Columbia Sportswear 2002 Annual Report Download - page 12

Sourcing and Manufacturing
Our apparel and footwear products are produced by independent manufacturers selected, monitored and
coordinated by regional Columbia employees to ensure conformity to strict quality standards. We believe the use
of these independent manufacturers increases our production capacity and flexibility and reduces our costs.
Unlike many apparel companies, we use few independent agents in our sourcing activities. We maintain
fifteen sourcing and quality control offices in the Far East, each staffed by Columbia employees and managed by
personnel native to the region. Personnel in these offices 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 2002 we sourced approximately 99% (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 significantly 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 flexibility 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
that every factory 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 that 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 final shipment to our customers. We believe our attention to the quality
control program is an important and effective means of maintaining the quality and reputation of our products.
Independent manufacturers generally produce our apparel using one of two principal methods. In the first
method, the manufacturer purchases the raw materials needed to produce the garment from suppliers that we
have approved, at prices and on terms negotiated by either the manufacturer or us. A substantial portion of our
merchandise is manufactured under this arrangement. In the second method, 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 of the other necessary items, to the independent
manufacturer to produce the finished 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 flexibility 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, that long term relationships with our vendors will help to
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