ARBA MINCH UNIVERSITY

ARBAMINCH INSTITUTE OF TECHNOLOGY (AMIT)

FACULTY OF MECHANICAL ENGINEERING

INDUSTRIAL EXTERNSHIP REPORT FOR

AKAKI BASIC METALS INDUSTRY STAFFS

 INTRODUCTION

Akaki Basic Metals Industry is one of the largest a state-

owned manufacturing industry in Ethiopia.
It was established in 1981 E.C during Derg regime and it
was expected to be one of the largest
manufacturing industry in east Africa.
From the date of its establishment, the industry has been
producing different kinds of products for the last 35 years.
 Although the industry is engaged in the manufacturing
of different products for a long period of time, it
became less competitive both in domestic and
international market due to various reason.

During our stay in Akaki Basic Metals Industry for one

month, we are tried to figure out the major causes that
made the industry less competitive in domestic as well as
in international market.
• In order to address the industry problem properly, we
used the following the following methods.
1.Physical observation of the manufacturing process of
the industry and also visiting the entire industry.
2.Asking questions from the industry top management
leaders up to machine operators.

So based up on the above methods, we are tried to identify the major problems
as follows.
 WASTE
 The first and the major type of problem that made Akaki Basic Metals
Industry less competitive in domestic and international market is the
presence of high level of lean waste.
 Most of the manufacturing industries are victims of lean waste and if
these wastes are not managed properly, they lead the industries to be
inefficient and less productive.
 For eliminating these wastes, understanding about the philosophy of lean
The philosophy of lean is the elimination of non-value-adding
activities that is muda.
Muda is a Japanese word that means waste.
Therefore, waste can be defined as any human activity that absorbs
resource but creates no value.
So, the rough rule of lean philosophy is the elimination of any activity
that does not add value to the final product, and taking of action so that
the non-value adding activities never occurs again.
 TYPES OF LEAN WASTES
Lean wastes can be classified in to the following categories. These are:

A.Over-production: Product made for no specific customer or it is producing ahead

of what is actually needed by the customer.
B.Underutilization of workers potential: It is a failure of not using workers
potential or talent.
C.Waiting time: Operators standing idle as machines cycle, equipment fails, needed
parts fail to arrive, etc.
D.Transportation: Unnecessary product movement to several locations. Or any
material movement that does not directly support the production process.
E. Over Processing: Is performing unnecessary or incorrect processing,
typically from poor tool or product design.
F.Inventory: it is storing excess products with no orders in the
warehouse and having excess WIP.
G.Motion: Making movements that are wasteful or unnecessary, such as
looking for parts, tools, documents, etc.
H.Defects: Is the non-conformance of a product with the specified
requirements, or non-fulfillment of user expectations.
 So according to our observation Akaki Basic Metals Industry is also one of
the victims of these wastes. The following are the major types of lean wastes
that are found in Akaki Basic Metals Industry. These are: -

1. Underutilization of workers potential: - The major resources for any

manufacturing industries are man, machine, material, money and method or
sometimes they are known as 5Ms. So effectively utilizing these resources
makes the manufacturing industries more effective and productive.

If these resources are not utilized properly, it leads the manufacturing

industries to adversity.
 During the physical observation of the manufacturing process of the
industry, we have seen that the problem of underutilization of workers
potential. In other word there is the problem of not fully utilizing employees'
skills, knowledge, and abilities.
 For example, in machine shop we interviewed the machine operators while
they are producing bolts on the lathe machine.
 They said that if a single person uses his maximum production capacity, he
can produce five to six bolts per day but right now a single person is
producing two bolts per day.
 From this anybody can easily understand that if the industry encourages the
workers to use their maximum potential, each worker produces extra three
to four bolts per day.
For better understanding let me explain the above case in terms of money.

Capacity of Bolt No of Bolts The price of Profit from Total profit per
S.No Production per day single bolt in each bolt day in Birr
Birr

1. Current Capacity 2 1000 300 600

2. Maximum 6 1000 300 1800

Capacity

Note: - From the above table, the price of single bolt and the value of profit is not the real data
but these data are used only for demonstrating how underutilization of workers potential affects
 From the above table anybody can easily calculate the amount of money the
industry is losing due to not fully utilizing the workers production capacity
that is 1800 – 600 = 1200 Birr per day from a single machine operator.

 If the industry has 20 machine operators, it is losing around 24,000

Birr per day.

 If we calculate for one month, the industry is losing around 720,000
Birr per month because of the underutilization of workers potential.
For better understanding, let me explain the above calculation using
the table below.

S.No No of machine Loss per day (in Birr) Loss per month (in Birr)
operators

1. 1 1,200 36,000

2. 20 20*1,200 = 24,000 30*24,000 = 720,000

 Note: The above calculation is made considering that the industry has 20 active machine
operators.
 Let us assume the average monthly salary of the industry workers is
10,000 birr.
 So if we divide 720,000/10000 = 72

 From this we can easily understand that the amount of money obtained
by proper utilization of workers potential makes the industry to pay a
monthly salary for 72 workers.
2. Waiting time: - This is another type of lean wastes that exist in Akaki Basic
Metals Industry where the operators standing idle as equipment fails and
needed parts fail to arrive.
 During the physical observation of the manufacturing process of the industry,
this type of waste is mainly seen in foundry shop. In this shop most of the
time the furnaces fail due to some reason.
 But for fixing the problem of the furnace, it may take from one week up to
certain months.
 During this time the foundry shop workers wait until the problem of furnace
Due to this problem, the industry is losing a lot of money in different ways.
 The industry has a duty to pay the monthly salary for the entire workers. But
at this time the industry is paying the salary of the workers not from its
profit.
Let me explain this problem briefly by giving an example.
 Let the total number of the foundry shopworkers be 20 and the average
monthly salary of a single person is 6000 Birr. Then the daily salary for a
single person is 200 Birr.
 If the foundry shop has 20 active workers, then the industry is paying 4000
Let me show the effect of waiting time in table below.

S.No No of Loss per day Loss per week Loss per month Loss per two
workers (in Birr) (in Birr) (in Birr) months (in Birr)

1. 1 1*200 = 200 200*7 = 1400 200*30 = 6000 12,000

2. 20 20*200 = 4,000*7 = 4000*30 = 240,000

4,000 28,000 120,000

 So to avoid waiting time and to increase the profitability of the industry,

shifting the workers to other shops when there is breakdown of machine is
the best option.
 Shifting the workers to other shops not only saves the amount of money paid
for non-value-added activities it also creates a better opportunity to use the
workers potential so that the industry gets additional income if it uses the
maximum production capacity of the workers.
3. Motion: - It is also a type of lean waste where the industry workers
make movements that are wasteful or unnecessary, such as looking
for parts, tools, documents, etc.
While they are in motion, they cannot support the processing of the
product.
According to our observation, this type of lean waste is common in all shops.
For instance, in machine shop, the operators share different tools like Varner
caliper, tape and other tools while they operate the machine.
 In addition to this, the operators are searching different sized tools from
toolbox as a result they wastes the production time without adding value.
4. Defects: - Non-fulfillment of user expectations. Its effects is very high
because this type of waste is determined after so many efforts have
been made or after scarification of so many resources.

This type of waste is very common in foundry shop.

Let me show how defects affect Akaki Basic Metals Industry.
 In foundry shop they cast different sized rollers for sugar industries. The
weight of these rollers ranges from 8 tons up to 22 tons. But during the
casting process the rollers are rejected due to the presence of defects.
 The price of a single roller is 4,000,000 birr and above.
 So if one roller is rejected due to the presence of defect the industry is
losing four million birr. If we assume that the average monthly salary of a
single worker is 6,000 birr then the price of one roller pays the monthly
salary of 667 workers.
 2. Lack of regular maintenance of
machineries.
 The term maintenance is derived from the word maintain which is defined
as cause to continue or keep in an existing state.
 Maintenance can be classified in to several categories. But let us see the
first two types of maintenance.
These are preventive maintenance and corrective or breakdown maintenance.
A.Preventive or scheduled maintenance: - It is a technique of minimizing
untimely equipment breakdown and or an equipment’s condition falling
below a required level of acceptability.

 The preventive maintenance consists of lubricating machines, cleaning

machines after operation, replacing worn parts and etc.

B. Corrective or breakdown maintenance: - It is a reactive approach where

repairs are only done when equipment has already failed. In other word it
is a method of bringing dead machines back to life.
If the machines are not maintained regularly, it brings the following
problems.
Unexpected Breakdowns
Increased Repair Costs

Accelerated Wear and Tear of machine parts

Higher Energy Consumption

Wasted Materials

Lower Quality Output and Increased Defects

Difficulty in Meeting Deadlines

 During the physical observation of the manufacturing process of the Akaki
Basic Metals Industry, we never noticed when the industry workers were
doing preventive or scheduled maintenance and also corrective
maintenance.
 Although the machines found in the case industry are old machines, the
major cause of the machines failure is due to lack of regular scheduled
maintenance.
 Most of the machines that are found in machine shop like lathe and milling
machines are not functional.
 For example, in a machine shop, out of 42 light-duty lathe machines, only 8
machines are working. That means from the total light-duty lathe machines,
only 19.04% of the machines are working and the rest are not functional.
 In addition to this, out of 50 light-duty milling machines, only 10 milling
machines are working. That means from the total light-duty milling machines,
only 20% machines are working.
From this, anybody can easily understand that the production capacity of the
industry is exponentially declining.
 If proper solution and measures are not taken, the machine shop will be
Let me show how malfunctioning of these machines affects the productivity of
the machines.
 Let us assume that a single lathe machine with a single operator has a daily
production capacity of six bolts per day.
 Now in a machine shop, there are 8 actively working lathe machine. So, the
daily production capacity of 8 machines with their operator is 8*6 = 48
bolts per day.
 Let us assume that the amount of profit from a single bolt is 300 Birr then
the industry is currently getting a profit of 48*300 = 14400 Birr per day.
 If we maintain and return back 50% the existing machines, the industry
will get 13 additionally maintained machines.
 These 13 maintained lathe machines require 13 new operators and they
have the production capacity of 13*6 = 78 bolts per day.
 Then because of 78 bolts per day the industry will get a profit of
78*300 = 23,400 additional Birr per day.
Let me summarize the above points in the table below.
Percentage of Production Profit obtained The total amount of profit
S.No maintained Capacity of Bolts from each Bolt obtained per day
machine per day in Birr In Birr

1. 19.04% 48 300 14,400

2. 50% 78 300 23,400
3. 60% 103.2 300 30,960
4. 70% 128.4 300 38,520
5. 80% 153.6 300 46,080
6. 100% 252 300 75,600
 3. PRODUCING CUSTOMER BASED
PRODUCT ONLY
 Akaki Basic metals industry is producing different kinds of products according to
the order of customer only.
 Some of the customers are like Oromia Construction Corporation (OCC), Wonji
Sugar industry, Fincha sugar industry and also other sugar industries.
 But producing products solely based on customer orders, rather than engaging in
mass production for the general market, presents several disadvantages:
A. Idle Capacity: Production resources like machinery and labor might remain idle during periods
with fewer customer orders, leading to underutilization and increased overhead costs per unit
produced.

B. Completely shutdown of the industry: Producing products only according to the order of
customers is very risky, especially for Akaki Basic Metals Industry.

 Because if the customers get better manufacturing industry and if they stop giving order to this
industry, then the industry will be forced to completely stop its production process.

C. Irregular Sales and Revenue Streams: Sales volume can fluctuate significantly depending on
the number and size of customer orders received, leading to less predictable revenue streams
compared to the potentially steadier demand for mass-produced goods.
Based up on the above information we propose the following solutions.
Minimizing the existing lean wastes to the lowest minimum level.
Establishing a strong team so that the team identifies the products with a
high demand in market and based up on their finding the industry has to
produce these products to the market.
Doing preventive or scheduled maintenance for working machines and
doing corrective maintenance for already failed machines is very important.
Delivering the products for the customer at the right time is very important.
THANK YOU !!!!!