Columbia Sportswear 2011 Annual Report Download - page 13

and the risk of non-delivery, we place a significant amount of orders for our products with independent factories
prior to receiving our customers’ advance orders and we maintain an inventory of select products that we
anticipate will be in greatest demand. In addition, we build calculated amounts of inventory to support estimated
at-once orders from customers and auto-replenishment orders on certain long-lived styles.
Credit and Collection
We extend credit to our customers based on an assessment of each customer’s financial condition, generally
without requiring collateral. To assist us in scheduling production with our suppliers and delivering seasonal
products to our customers on time, we offer customers discounts for placing advance orders and extended
payment terms for taking delivery before peak seasonal shipping periods. These extended payment terms
increase our exposure to the risk of uncollectible receivables. In order to manage the inherent risks of customer
receivables, we maintain and continue to invest in information systems, processes and personnel skilled in credit
and collections. In some markets and with some customers we use credit insurance or standby letters of credit to
minimize our risk of credit loss.
Sourcing and Manufacturing
We do not own or operate manufacturing facilities and virtually all of our products are manufactured to our
specifications by independent factories located outside the United States. We generally do not maintain long-
term manufacturing commitments. 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
manage our supply chain from a global and regional perspective and adjust as needed to changes in the global
production environment, including political risks, factory capacity, import limitations and costs, raw material
costs, availability and cost of labor and transportation costs. However, without long-term or reserved
commitments, there is no assurance that we will be able to secure adequate or timely production capacity or
favorable pricing terms.
Our apparel, accessories and equipment are manufactured in more than 15 countries with Vietnam and
China accounting for approximately 73% of our 2011 apparel, accessories and equipment production. Our
footwear is manufactured in three countries, with China and Vietnam accounting for approximately 92% of our
2011 footwear production.
Our five largest apparel, accessories and equipment factory groups accounted for approximately 25% of
2011 global apparel, accessories and equipment production, with the largest factory group accounting for 9% of
2011 global apparel, accessories and equipment production. Our five largest footwear factory groups accounted
for approximately 72% of 2011 global footwear production, with the largest factory group accounting for 25% of
2011 global footwear production. In addition, a single vendor supplies substantially all of the zippers used in our
products. Most of our largest suppliers have multiple factory locations, thus reducing the risk that unfavorable
conditions at a single factory or location will have a material adverse effect on our business.
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 our quality standards. We believe that
our quality assurance process is an important and effective means of maintaining the quality and reputation of
our products. In addition, independent contractors that manufacture products for us are subject to our Standards
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