Columbia Sportswear 2009 Annual Report Download - page 15

Sourcing and Manufacturing
Virtually all of our products are manufactured to our specifications by independent factories located outside
the United States. We believe that the use of independent factories enables us to substantially limit our capital
expenditures and avoid the costs and risks associated with owning and operating large production facilities and
managing large labor forces. We also believe that the use of independent factories greatly increases our
production capacity, maximizes our flexibility and improves our product pricing. We generally do not maintain
long-term manufacturing contracts; however, we believe that our long-term relationships with various factories
will help to ensure that adequate sources are available to produce a sufficient supply of goods in a timely manner
and on satisfactory economic terms in the future. In 2009, our four largest apparel factory groups accounted for
approximately 15% of our total global apparel production and our four largest footwear factory groups accounted
for approximately 66% of our total global footwear production. In addition, a single vendor supplies substantially
all of the zippers used in our products. These companies, however, have multiple factory locations, many of
which are in different countries, thus reducing the risk that unfavorable conditions at a single factory or location
will have a material adverse effect on our business.
Our apparel is manufactured in more than 13 countries with Vietnam and China accounting for
approximately 71% of our 2009 apparel production. Our footwear is manufactured in three countries, with China
and Vietnam accounting for approximately 94% of our 2009 footwear production.
We maintain 13 manufacturing liaison offices in a total of seven Asian countries. We also maintain a
manufacturing liaison office in Richmond, California. Personnel in these manufacturing liaison offices are direct
employees of Columbia, and are responsible for overseeing production at our independent factories. We believe
that having employees physically located in these regions enhances our ability to monitor factories for
compliance with our policies, procedures and standards related to quality, delivery, pricing and labor practices.
Our quality assurance process is designed to ensure that our products meet the highest quality standards. We
believe that our quality assurance process is an important and effective means of maintaining the quality and
reputation of our products.
Backlog
We typically receive the majority of our advance orders from our wholesale customers and independent
distributors for the fall and spring seasons by March 31 and September 30, respectively, based upon customer
ordering deadlines that we establish. As a result, our order backlog at each of March 31 and September 30 has
historically been a meaningful indicator of anticipated sales to wholesale customers and independent distributors
for the corresponding future period. Accordingly, we disclose our backlog at March 31 and at September 30 in
our Quarterly Reports on Form 10-Q for those respective periods, rather than at December 31. Generally, orders
are subject to cancellation prior to the date of shipment.
Our owned retail stores and e-commerce websites do not participate in the advance order program.
Accordingly, to the extent that order cancellations from wholesale customers and independent distributors remain
at elevated levels and our retail and e-commerce sales grow to represent a larger proportion of our total sales, our
advance order backlog may become less indicative of anticipated sales for corresponding future periods.
Competition
The markets for sportswear, outerwear, footwear, accessories and equipment are highly competitive. In each of
our geographic markets, we face significant competition from numerous and varying competitors. Some of our large
wholesale customers also pose a significant competitive threat by marketing apparel, footwear and equipment under
their own private labels. Our licensees operate in very competitive markets, such as those for watches, bicycles,
leather outerwear and socks. In addition, our own retail channels expose us to competitors who operate retail stores
in outlet malls and key metropolitan markets, as well as competitors who sell product online. We believe that the
primary competitive factors in the market for active sportswear, outerwear, footwear, accessories and equipment are
brand strength, product innovation, product design, functionality, durability and price.
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