Columbia Sportswear 2001 Annual Report Download - page 11

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 2001 we sourced approximately 97% (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.
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
formal arrangements with most of our contractors or suppliers other than through purchase orders. However,
we believe our relationships with our contractors and suppliers are excellent and that the long-term, reliable
and cooperative relationships that we have with many of our vendors provide us a competitive advantage over
other apparel distributors.
By having Columbia employees in regions where we source our products, we enhance our ability to
monitor factories to ensure their compliance with Columbia's Standards of Manufacturing Practices. Our
policies require every factory to comply with a code of conduct relating to factory working conditions and the
treatment of workers involved in the production of Columbia brand products.
Our quality control program is designed to ensure our products meet the highest quality standards. Our
employees monitor the quality of fabrics and other components and inspect prototypes of each product before
starting production runs. In addition, our employees also perform quality control checks throughout the
production process up to and including Ñnal shipment to our customers. We believe our attention to the quality
control program is an important and eÅective means of maintaining the quality and reputation of our products.
Independent manufacturers generally produce our apparel using one of two principal methods. In the Ñrst
method, the manufacturer purchases the raw materials needed to produce the garment from suppliers we
approve, at prices and on terms negotiated by either that manufacturer or ourselves. A substantial portion of
our merchandise is manufactured under this arrangement. In the second, sometimes referred to as ""cut, make,
pack, and quota'' and used principally for production in China, we directly purchase the raw materials from
suppliers, assure that the independent manufacturers have the necessary availability of import quotas, and ship
the materials in a ""kit,'' together with patterns, samples, and most other necessary items, to the independent
manufacturer to produce the Ñnished garment. While this second arrangement advances the timing for
inventory purchases and exposes us to additional risks before a garment is manufactured, we believe it further
increases our manufacturing Öexibility and frequently provides us with a cost advantage over other production
methods.
We transact business on an order-by-order basis without exclusive commitments or arrangements to
purchase from any single vendor. We believe, however, long term relationships with our vendors will help to
assure adequate sources to produce a suÇcient supply of goods in a timely manner and on satisfactory
economic terms in the future.
By sourcing the bulk of our products outside the United States, we are subject to risks of doing business
abroad. These risks include, but are not limited to, foreign exchange rate Öuctuations, governmental
restrictions and political or labor disturbances. In particular, we must continually monitor import requirements
and transfer production as necessary to lessen the potential impact from increased tariÅs or quota restrictions
which may be periodically imposed.
We have from time to time experienced diÇculty satisfying our raw material and Ñnished goods
requirements, and any such future diÇculties could adversely aÅect our business operations. Three major
factory groups accounted for approximately 17% of our total global production for 2001. Another company
produces substantially all of the zippers used in our products. However, in both instances these companies
have multiple factory locations, many of which are in diÅerent countries.
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