Coach 2012 Annual Report Download - page 12

In fiscal 2012, Coach had marketing websites in Australia, Bahrain, Brazil, China, Colombia, France,
Ireland, Malaysia, Mexico, Panama, Portugal, Singapore, South Korea, Spain, Taiwan, Thailand, UAE, United
Kingdom, Venezuela and Vietnam. In addition, the Company utilizes and continues to explore new
technologies such as blogs and social networking websites, including Twitter and Facebook, as a cost effective
consumer communication opportunity to increase on-line and store sales, acquire new customers and build
brand awareness.
The Company also runs national, regional and local advertising campaigns in support of its major selling
seasons.
MANUFACTURING
While all of our products are manufactured by independent manufacturers, we nevertheless maintain
control of the supply chain process from design through manufacture. We are able to do this by qualifying
raw material suppliers and by maintaining sourcing and product development offices in China, Hong Kong,
Vietnam, South Korea and India that work closely with our independent manufacturers. This broad-based,
global manufacturing strategy is designed to optimize the mix of cost, lead times and construction capabilities.
Over the last several years, we have increased the presence of our senior management at our manufacturers’
facilities to enhance control over decision making and ensure the speed with which we bring new product to
market is maximized.
These independent manufacturers support a broad mix of product types, materials and a seasonal influx
of new, fashion oriented styles, which allows us to meet shifts in marketplace demand and changes in
consumer preferences. During fiscal 2012, approximately 71% of Coach’s total net sales were generated from
newly introduced products with no sales in the same quarter the previous year. As the collections are seasonal
and planned to be sold in stores for short durations, our production quantities are limited which lowers our
exposure to excess and obsolete inventory.
All product sources, including independent manufacturers and licensing partners, must achieve and
maintain Coach’s high quality standards, which are an integral part of the Coach identity. One of Coach’s
keys to success lies in the rigorous selection of raw materials. Coach has longstanding relationships with
purveyors of fine leathers and hardware. Although Coach products are manufactured by independent
manufacturers, we maintain control of the raw materials that are used in all of our products. Compliance with
quality control standards is monitored through on-site quality inspections at all independent manufacturing
facilities.
Coach carefully balances its commitments to a limited number of ‘‘better brand’’ partners with
demonstrated integrity, quality and reliable delivery. Our manufacturers are located in many countries,
including China, Italy, United States, Vietnam, Hong Kong, India, Thailand, Philippines, Taiwan and Peru.
Coach continues to evaluate new manufacturing sources and geographies to deliver the finest quality products
at the lowest cost and help limit the impact of manufacturing in inflationary markets. During fiscal 2012, one
vendor provided approximately 16% of Coach’s total units. No other individual vendor currently provides
more than approximately 11% of Coach’s total units. Before partnering with a vendor, Coach evaluates each
facility by conducting a quality and business practice standards audit. Periodic evaluations of existing,
previously approved facilities are conducted on a random basis. We believe that all of our manufacturing
partners are in material compliance with Coach’s integrity standards.
DISTRIBUTION
Coach operates an 850,000 square foot distribution and consumer service facility in Jacksonville, Florida.
This automated facility uses a bar code scanning warehouse management system. Coach’s distribution center
employees use handheld radio frequency scanners to read product bar codes, which allow them to more
accurately process and pack orders, track shipments, manage inventory and generally provide excellent service
to our customers. Coach’s products are primarily shipped to Coach retail stores and wholesale customers via
express delivery providers and common carriers, and direct to consumers via express delivery providers.
To support our growth in China and the region, in fiscal 2010 we established an Asia distribution center
in Shanghai, owned and operated by a third-party, allowing us to better manage the logistics in this region
while reducing costs. The Company also operates a distribution center, through a third-party, in Japan.
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