Semi Knocked Down

What is SKD ?

SKD is the acronym for Semi Knocked Down. It is an export strategy very commonly used by vehicle manufacturers. The procedure is also currently used by manufacturers for the production of home appliances, and in telephony.

As its name indicates, SKD consists of exporting partially assembled products abroad. The final assembly of the products is carried out in the importing country where the sale will take place. Kits sent abroad may then be added to by components produced locally to achieve stronger integration.

Manufacturers have two interests in SKD:

  • it allows them to benefit from lower customs fees than would be applied to finished products ;
  • incomplete products and spare parts are shipped to a trading partner or to a subsidiary to be assembled, usually using cheaper local labour.

This industrial practice is usually encouraged by preferential agreements from developing countries looking to develop a particular industry. This was the case with Algeria and the automotive sector.

The characteristics of SKD

SKD is a variant of CKD (Complete Knock Down). In this other industrial strategy, it is all the parts required to assemble the product that are shipped to be assembled in the country of marketing. Therefore, the integration of parts is weaker in SKD than in CKD, with a smaller number of parts to be assembled.

As with CKD, companies using SKD benefit from a preferential fiscal and/or customs regime.

However, to take advantage of this, manufacturers must meet several conditions:

  • meet a minimum rate of integration of the products in the recipient country ;
  • make investments and create jobs in the country concerned.

Import/export quotas for SKD and CKD kits are often applied in this respect.

Examples and application

In practice, the SKD (the same applies to CKD) export strategy requires good management of inbound logistics and transport operations:

  • collection of components from suppliers, even disassembling (partially or completely) products before shipment ;
  • optimal stock management to ensure the good preparation of shipments ;
  • optimal design, supply and management of packaging for transporting parts and components ;
  • groupage and massification of flows for transporting products abroad, etc.

In the transport of semi-assembled parts, the role of logisticians and carriers is essential to massify flows of goods to third countries. The challenge is to obtain the best filling rates for containers by constantly innovating to achieve the shortest possible packaging and loading times.

Packaging management is a strategic part of SKD export. This concerns guaranteeing the protection of parts during transport while limiting the weight and space of wood, cardboard, foam, plastic, etc. When SKD is a recurring practice relating to large volumes, there is also the question of packaging waste. This problem can be overcome by using reusable packaging to reduce the carbon footprint of operations.

The end-to-end traceability of flows in the supply chain is also essential to avoid disruptions, and to guarantee the continuity of production to achieve a better customer experience. In this respect, the use of RFID chips is real asset for tracking packages.