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CBU (Completely Built Unit)

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Acronym for Completely Built Unit

What does CBU refer to?

CBU is a production technique essentially encountered in the automotive and transport industry. It refers to an assembly technique aiming to optimize internal supply chain flows. CBU namely makes it possible to meet a specific production rate, defined based on the number of units to be made within a set amount of time.

As its name indicates, this kind of assembly consists in importing finished products or already-assembled parts. Most or all of the production has therefore already been completed in the country of origin. Once delivery has been made, operations are reduced to the strict minimum. This applies for instance to packaging, or storage in dedicated warehouses when talking about vehicles. We can talk about “ready-to-sell” products in this case. The main purpose here is to meet constant or growing requests via a high-quality and quickly-accessible offer.

Other optimization techniques also exist, better suited for variable production scales. This is the case for CKD (Complete Knock Down) and SKD (Semi Knock Down), which use different means compared to the CBU concept.

Specificities of CBU in 5 key points

Applying the principle of CBU requires the consideration of international import regulations. Various duties and taxes can be applied to companies that choose the CBU method for their production. The CBU system may be more or less advantageous depending on the country of origin and destination.

In more concrete terms, the CBU system can be explained in 5 key points.

  • It is an assembly mode that helps reduce production costs in the destination country.

  • The goods can be sold effectively and immediately.

  • Taxation may end up being fairly high in emerging countries.

  • To turn a real profit from an economic standpoint, the system is generally based on large-scale demand or regular orders.

  • Despite logistical and organizational differences, production methods and technologies only very rarely differ from other techniques such as CKD or SKD. This helps guarantee consistency in the production of a same model, whilst preserving the company’s brand image.

Examples and practical applications

To illustrate the CBU principle, its main processing stage should be mentioned.

  • A company chooses to implant production in a country with a view to importing products to its country of origin, or exporting them to another destination.

  • Production is ensured entirely on-site to minimize downstream management and production expenses.

  • The goods are delivered via a means of transport determined either by the company itself or by a freight specialist.

  • Delivery, additional handling operations and storage are all done upon arrival, prior to the sale.

As an example, a Japanese car manufacturer may call upon a Thai assembly factory, with a view to transporting its vehicles to European countries. The goods are thus ready to be sold without having to cover high production loads in the destination country. Expenses must nonetheless take local taxation relating for CBU import into account.

CBU in figures

Though CBU is an often-accepted import mode working towards globalization, it is still heavily taxed in certain developing countries. Customs or import duties can reach up to 30% of the goods’ initial value.

(Source: https://www.cioa.com/cnt/gt/tout-savoir-importation-cld-3212-81569-cat.html)

Regulatory cornerstones