency Identification Device (RFID) technology, just like in modern credit cards. In this case, there could be a passive RFID on hoses and powered RFIDs on tanks and pumps. If these were linked to the bulk wine system, it might not allow a cellar operation to proceed unless everything was connected correctly. Oversight could be taken further by integrating flow meters and level sensors in tanks. While that seems a little far-fetched today, it is worth noting that all of these components are inexpensive, currently available, widely used in other industries and in 10 years’ time are likely to cost about 50% of today’s prices. One New Zealand winery has just done away with catwalks in a new tank farm by diverting the investment to sensors which eliminated the need to be at the top of the tank.

TAKING STOCK

Another aspect of information flows which, surprisingly, continues to cause problems for too many wine businesses is the simple matter of stock control. When a business cannot easily keep abreast of movements (or lack thereof) in stock numbers it can lead to all sorts of problems from bad debts to meaningless forecasting – all of which can become expensive and cripple businesses.

There are many options here too, with some systems like EzyWine offering an off-the-shelf accounting function. With more straightforward options like WineFile the monthly update of information from the bulk wine system to the accounting package is relatively painless, but some newer packages integrate automatically. Vintace is one of the options that communicates readily with accounting packages such as Xero and seems to have been quite popular.

Again, the key point is that there are many options available but they must be used with care and attention to detail if they are to be useful – especially in preventing problems by providing meaningful, concise report information to the management team.

CAUGHT IN THE NET

Many of the aspects considered above are not new but the shift to direct and/ or on line sales is forcing many wine businesses to learn a new set of skills and jargon and to do it quickly. Despite the promising and overdue signs of recovery, the wine world remains ferociously competitive. From fickle sommeliers to laggard payers to dominant retail chains, many (or most) wine businesses in the world realised long ago that direct sales is one of the few remaining profitable channels over which they can have some control. The basic principle and the margins on the spreadsheets are as compelling as they are simple but the execution can be tricky.

Quite apart from the marketing and relationship work involved in getting a customer to click ‘confirm order’ on their screen, the level of complexity involved in every tiny step to deliver the wine to their doorstep still surprises many people. The integration of systems involves banking and credit card functions, websites, accounting and inventory, stock picking, delivery, insurance and tracking all the way to the customer – not to mention troubleshooting the problems and placating upset customers from missed, broken or stolen deliveries.

The nature of the systems involved is often alien to wine business owners who may be from more production­focussed backgrounds, so it is difficult to assess which packages are best. For an impression of the current jungle of options I spoke to Robin Shaw, from Wine Tourism Australia, who advises clients on direct to consumer business matters.

In short, there is no magic bullet and no single package that can operate as seamlessly as the customer experience needs it to be. Like the duck paddling hard to give the appearance of gliding effortlessly over the water, it is up to the management team to integrate the right systems and be across the detail to give the modern customer the seamless experience they have come to expect. Near enough is not good enough.

The right selection of packages also depends on the goals and nature of the business. The management team needs to ask: are the existing software packages capable of integration with new platforms? Do our site(s) have sufficient internet access for cloud-based systems? Is it time to bite the bullet and migrate to new systems that can adapt and integrate as our business grows?

The level of sophistication and integration is improving by the day but it is still the case that more functions does not necessarily mean better performance. All-in-one club software, for example, will still require integration with accounting and inventory packages. Existing websites are usually incompatible with the modern breed of wine club platforms, which incorporate website, e-commerce and club functions, while custom built websites require the business to manage software updates and other functionality regularly. The best advice is to map out all the functions required and divide into ‘must-have’ and ‘nice-to-have’ initially, based on existing needs and future projections.

WHERE TO NEXT? THE BEST OF BREED

So far, the large and rather expensive efforts at developing a comprehensive Enterprise Resource Planning (ERP) system with vineyard, bulk wine, accounting, logistics and web functions have struggled with wine’s complexity, even with some of the largest wine and ERP companies in the world. For that reason, the current trend is towards integrating ‘best of breed’ systems for the various functions and allowing them to talk to each other.

Unsurprisingly, this means that one of the key criteria to use when assessing the component systems is the way they integrate and not just on stand­alone performance. Many systems at present use RESTful web services (a web communication protocol) to facilitate integration but making the systems ‘talk’ still requires more work than just plugging in. Meanwhile, efforts to standardise information flows are continuing where possible, with good examples being the Global Wine Database (www. gwdb.io) or an electronic Bill of Lading (eBOL) for wine that transfers all the key information about a particular wine (blend composition, analysis, etc.) between systems. Until the magic bullet system is released, and as cliched as it sounds, the best approach for wine businesses grappling with information flows is to take a step back and look at the business overall. Viewing it from the perspective of the customer(s) should inform how the various functions should integrate. The management team should also look ahead to ensure they have the capacity for growth or inclusion of other inputs in the future. Oh, and don’t approach the exercise thinking it will be easy or that it will ever be complete.

Mark O’Callaghan is Managing Director of Wine Network Consulting. Based in the Yarra Valley, but working on projects around Australia, the UK and China, Mark is a regular contributor to various wine industry bodies and wine show judge. The views expressed here are his own.