Columbia Sportswear 2000 Annual Report Download - page 16

Inventory Management
From the time of initial order through production, distribution and delivery, we manage our inventory to
reduce risk. Our inventory management systems coupled with our enterprise-wide information system have
enhanced our ability to manage our inventories by providing detailed inventory status from the time of initial
factory order through shipment to our retail customers.
Additionally, through the use of incentive discounts we encourage early purchases by our customers to
promote eÅective inventory management. We provide our customers with staggered delivery times through the
spring and fall seasons, which also permits us and our customers to manage inventories eÅectively and thereby
diminish the likelihood of closeout sales. Through our eÅorts to match our purchases of inventory to the
receipt of customer orders, we believe we are able to reduce the risk of overcommitting to inventory purchases.
This helps us avoid signiÑcant inventory build-ups and minimizes working capital requirements. This strategy,
however, does not eliminate inventory risk entirely because customer orders are subject to cancellation prior to
shipment.
Product Design
Our experienced in-house merchandising and design teams, working closely with internal sales and
production teams as well as with retailers and consumers, produce products designed primarily for functional-
ity and durability. In addition to new designs, we are continually making innovative changes to existing
products such as the Bugaboo» Parka, a consistent best seller for more than a decade. By pursuing this
strategy we believe we can attract a wider, value-oriented consumer audience than our more technical or
fashion-oriented competitors.
In addition, our use of specialized materials, such as Omni-TechTM(waterproof, breathable) and
Bergundtal Cloth (water-resistant, wind protection) substantially enhance the value of our products without
adding signiÑcant cost.
Sourcing and Manufacturing
Our apparel and footwear products are produced by independent manufacturers selected, monitored and
coordinated by regional Columbia employees to assure conformity to strict quality standards. We believe the
use of these independent manufacturers increases production capacity and Öexibility and reduces our costs.
Unlike many apparel companies, we use few independent agents in our sourcing activities. We maintain
11 sourcing and quality control oÇces in the Far East, each staÅed by Columbia employees and managed by
personnel native to the region. Personnel in these oÇces direct sourcing activities, help to ensure quality
control and assist with the monitoring and coordination of overseas shipments. Final pricing for all orders,
however, is approved by personnel from our U.S. headquarters. We believe Columbia personnel in the
Far East, who are focused narrowly on our interests, are more responsive to our needs than independent agents
would be and are more likely to build long-term relationships with key vendors. We believe these relationships
enhance our access to raw materials and factory capacity at more favorable prices.
For 2000 we sourced approximately 92% (by dollar volume) of our products outside the United States,
principally in the Far East. We monitor the selection of independent factories to ensure that no single
manufacturer or country is responsible for manufacturing a disproportionate amount of our merchandise.
On September 30, 1999 we announced the closure of our only manufacturing facility in ChaÅee,
Missouri, a strategic move designed to reduce costs and enhance operating eÇciencies. The closure was
completed during the Ñrst quarter of 2000. By relocating the sourcing of this product to our sourcing oÇce in
Los Angeles, California, we will be able to more eÇciently and eÅectively manage product procurement.
We believe the use of independent manufacturers, in conjunction with the use of Columbia sourcing
personnel rather than agents, increases our production Öexibility and capacity and allows us to maintain
control over critical aspects of the sourcing process. Our approach also enables us to substantially limit our
capital expenditures and avoid costs associated with managing a large production work force. We do not have
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