Columbia Sportswear 2012 Annual Report Download - page 11

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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 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 uncollectable 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 approximately 20 countries, with Vietnam and China
accounting for approximately 67% of our 2012 apparel, accessories and equipment production. Our footwear is manufactured
in three countries, with China and Vietnam accounting for approximately 93% of our 2012 footwear production.
Our five largest apparel, accessories and equipment factory groups accounted for approximately 25% of 2012 global
apparel, accessories and equipment production, with the largest factory group accounting for 9% of 2012 global apparel,
accessories and equipment production. Our five largest footwear factory groups accounted for approximately 79% of 2012
global footwear production, with the largest factory group accounting for 34% of 2012 global footwear production. In
addition, a single vendor supplies the majority 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 12 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 of Manufacturing Practices (“SMP”). Columbia sources products around the world and values legal, ethical