Executive Briefings

Columbia Sportswear: A European DC With a French Flair

The Oregon-based sportswear company finds France's labor rules are a perfect fit for its new European distribution center operation.

Columbia Sportswear Company, the 67-year-old manufacturer of a broad range of apparel based in Portland, Ore., sells its products in more than 60 countries and to more than 12,000 retailers worldwide. Global sales were above $1bn during 2004. The 450m consumers in the ever-expanding European Union, represent a burgeoning market for the sportswear company, especially because of the Europeans' shared passion for skiing, hiking and other outdoor sports.

In fact, the large and diverse European marketplace has emerged as a critical component of the company's growth strategy, and for good reason. Its 2004 annual sales in Europe totaled $170.3m last year, up 26 percent over 2003. Particularly important to Columbia's European operations is its distribution center, which serves as the hub for all of its shipping and receiving throughout Western Europe.

Columbia's original European distribution center was located in the Netherlands, where the company outsourced its distribution operations to a third-party logistics provider. During the contract period with the 3PL, Columbia's European sales volume grew so rapidly that its space requirements expanded from one to two and eventually to three different buildings. While growing sales were welcome, the multiple building operation set definite limits on the distribution efficiency that could be achieved.

"When it came time to negotiate another agreement, we decided that it was time for us to invest in a place that would allow us to manage our European distribution operations as they grew," says Dan Dougherty, Columbia's director of technical services. "If we stayed with the 3PL, we knew that we would constantly be resizing our operation and having to move our inventory."

The decision to build and operate its own distribution center was made in late 1990s, but the bigger question was where should this new DC be located? Columbia understood that the decision would play a huge role in the future of its European operations. To identify the optimal location, Columbia launched a comprehensive search that encompassed many European countries.

"We started with a list of 32 locations and, based on our own research, narrowed the candidates down to 12 and finally to eight," says Dougherty. "We visited these eight sites in four countries."

The company's criteria were specific. It wanted a location that could provide:
• A central location relative to the rest of Western Europe, including proximity to key customers and ports

• Ample land: approximately 50 acres, with room for expansion and in an area that is suited to high-volume distribution activity

• A highly skilled labor pool with sufficient flexibility to handle Columbia's two busy seasons: August/September for pre-Christmas, and January-March for summer.

Following an extensive and highly competitive search that included numerous site visits and aggressive presentations from multiple countries, Columbia chose a location at Cambrai, in the Nord-Pas-de-Calais region of northern France.

"Each site we looked at had good things to recommend it, but we found everything we were looking for in Nord-Pas-de-Calais," says Dougherty. Nord-Pas-de-Calais offered solutions to all of Columbia's needs, including experienced and technically skilled labor, a close proximity to much of Western Europe, and an expanse of undeveloped land that enabled the company to build an 270,000 square-foot facility. Building construction was completed in 2002 followed by equipment installation and testing. The first orders were shipped from the DC January 2003.

The Cambrai site not only met all of the stated criteria, but also came with the considerable value-added support of Northern France Experts (NFX), which promotes economic development in northern France. Among other assistance, NFX helped Columbia find the optimal vendors and contractors for building the facility, negotiate potential financial incentives, and identify the best sources for high-performing labor.

Dan Dougherty notes that, "NFX was instrumental in introducing Columbia to the Nord-Pas-de-Calais community and helping us get settled."

Inbound and Outbound Transportation
As with most apparel companies today, the vast majority of Columbia's manufacturing is in Asia. The great distances involved mean fairly long lead times, but the supply chain runs very smoothly.

"Our sourcing and planning people in Asia are able to tell us exactly when a purchase order will be finished in the factory, when the goods will ship, how long they will be in transit and when they will arrive in the port," says Dougherty. He explains that several hundred inbound ocean containers each year come through the ports of LeHavre, Antwerp and the French port of Dunkerque near the Belgian border.

"We are often able to schedule inbound containers far enough in advance that we can use river barge to move the containers from the ports to a terminal near our DC," he says. "Barge is a less expensive mode to dray in the containers. If we need the containers more quickly, we just truck them in directly."

The DC's close proximity to highways allows for quick transport and delivery time throughout the rest of Europe, including the new EU states in Eastern Europe that Columbia is beginning to serve. France's transportation infrastructure is one of the best in Europe and boasts the largest road network. The country has more than 589,000 miles of road network, including 6,820 miles of freeways, fully interconnected with Western Europe.

Unlike many companies in Europe that outsource its transportation to forwarders or 3PLs, Columbia's shipping is handled entirely by its own transportation management department that is housed at the DC. It manages its own transportation contracts and routes each shipment. Orders are shipped to retailer's DCs or directly to stores. Columbia prepays all freight.

"We are fortunate to have a very experienced transportation manager who knows the whole European market very well," says Dougherty. "We have been able to control the cost and increase the level of service better than we could by outsourcing this to a forwarder."

The company uses as many as 16 different carriers of all types including express, less-than-truckload and full truckload to handle everything from single parcels to multiple pallets. The transportation department even does its own pool shipping to the U.K. Full truckloads are shipped across the English Channel to a parcel carrier terminal where pallets are deconsolidated into individual shipments.

"It would certainly be simpler to hand off all of our shipments to a single freight company, but we believe we get better service and lower costs managing the freight ourselves."

The Cambrai DC is well situated for its outbound truck shipments. It is very near the Belgian border on the A2 motorway that is a major truck route linking Brussels and Paris. The DC is only one and a half hour's drive north of Paris, an hour south of Lille and Brussels.

Columbia's pan-European distribution strategy has always been to serve the entire market out of one facility. Even as its business has mushroomed, the strategy remains the same and the Cambrai DC continues to meet the need.

"When we moved into this facility, 70 percent of our shipping points were in northwestern Europe and were within a transit time of a day or two," says Dougherty. "As we grow our business in more distant areas such as Scandinavia, the Baltic States and southern Italy, we still are able to meet our customer service requirements out of this DC. Our farthest regular service points in eastern Europe are still only about a three-day transit time."

DC Operations
The Cambrai site is 48 acres, which by European standards is quite large. The size allows for considerable expansion in the future, and it is in an industrial zone with similar operations. Adjacent companies include a grocery DC a printing company and several small manufacturers.

Columbia designed its 25,000 square-meter DC to meet is specific distribution needs. The building is 250 meters long by 100 meters wide. Receiving is on one end, and shipping is on the other end. Stock keeping is in the middle and occupies most of the building.

Cases that come in off the container are put on a conveyer into stock keeping. The stock put-away is a manual system using pushcarts on three levels of the storage area. Picking is done the same way. Items that are picked are placed on conveyers that can handle cases and cartons and interpack footwear cartons. Picked items go to a sorter area that goes to a processing area for any retail services needed for an order. The sortation system also supports a repacking operation for less-than-case quantities. The remnant cases are moved via an automatic stacker crane to slots for easy retrieval for the next less-than-case order. Orders are moved by conveyor to 16 shipping areas on the floor that represent separate carriers, countries or major customers. The orders are marshaled and palletized in the shipping area and loaded on trucks. A small portion of expedited orders, samples and other special shipments are moved by air, mainly through Paris's Charles de Gaulle International Airport, which is about an hour-and-a-half away.

As well as the facility runs, Columbia's success is already forcing the company to think about expansion. It has enjoyed double-digit growth every year in its apparel lines, and is now expanding its footwear business.

"The cube requirement for footwear and different processing needs takes more storage space." Says Dougherty. "These demands are already pushing the limits of our building. Fortunately, expansion would not be a major challenge."

With full expansion, the outside building dimensions will eventually have a total footprint of 80,000 square meters.

Good Labor Relations
For Columbia, the flexibility of France's skilled workforce has been critically important. Besides the typical distribution operations in the warehouse, Columbia's workers add considerable value to product for individual customers. The retail services performed include customizing the product and packaging, which can be as simple as attaching price tickets or as complicated as making a special assortment packs of products for specific customers.

"We have a unionized workforce, but we have a very positive relationship with them. They help us improve the efficiency of the facility," says Dougherty

Columbia has also benefited from the 35-hour workweek that is now part of France's labor regulations. These same regulations allow a system called modulation where employees can work fewer hours during off-seasons, and more hours during busy-seasons, all while paying workers a consistent salary year-round. Thus, the 35-hour workweek is actually flexible. The workweek must be in a range between 28 hours to 44 hours for up to 10 weeks.

"As long as we are in that range and don't exceed the annual number of hours, we pay each worker a monthly salary that includes no overtime premiums," Says Dougherty. "This arrangement works extremely well for us because our business is very seasonal. We are able to move the hours to meet our peak periods and have fewer hours in the slow periods. As a result, we have a much smaller percent of temporary workers than we do in our U.S. operation."

While some industries have complained about France's 35-hour workweek, businesses with seasonality have come to appreciate it. These businesses traditionally incur considerable costs in hiring temporary workers, training them and then letting them go when the peak demand cools. France's modulation system allows companies like Columbia to schedule the workforce when the need it, avoid paying wages when workers are not needed, and during these slow times, still retain valuable workers and the investment in training. In addition to facilitating the planning process, this workforce flexibility also allows Columbia to minimize training costs, because fewer temporary workers are required during busy seasons.

"There is a great labor pool, and we are impressed with the work ethic of our French employees," says Dougherty. "For a total investment of $30 million, Columbia believes we've put the center of our European operations in safe hands that will allow us to develop our business in Europe."

 

Back to Business in France
France has been criticized by U.S. senior managers as a difficult place to do business, with its 35-hour work-week and no-layoff regulations leading the list of impediments to investment in France. To deal with these issues, French Prime Minister Raffarin last year invited 21 CEOs from global corporations including GE, Eli Lilly and Rohatyn Associates LLC for a series of frank discussions about France's strengths and weaknesses as a destination for foreign corporate investment. The result of these on-going discussions, called the Strategic Council of Attractiveness, are 35 new legal reforms designed to increase France's appeal as a destination for foreign investment. The new measures include a relaxation of the 35-hour workweek, as well as the simplification of the legal procedures for laying off personnel.

"The relaxation of France's 35-hour workweek regulations and the easing of the layoff procedures are great news for current and future international investors," said Clara Gaymard, French Ambassador, Special Representative for International Investment and President, Invest in France Agency, the investment arm of the French government in charge of attracting foreign investment and coordinating the legal reform process. Briefly, the new employment measures include:

• New flexibility in the application of legal working hours (35 hours) in 2005: The legal standard for annual working hours has been increased from 1,780 to 1,820 with allowable overtime raised to 220 hours per year (which translates into an average of 40 hours per week). Collective labor agreements may increase this flexibility even further.

• Major changes to the law on collective dismissals: The duration of negotiations between employees and employers for the preservation of employment in the event of economically-induced layoffs has been substantially simplified and reduced.

• Changes to rules governing the personal tax liability of impatriate employees: Personal tax liability is to be aligned with the best international practice, with charges proportional to the time spent in France. For example, taxation is now proportionate to the time actually spent working in France, applying a principle similar to remittance-basis taxation in the U.K.

The other 33 new measures are primarily designed to attract students, researchers and managers, as well as and business operations such as headquarters and R&D centers. Further information on these measures is available at www.investinfrance.org.

Columbia Sportswear Company, the 67-year-old manufacturer of a broad range of apparel based in Portland, Ore., sells its products in more than 60 countries and to more than 12,000 retailers worldwide. Global sales were above $1bn during 2004. The 450m consumers in the ever-expanding European Union, represent a burgeoning market for the sportswear company, especially because of the Europeans' shared passion for skiing, hiking and other outdoor sports.

In fact, the large and diverse European marketplace has emerged as a critical component of the company's growth strategy, and for good reason. Its 2004 annual sales in Europe totaled $170.3m last year, up 26 percent over 2003. Particularly important to Columbia's European operations is its distribution center, which serves as the hub for all of its shipping and receiving throughout Western Europe.

Columbia's original European distribution center was located in the Netherlands, where the company outsourced its distribution operations to a third-party logistics provider. During the contract period with the 3PL, Columbia's European sales volume grew so rapidly that its space requirements expanded from one to two and eventually to three different buildings. While growing sales were welcome, the multiple building operation set definite limits on the distribution efficiency that could be achieved.

"When it came time to negotiate another agreement, we decided that it was time for us to invest in a place that would allow us to manage our European distribution operations as they grew," says Dan Dougherty, Columbia's director of technical services. "If we stayed with the 3PL, we knew that we would constantly be resizing our operation and having to move our inventory."

The decision to build and operate its own distribution center was made in late 1990s, but the bigger question was where should this new DC be located? Columbia understood that the decision would play a huge role in the future of its European operations. To identify the optimal location, Columbia launched a comprehensive search that encompassed many European countries.

"We started with a list of 32 locations and, based on our own research, narrowed the candidates down to 12 and finally to eight," says Dougherty. "We visited these eight sites in four countries."

The company's criteria were specific. It wanted a location that could provide:
• A central location relative to the rest of Western Europe, including proximity to key customers and ports

• Ample land: approximately 50 acres, with room for expansion and in an area that is suited to high-volume distribution activity

• A highly skilled labor pool with sufficient flexibility to handle Columbia's two busy seasons: August/September for pre-Christmas, and January-March for summer.

Following an extensive and highly competitive search that included numerous site visits and aggressive presentations from multiple countries, Columbia chose a location at Cambrai, in the Nord-Pas-de-Calais region of northern France.

"Each site we looked at had good things to recommend it, but we found everything we were looking for in Nord-Pas-de-Calais," says Dougherty. Nord-Pas-de-Calais offered solutions to all of Columbia's needs, including experienced and technically skilled labor, a close proximity to much of Western Europe, and an expanse of undeveloped land that enabled the company to build an 270,000 square-foot facility. Building construction was completed in 2002 followed by equipment installation and testing. The first orders were shipped from the DC January 2003.

The Cambrai site not only met all of the stated criteria, but also came with the considerable value-added support of Northern France Experts (NFX), which promotes economic development in northern France. Among other assistance, NFX helped Columbia find the optimal vendors and contractors for building the facility, negotiate potential financial incentives, and identify the best sources for high-performing labor.

Dan Dougherty notes that, "NFX was instrumental in introducing Columbia to the Nord-Pas-de-Calais community and helping us get settled."

Inbound and Outbound Transportation
As with most apparel companies today, the vast majority of Columbia's manufacturing is in Asia. The great distances involved mean fairly long lead times, but the supply chain runs very smoothly.

"Our sourcing and planning people in Asia are able to tell us exactly when a purchase order will be finished in the factory, when the goods will ship, how long they will be in transit and when they will arrive in the port," says Dougherty. He explains that several hundred inbound ocean containers each year come through the ports of LeHavre, Antwerp and the French port of Dunkerque near the Belgian border.

"We are often able to schedule inbound containers far enough in advance that we can use river barge to move the containers from the ports to a terminal near our DC," he says. "Barge is a less expensive mode to dray in the containers. If we need the containers more quickly, we just truck them in directly."

The DC's close proximity to highways allows for quick transport and delivery time throughout the rest of Europe, including the new EU states in Eastern Europe that Columbia is beginning to serve. France's transportation infrastructure is one of the best in Europe and boasts the largest road network. The country has more than 589,000 miles of road network, including 6,820 miles of freeways, fully interconnected with Western Europe.

Unlike many companies in Europe that outsource its transportation to forwarders or 3PLs, Columbia's shipping is handled entirely by its own transportation management department that is housed at the DC. It manages its own transportation contracts and routes each shipment. Orders are shipped to retailer's DCs or directly to stores. Columbia prepays all freight.

"We are fortunate to have a very experienced transportation manager who knows the whole European market very well," says Dougherty. "We have been able to control the cost and increase the level of service better than we could by outsourcing this to a forwarder."

The company uses as many as 16 different carriers of all types including express, less-than-truckload and full truckload to handle everything from single parcels to multiple pallets. The transportation department even does its own pool shipping to the U.K. Full truckloads are shipped across the English Channel to a parcel carrier terminal where pallets are deconsolidated into individual shipments.

"It would certainly be simpler to hand off all of our shipments to a single freight company, but we believe we get better service and lower costs managing the freight ourselves."

The Cambrai DC is well situated for its outbound truck shipments. It is very near the Belgian border on the A2 motorway that is a major truck route linking Brussels and Paris. The DC is only one and a half hour's drive north of Paris, an hour south of Lille and Brussels.

Columbia's pan-European distribution strategy has always been to serve the entire market out of one facility. Even as its business has mushroomed, the strategy remains the same and the Cambrai DC continues to meet the need.

"When we moved into this facility, 70 percent of our shipping points were in northwestern Europe and were within a transit time of a day or two," says Dougherty. "As we grow our business in more distant areas such as Scandinavia, the Baltic States and southern Italy, we still are able to meet our customer service requirements out of this DC. Our farthest regular service points in eastern Europe are still only about a three-day transit time."

DC Operations
The Cambrai site is 48 acres, which by European standards is quite large. The size allows for considerable expansion in the future, and it is in an industrial zone with similar operations. Adjacent companies include a grocery DC a printing company and several small manufacturers.

Columbia designed its 25,000 square-meter DC to meet is specific distribution needs. The building is 250 meters long by 100 meters wide. Receiving is on one end, and shipping is on the other end. Stock keeping is in the middle and occupies most of the building.

Cases that come in off the container are put on a conveyer into stock keeping. The stock put-away is a manual system using pushcarts on three levels of the storage area. Picking is done the same way. Items that are picked are placed on conveyers that can handle cases and cartons and interpack footwear cartons. Picked items go to a sorter area that goes to a processing area for any retail services needed for an order. The sortation system also supports a repacking operation for less-than-case quantities. The remnant cases are moved via an automatic stacker crane to slots for easy retrieval for the next less-than-case order. Orders are moved by conveyor to 16 shipping areas on the floor that represent separate carriers, countries or major customers. The orders are marshaled and palletized in the shipping area and loaded on trucks. A small portion of expedited orders, samples and other special shipments are moved by air, mainly through Paris's Charles de Gaulle International Airport, which is about an hour-and-a-half away.

As well as the facility runs, Columbia's success is already forcing the company to think about expansion. It has enjoyed double-digit growth every year in its apparel lines, and is now expanding its footwear business.

"The cube requirement for footwear and different processing needs takes more storage space." Says Dougherty. "These demands are already pushing the limits of our building. Fortunately, expansion would not be a major challenge."

With full expansion, the outside building dimensions will eventually have a total footprint of 80,000 square meters.

Good Labor Relations
For Columbia, the flexibility of France's skilled workforce has been critically important. Besides the typical distribution operations in the warehouse, Columbia's workers add considerable value to product for individual customers. The retail services performed include customizing the product and packaging, which can be as simple as attaching price tickets or as complicated as making a special assortment packs of products for specific customers.

"We have a unionized workforce, but we have a very positive relationship with them. They help us improve the efficiency of the facility," says Dougherty

Columbia has also benefited from the 35-hour workweek that is now part of France's labor regulations. These same regulations allow a system called modulation where employees can work fewer hours during off-seasons, and more hours during busy-seasons, all while paying workers a consistent salary year-round. Thus, the 35-hour workweek is actually flexible. The workweek must be in a range between 28 hours to 44 hours for up to 10 weeks.

"As long as we are in that range and don't exceed the annual number of hours, we pay each worker a monthly salary that includes no overtime premiums," Says Dougherty. "This arrangement works extremely well for us because our business is very seasonal. We are able to move the hours to meet our peak periods and have fewer hours in the slow periods. As a result, we have a much smaller percent of temporary workers than we do in our U.S. operation."

While some industries have complained about France's 35-hour workweek, businesses with seasonality have come to appreciate it. These businesses traditionally incur considerable costs in hiring temporary workers, training them and then letting them go when the peak demand cools. France's modulation system allows companies like Columbia to schedule the workforce when the need it, avoid paying wages when workers are not needed, and during these slow times, still retain valuable workers and the investment in training. In addition to facilitating the planning process, this workforce flexibility also allows Columbia to minimize training costs, because fewer temporary workers are required during busy seasons.

"There is a great labor pool, and we are impressed with the work ethic of our French employees," says Dougherty. "For a total investment of $30 million, Columbia believes we've put the center of our European operations in safe hands that will allow us to develop our business in Europe."

 

Back to Business in France
France has been criticized by U.S. senior managers as a difficult place to do business, with its 35-hour work-week and no-layoff regulations leading the list of impediments to investment in France. To deal with these issues, French Prime Minister Raffarin last year invited 21 CEOs from global corporations including GE, Eli Lilly and Rohatyn Associates LLC for a series of frank discussions about France's strengths and weaknesses as a destination for foreign corporate investment. The result of these on-going discussions, called the Strategic Council of Attractiveness, are 35 new legal reforms designed to increase France's appeal as a destination for foreign investment. The new measures include a relaxation of the 35-hour workweek, as well as the simplification of the legal procedures for laying off personnel.

"The relaxation of France's 35-hour workweek regulations and the easing of the layoff procedures are great news for current and future international investors," said Clara Gaymard, French Ambassador, Special Representative for International Investment and President, Invest in France Agency, the investment arm of the French government in charge of attracting foreign investment and coordinating the legal reform process. Briefly, the new employment measures include:

• New flexibility in the application of legal working hours (35 hours) in 2005: The legal standard for annual working hours has been increased from 1,780 to 1,820 with allowable overtime raised to 220 hours per year (which translates into an average of 40 hours per week). Collective labor agreements may increase this flexibility even further.

• Major changes to the law on collective dismissals: The duration of negotiations between employees and employers for the preservation of employment in the event of economically-induced layoffs has been substantially simplified and reduced.

• Changes to rules governing the personal tax liability of impatriate employees: Personal tax liability is to be aligned with the best international practice, with charges proportional to the time spent in France. For example, taxation is now proportionate to the time actually spent working in France, applying a principle similar to remittance-basis taxation in the U.K.

The other 33 new measures are primarily designed to attract students, researchers and managers, as well as and business operations such as headquarters and R&D centers. Further information on these measures is available at www.investinfrance.org.