Columbia Sportswear 2011 Annual Report Download - page 12

Our global internet marketing sites are used by consumers to research our products’ features and benefits, to
interact with content created to inform and entertain about each brand and its technologies, to be directed to
nearby retailers where they can purchase our products, and to directly purchase products for delivery in most of
our major direct-distribution markets.
Working Capital Utilization
We design, develop, market and distribute our products, but do not own or operate manufacturing facilities.
As a result, most of our capital is invested in short-term working capital assets, including cash and cash
equivalents, short-term investments, accounts receivable from customers, and finished goods inventory. At
December 31, 2011, working capital assets accounted for approximately 76% of total assets. As a result, the
degree to which we efficiently utilize our working capital assets can have a significant impact on our
profitability, cash flows and return on invested capital. The overall goals of our working capital management
efforts are to maintain the minimum level of inventory necessary to deliver goods on time to our customers to
satisfy end consumer demand, and to minimize the cycle time from the purchase of inventory from our suppliers
to the collection of accounts receivable balances from our customers.
Demand Planning and Inventory Management
As a branded consumer products company, inventory represents one of the largest and riskiest capital
commitments in our business model. We design and develop our seasonal product lines 12 to 18 months in
advance of their availability to consumers in retail stores. As a result, our ability to forecast and produce the
individual product styles that match ultimate seasonal wholesale customer and end-consumer demand and to
deliver products to our customers in a timely and cost-effective manner can significantly affect our sales, gross
margins and profitability. For this reason, we maintain and continue to make substantial investments in
information systems, processes and personnel that support our ongoing demand planning efforts. The goals of our
demand planning efforts are to develop a collaborative forecast that drives the timely purchase of an adequate
amount of inventory to satisfy demand, to minimize transportation and expediting costs necessary to deliver
products to customers by their requested delivery dates, and to minimize excess inventory to avoid liquidating
excess, end-of-season goods at discounted prices. Failure to achieve our demand planning goals could reduce our
revenues and/or increase our costs, which would negatively affect our gross margins, profitability and brand
strength.
In order to manage inventory risk, we use incentive discounts to encourage our wholesale customers and
independent distributors to place orders at least six months in advance of scheduled delivery. We generally solicit
orders from wholesale customers and independent distributors for the fall and spring seasons based on seasonal
ordering deadlines that we establish to aid our efforts to plan manufacturing volumes to meet demand for each of
our selling seasons.
We use those advance orders, together with forecasted demand from our direct-to-consumer operations,
market trends, historical data, customer and sales feedback and other important factors to estimate the volumes of
each product to purchase from our suppliers around the world. From the time of initial order through production,
receipt and delivery, we attempt to manage our inventory to reduce risk. We typically ship the majority of our
advance fall season orders to wholesale customers and independent distributors beginning in June and continuing
through November. Similarly, the majority of our advance spring season orders ship to wholesale customers and
independent distributors beginning in December and continuing through May. Generally, orders are subject to
cancellation prior to the date of shipment.
Our inventory management efforts cannot entirely eliminate inventory risk due to the inherently
unpredictable nature of unseasonable weather, consumer demand, the ability of customers to cancel their advance
orders prior to shipment, and other variables that affect our customers’ ability to take delivery of their advance
orders when originally scheduled. To minimize our purchasing costs, the time necessary to fill customer orders
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