Andinet Negash

ADDIS ABABA UNIVERSITY
SCHOOL OF GRADUATE STUDIES

ADDIS ABABA INSTITUTE OF TECHNOLOGY
MECHANICAL ENGINEERING DEPARTMENT
DESIGN OF PRODUCTIVITY IMPROVEMENT

METHOD FOR ETHIOPIAN GARMENT INDUSTRIES
(With Special Reference to Novastar Garment PLC)
By
Azemeraw Tadesse
A Thesis Submitted to School of Graduate Studies of Addis Ababa University in Partial

Fulfillment of the Requirements for the Degree of Masters of Science in Mechanical
Engineering (Industrial Engineering Stream)
Advisor
Dr.-Ing. Daniel Kitaw
Co-Advisor
Mr. Amare Matebu
November, 2011
ADDIS ABABA UNIVERSITY
SCHOOL OF GRADUATE STUDIES
ADDIS ABABA INSTITUTE OF TECHNOLOGY
MECHANICAL ENGINEERING DEPARTMENT
DESIGN OF PRODUCTIVITY IMPROVEMENT

METHOD FOR ETHIOPIAN GARMENT INDUSTRIES
(With Special Reference to Novastar Garment PLC)
By
Azemeraw Tadesse
Approved by Board of Examiners:
_________________________ ________________ ____________

Chairman, Department Signature Date
Graduate Committee
___Dr.-Ing. Daniel Kitaw____ ________________ ____________

Advisor Signature Date
____ Mr. Amare Matebu_____ ________________ ____________

Co-Advisor Signature Date
_________________________ ________________ ____________

Internal Examiner Signature Date
_________________________ ________________ ____________

External Examiner Signature Date
DECLARATION
I hereby declare that the work which is being presented in this thesis entitled “Design of
Productivity Improvement Method for Ethiopian Garment Industries: With Special
Reference to Novastar Garment PLC” is original work of my own, has not been presented
for a degree of any other university and all the resource of materials used for this thesis have
been duly acknowledged.
_____________________________ ________________________
Azemeraw Tadesse Date
This is to certify that the above declaration made by the candidate is correct to the best of my
knowledge.
_____________________________ ________________________
Dr.-Ing. Daniel Kitaw Date
(Advisor)
_____________________________ ________________________
Mr. Amare Matebu Date
(Co-Advisor)
Acknowledgement
Before and above all, “Let GOD the Almighty be praised” for making me healthy and happy
in order to carryout this thesis.
First, my grateful thank goes to my advisor Dr.-Ing. Daniel Kitaw (associate professor of
mechanical engineering in Addis Ababa University) for his unreserved support and
encouragement while doing the thesis. He helped me to acquire lots of knowledge and skills
during my stay in Addis Ababa University. All I learnt from him and the thesis are value
adding for my future carrier, and hence I would like to thank him for all his contributions.
And I really thank my co-advisor Mr. Amare Matebu (PhD candidate in mechanical
engineering department, Addis Ababa University) for his timely, encouraging, genuine,
valuable and unreserved support to come up with this thesis. I learnt a lot from him. I thank
him for his friendly approach and dedicated effort in order to accomplish the thesis in this
attractive way.
Second, I would like to extend my gratitude to all Novastar Garment PLC staffs especially
Mr. Mohammed Umer (owner and deputy general manager), Mr. Berhanu Sisay (factory
manager), Mr. Umer Ali (finance and administration department manager), Mr. Wabie
Tadesse (commercial division head), Mr. Getachew Weyessa (human resource development
division head), Mr. Alamerew Ayalneh (quality control division head), Mr. Chanyalew
Sima (design and cutting head), Mr. Nardos Abadi (production division head) and Mr.
Sintayehu Bekele (senior accountant) for their hospitality and cooperation in giving the
required information. And I truly thank staffs of TGIDI especially Mr. Yitbarek Sisay
(senior textile engineer) for his discussion and giving me secondary data about EGIs.
Last but not least, I would like to thank my family, friends and classmates who give me
moral and encouragement while doing the thesis.
Azemeraw Tadesse Mengistu
Addis Ababa University, 2011
By: Azemeraw Tadesse (2011) Page I

Abstract
Productivity is one of the major determinants that enable manufacturing organizations to

compete in the global market. A nation's efforts to improve productivity must first begin with
basic economic units namely, manufacturing and service organizations. The gains in
productivity are one of the major weapons to achieve cost and quality advantages for
competition.
EGIs are not competitive in the global market. One of the main reasons is low productivity.
The main objective of the study is to develop a method that supports productivity
improvement of EGIs. To achieve this objective, a literature survey has been conducted to get
empirical knowledge. The existing productivity measurement and improvement practices,
and productivity factors1 of EGIs have been assessed using questionnaire and secondary data.
In order to make the study practical and realistic, a case study has been conducted on
Novastar Garment PLC. The result shows that the productivity of EGIs and the case company
is low when it compared with the best practice. The partial and total productivity indicators of
the case company show under target performance. Most of surrogate productivity and process
indicators of the company show poor status. There are multidimensional productivity factors
related to human, capital, material, method, control, process and product. To solve the
problems associated with these productivity factors, sustainable and organized productivity
improvement program is required.
To improve the productivity, a method called PIM has been developed considering the
existing situation of EGIs and the case company. The important characteristics which make
the PIM preferable are compatibility with knowledge and skill of the user (i.e. easy to use);
compatibility with existing tools and techniques; addressing the possible productivity factors;
being continuous improvement tool based on Deming cycle (i.e. plan-do-check-act); having
clearly defined productivity targets setting, measurement and analysis framework; and
flexibility to apply from operation to firm level. The PIM has clearly defined user manual
which makes it organized and sustainable productivity improvement program.
For academicians and researchers, the PIM can be used as a guideline how to develop a
method that supports productivity improvement of manufacturing firm.
1
Both internal (firm level) and external (national level) productivity factors are discussed in the literature
review. But only internal factors are considered to develop the PIM since they are under the control of the firm
and potential for productivity improvement.
By: Azemeraw Tadesse (2011) Page II

Table of Contents
Acknowledgement.......................................................................................................................... I
Abstract ......................................................................................................................................... II
Table of Contents .......................................................................................................................... II
List of Figures ............................................................................................................................. IX
List of Tables ............................................................................................................................... XI
List of Acronyms........................................................................................................................ XII
Chapter One ................................................................................................................................... 1
1-Introduction ................................................................................................................................ 1
1.1-Background of the Study ....................................................................................................... 1
1.2-Statement of the Problem ...................................................................................................... 2
1.3-Objective of the Study ........................................................................................................... 3
1.4-Significance of the Study....................................................................................................... 3
1.5-Scope of the Study ................................................................................................................. 4
1.5-Research Methodology .......................................................................................................... 4
1.5.1-Literature Survey ............................................................................................................ 4
1.5.2-Data Collection ............................................................................................................... 4
1.5.3-Data Analysis and Presentation ...................................................................................... 5
1.6-Organization of the Study ...................................................................................................... 5
Chapter Two .................................................................................................................................. 7
2-Literature Review....................................................................................................................... 7
2.1-Concepts of Productivity ....................................................................................................... 7
2.2-Productivity Factors............................................................................................................. 11
2.3-Productivity Measurement................................................................................................... 13
2.3.1-Productivity Measurement at International Level ........................................................ 13
2.3.2-Productivity Measurement at National Level ............................................................... 15
By: Azemeraw Tadesse (2011) Page III

2.3.3-Productivity Measurement at Industry Level ................................................................ 17
2.3.4-Productivity Measurement at Company Level ............................................................. 19
2.4-Productivity Analysis .......................................................................................................... 26
2.5-Productivity Planning .......................................................................................................... 27
2.6-Productivity Improvement ................................................................................................... 28
2.7-Overview of Productivity Improvement Methods ............................................................... 31
2.7.1-Total Quality Management ........................................................................................... 31
2.7.2-Six Sigma ...................................................................................................................... 31
2.7.3-Total Productive Maintenance ...................................................................................... 31
2.7.4-Just In Time .................................................................................................................. 31
2.7.5-Lean Manufacturing ...................................................................................................... 32
2.7.6-Business Process Reengineering ................................................................................... 32
2.7.7-Balanced Scorecard....................................................................................................... 32
2.7.8-Work Study ................................................................................................................... 32
2.7.9-Supply Chain Management ........................................................................................... 32
2.7.10-Theory of Constraints ................................................................................................. 32
2.7.11-Five S .......................................................................................................................... 32
2.7.12-Kaizen ......................................................................................................................... 33
2.7.13-Total Productivity Management ................................................................................. 33
2.8-State of the Art of Productivity ........................................................................................... 34
Chapter Three .............................................................................................................................. 36
3-Overview and Assessment of Ethiopian Garment Industries .............................................. 36
3.1-Overview of World Textile and Garment Sector ................................................................ 36
3.1.1-Major Trends in World Textile and Garment Sector .................................................... 36
3.1.2-Future Strategy for World Textile and Garment Sector ............................................... 37
3.2-Overview of Ethiopian Textile and Garment Sector ........................................................... 37
3.3-Incentive Mechanism to Promote Ethiopian Textile and Garment Sector .......................... 40
3.4-Export Market Performance of Ethiopian Garment Industries ............................................ 40
By: Azemeraw Tadesse (2011) Page IV

3.5-Benchmarking of Ethiopian Garment Industries ................................................................. 43
3.6-SWOT Analysis of Ethiopian Garment Industries .............................................................. 49
3.6.1-Strength ......................................................................................................................... 49
3.6.2-Weakness ...................................................................................................................... 49
3.6.3-Opportunity ................................................................................................................... 49
3.6.4-Threat ............................................................................................................................ 50
3.7-Productivity Assessment of Ethiopian Garment Industries ................................................. 50
3.7.1-Human Productivity ...................................................................................................... 51
3.7.2-Material Productivity .................................................................................................... 52
3.7.3-Energy Productivity ...................................................................................................... 53
3.7.4-Multifactor Productivity ............................................................................................... 53
3.8-Survey Questionnaire Analysis and Synthesis .................................................................... 54
3.8.1-Respondent Information ............................................................................................... 55
3.8.2-Company Information ................................................................................................... 57
3.8.3-Existing Productivity Measurement and Improvement Practices of EGIs ................... 57
3.8.4-Productivity Factors of EGIs ........................................................................................ 59
Chapter Four ............................................................................................................................... 62
4-Case Study................................................................................................................................. 62
4.1-Objective of the Case Study ................................................................................................ 62
4.2-Overview of the Company................................................................................................... 62
4.2.1-Background of the Company ........................................................................................ 62
4.2.2-Location of the Company ............................................................................................. 62
4.2.3-Vision, Vision and Values of the Company ................................................................. 63
4.2.4-Machinery and Equipment of the Company ................................................................. 63
4.2.5-Products of the Company .............................................................................................. 63
4.2.6-Quality Control of the Company .................................................................................. 64
4.2.7-Human Resource of the Company ................................................................................ 64
4.3-Productivity Awareness of the Company ............................................................................ 64
By: Azemeraw Tadesse (2011) Page V

4.4-Working Definition of Productivity in the Company .......................................................... 65
4.5-Critical Success Factors of the Company ............................................................................ 65
4.6-Productivity Factors of the Company .................................................................................. 65
4.7-Status of Productivity Factors ............................................................................................. 69
4.8-Productivity Indicators of the Company.............................................................................. 75
4.8.1-Partial and Total Productivity Indicators ...................................................................... 75
4.8.3-Surrogate Productivity Indicators ................................................................................. 76
4.9-Process Mapping ................................................................................................................. 76
4.10-Data Collection and Organization ..................................................................................... 81
4.11-Productivity Measurement................................................................................................. 83
4.11.1-Partial Productivity Measurement .............................................................................. 83
4.11.2-Total Productivity Measurement ................................................................................ 83
4.11.3-Surrogate Productivity Measurement ......................................................................... 85
4.11.4-Process Indicator Measurement .................................................................................. 85
4.12-Productivity Analysis ........................................................................................................ 86
4.12.1-Partial and Total Productivity Analysis ...................................................................... 86
4.12.2-Surrogate Productivity Analysis ................................................................................. 87
4.12.3-Process Indicator Analysis .......................................................................................... 88
4.13-Intervention Areas ............................................................................................................. 89
4.14-Proposed Solution .............................................................................................................. 90
Chapter Five................................................................................................................................. 92
5-The Productivity Improvement Method ................................................................................ 92
5.1-Introduction ......................................................................................................................... 92
5.2-Overview of the PIM ........................................................................................................... 92
6.3-Detials of the PIM ............................................................................................................... 94
6.3.1-Define Processes of the Firm ........................................................................................ 94
5.3.2-Assess Productivity Factors .......................................................................................... 99
5.3.3-Set Productivity Targets.............................................................................................. 100
By: Azemeraw Tadesse (2011) Page VI

5.1.4-Map the Process .......................................................................................................... 101
5.1.5-Collect and Organize Data .......................................................................................... 101
5.3.6-Measure Productivity .................................................................................................. 101
5.3.6-Analyze Productivity .................................................................................................. 109
5.3.8-Formulate Productivity Improvement Plan................................................................. 110
5.3.9-Implement Productivity Improvement Plan ................................................................ 113
5.3.10-Evaluate Results ........................................................................................................ 113
5.4-Benefits of the PIM ........................................................................................................... 113
Chapter Six................................................................................................................................. 114
6-Conclusion and Recommendation ........................................................................................ 114
6.1-Conclusion ......................................................................................................................... 114
6.2-Recommendation ............................................................................................................... 116
6.3-Future Research Work ....................................................................................................... 117
References .................................................................................................................................. 118
Annexes ....................................................................................................................................... 121
Annex 1-Survey Questionnaire ................................................................................................ 121
Annex 2-Results of the Survey Questionnaire ......................................................................... 130
Annex 3-List of Contacted Garment Industries ....................................................................... 136
Annex 4-Organizational Structure of Novastar Garment PLC ................................................ 137
Annex 5-Benchmarking Analysis of Novastar Garment PLC ................................................. 138
Annex 6-Existing Layout of Novastar Garment PLC .............................................................. 140
Annex 7-Improved Layout of Novastar Garment PLC ........................................................... 141
Annex 8-Various Formats Formulated for the PIM................................................................. 142
Annex 8.1-Format for Critical Success Factors ................................................................... 142
Annex 8.2-Format for Identifying Productivity Factors ...................................................... 142
Annex 8.3-Format for Defining Status of Productivity Factors ........................................... 142
Annex 8.4-Format for Productivity Targets Setting ............................................................ 143
Annex 8.5-Format for Collecting Production Data .............................................................. 144
By: Azemeraw Tadesse (2011) Page VII

Annex 8.6-Format for Collecting Human Input Data .......................................................... 144
Annex 8.7-Format for Collecting Capital Input Data .......................................................... 144
Annex 8.8-Format for Collecting Material Input Data ........................................................ 145
Annex 8.9-Format for Collecting Energy Input Data .......................................................... 145
Annex 8.10-Format for Collecting Miscellaneous Inputs Data ........................................... 146
Annex 8.11-Format for Data Summary of Partial and Total Productivity Indicators .......... 146
Annex 8.12-Format for Collecting Employee Satisfaction and Motivation Data ................ 147
Annex 8.13-Format for Collecting Skill Level Data ............................................................ 147
Annex 8.14-Format for Collecting Absenteeism, Turnover and Human Hour Data ........... 147
Annex 8.15-Format for Collecting Machine Hour Data ...................................................... 147
Annex 8.16-Format for Collecting Scrap and Material Quality Data .................................. 148
Annex 8.17-Format for Data Summary of Surrogate Productivity Indicators ..................... 148
Annex 8.18-Format for Collecting Capacity Data ............................................................... 148
Annex 8.19-Format for Collecting Rejection, Rework and Product Quality Data .............. 149
Annex 8.20-Format for Collecting Data for Standard Time ................................................ 149
Annex 8.21-Format for Collecting Data for Lead Time ...................................................... 149
Annex 8.22-Format for Collecting Waiting Time and Setup Time Data ............................. 150
Annex 8.23-Format for Collecting Transfer Time and Internal Transport Data.................. 150
Annex 8.24-Format for Collecting Downtime Data ............................................................ 150
Annex 8.25-Format for Data Summary of Process Indicators ............................................. 151
Annex 8.26-Format for Productivity Measurement ............................................................. 151
Annex 8.27-Format for Productivity Analysis ..................................................................... 152
Annex 8.28-Format for Action Plan..................................................................................... 153
Annex 8.29-Format for Evaluation of the Results ............................................................... 153
By: Azemeraw Tadesse (2011) Page VIII

List of Figures
Figure 1.1: Organization of the study .............................................................................................. 6

Figure 2.1: Simple firm model ........................................................................................................ 8
Figure 2.2: Conceptual model of productivity .............................................................................. 10
Figure 3.1: Garment export market performance of World, Africa and SSA courtiers ................ 42
Figure 3.2: Garment export market performance trend of Ethiopia .............................................. 42
Figure 3.3: Garment export market performance of SSA countries by percentage in 2009 ......... 43
Figure 3.4: General export market performance trend .................................................................. 45
Figure 3.5: Textile and garment export market performance trend............................................... 46
Figure 3.6: Human productivity trend of Ethiopian garment industres by volume....................... 52
Figure 3.7: Human productivity trend of Ethiopian garment industries by value ......................... 52
Figure 3.8: Percentage share of the respondents position ............................................................. 55
Figure 3.9: Percentage share of the respondents qualification ...................................................... 56
Figure 3.10: Percentage share of the respondents work experience .............................................. 56
Figure 3.11: Percentage share of market segment ......................................................................... 57
Figure 3.12: Percentage share of workforces productivity level ................................................... 58
Figure 3.13: Percentage share of impact of processes on productivity ......................................... 59
Figure 3.14: Percentage share of impact of partial inputs on productivity ................................... 60
Figure 4.1: Some of the products of the company......................................................................... 64
Figure 4.2: Productivity factors of the company ........................................................................... 66
Figure 4.3: Productivity factors of the company using cause and effect diagram ........................ 67
Figure 4.4: Productivity indicators of production process ............................................................ 76
Figure 4.5: Process map of production process ............................................................................. 77
Figure 4.6: Flow process chart of production process ................................................................... 78
Figure 4.7: Productivity analysis bar chart against target ............................................................. 87
Figure 4.8: Surrogate productivity analysis bar chart against proposed target ............................. 88
Figure 4.9: Process indicator analysis bar chart against proposed target ...................................... 89
Figure 4.11: Intervention areas using four fields........................................................................... 90
Figure 5.1: The PIM with ten steps ............................................................................................... 93
Figure 5.2: Template 1 to classify processes of the firm ............................................................... 94
Figure 5.3: Processes of the firm using template 1 ....................................................................... 95
Figure 5.4: Relationship diagram among processes ...................................................................... 97
Figure 5.5: Template 1 to identify productivity indicators............................................................ 99
Figure 5.6: Productivity targets setting framework ..................................................................... 100
By: Azemeraw Tadesse (2011) Page IX

Figure 5.7: Template 2 for process mapping ............................................................................... 101
Figure 5.8: Total productivity measurement framework ............................................................. 104
Figure 5.9: Productivity analysis framework .............................................................................. 110
Figure 5.10: Template 4 for cause and effect analysis ................................................................ 111
Figure 5.11: Template 5 for four fields ....................................................................................... 111
Figure 5.12: Template 6 for four field method ............................................................................ 112
Figure 5.13: Action plan framework ........................................................................................... 112
By: Azemeraw Tadesse (2011) Page X

List of Tables
Table 2.1: Evaluation of the productivity improvement methods ........................................... 33

Table 3.1: Capacity utilization in Ethiopian textile and garment sector ................................. 39
Table 3.2: World, Africa and SSA countries garment export market performance ................ 41
Table 3.3: Benchmarked countries general profile comparison .............................................. 44
Table 3.4: General export market performance comparison ................................................... 45
Table 3.5: Textile and garment export market performance comparison................................ 46
Table 3.6: Scored values of key factors for each benchmarked countries .............................. 46
Table 3.7: Benchmarked countries garment comparison ........................................................ 48
Table 3.8: Representation of items .......................................................................................... 50
Table 3.9: Source data for productivity assessment ................................................................ 51
Table 3.10: Human productivity of Ethiopian garment industries .......................................... 51
Table 3.11: Productivity analysis of Ethiopian garment industries ......................................... 54
Table 3.12: Position of the respondents by number and percentage ....................................... 55
Table 3.13: Qualification of the respondents by number and percentage ............................... 56
Table 3.14: Work experience of the respondents by number and percentage ......................... 56
Table 3.15: Total point and percentage share of workforces productivity level ..................... 58
Table 3.16: Total point and percentage share of impact of processes on productivity ........... 59
Table 3.17: Total point and percentage share of impact of partial inputs on productivity...... 60
Table 3.18: Total point and percentage share of impact of productivity factors ..................... 60
Table 4.1: Explanations and measurements of productivity factors of the company .............. 67
Table 4.2: Status productivity factors of the company ............................................................ 70
Table 4.3: Inputs and outputs of each sub-process and operation of production process ....... 80
Table 4.4: Data for measuring partial and total productivity .................................................. 81
Table 4.5: Data for measuring surrogate productivity............................................................. 82
Table 4.6: Data for measuring process indicators ................................................................... 82
Table 4.7: Surrogate productivity measurement value ............................................................ 85
Table 4.8: Process indicators measurement value ................................................................... 85
Table 4.9: Productivity analysis against target ........................................................................ 86
Table 4.10: Surrogate productivity analysis against proposed target ...................................... 87
Table 4.11: Process indicator analysis against proposed target .............................................. 88
Table 5.1: Colors for defining status of productivity factors .................................................. 99
By: Azemeraw Tadesse (2011) Page XI

List of Acronyms
AGOA African Growth Opportunity Act

ANSI American National Standard Institute
APC American Productivity Center
BLS Bureau of Labor Statistics
CMT Cut, Make, Trim
CSA Central Statistics Agency
EPA European Productivity Agency
EGIs Ethiopian Garment Industries
ETGMA Ethiopian Textile and Garment Manufacturers Association
EU European Union
FDI Foreign Direct Investment
FOB Free on Board
GDP Gross Domestic Product
GNP Gross National Product
IET Industrial Engineering Terminology
MOI Ministry of Industry
NPBS National Productivity Board of Singapore
NBER National Bureau of Economic Research
OPT Office of Productivity and Technology
PASDEP Plan for Accelerated and Sustainable Development to End Poverty
PIM Productivity Improvement Method
PLC Private Limited Company
SDPR Sustainable Development and Poverty Reduction
SSA Sub-Sahara Africa
UNIDO United Nations Industrial Development Organization
US United States
USD United States Dollar
TGIDI Textile and Garment Industry Development Institute
By: Azemeraw Tadesse (2011) Page XII

Chapter One
1-Introduction
1.1-Background of the Study
The rapid pace of globalization and the forces driving it have created new market conditions.
The structure of international and domestic markets has changed. In the globalized economy
competitiveness means an ability to take the most advantageous position in a constantly
changing market environment. The major determinants of the ability to sell products and
services in highly competitive markets are no longer the relative cost advantages. More and
more, competitiveness is based on quality, speed, technical superiority, and service and
product differentiation. In the ultimate analysis though, one of the major determinants of
competitiveness, whether at national, industrial or firm level, is raising total productivity [34].
Global competitiveness has forced businesses to examine their operation for the purpose of
making process improvements. These improvements generally involve better utilization of
resources and higher level of quality. Essentially the focus is on enhancing productivity to
meet or beat the competition on relevant cost, quality, time and flexibility issues. Productivity
improvements require designing and successful implementing of sound programs [8].
At today's competitive market place, there is a need for organizations to ensure continual
improvement. Garment industries experience growing pressure to improve quality, increase
productivity, and reduce cost with limited resources. Fashion industry need to reduce
response time, eliminate errors and improve customer satisfaction [10].
Garment is one of the three basic needs of mankind. Hence, textile and garment have retained
an important place in human life starting from historical era to today’s modern world. Textile
and garment industry in today’s contemporary market place is a truly global industry. It is a
well documented fact that the textile and apparel industries have been the driving force for all
developing countries. Today, such countries have targeted the garment industry as means to
provide jobs, raise their standard of living and create economic wealth. There are two primary
reasons that the garment industry continues to be the industry that is used to lead developing
countries to the promise of a better tomorrow. The reasons are the industry continues to be
labor intensive, and the barriers to entry are relatively low [19].
By: Azemeraw Tadesse (2011) Page 1

The development of textile sector is closely linked with industrial revolution in England and
US in seventh and eighth century respectively. Garment industry took one more century to
develop after the growth of textile industry [19]. The modern garments industry started with
the establishment of Addis Garment Factory by three Italians in 1965. In 1992, Ethiopia's
largest garment factory, Nazareth garment, became operational [9]. Currently, there are 397
small size, 7 medium and 32 large garment industries in Ethiopia. These small, medium and
large size industries employ 1,961, 343 and 7,442 employees respectively. Totally, the sector
creates a job opportunity for 9,756 employees [29].
The government of Ethiopia has a planned projection of getting 1 billion USD from the
export of garment and textile related products in the next 5 years which is 40 times as much
as it actually earned during the 2009/10 (i.e. 25 million USD form garment export) [42].
However, EGIs are not competitive in the global market mainly due to low productivity.
The general objective of the study is to develop a method that supports productivity
improvement of the EGIs by identifying the possible productivity factors and selecting the
intervention areas.
1.2-Statement of the Problem
Garment is one of the basic needs of mankind. Today, garment industries make a significant
contribution to many national economies especially in the developing world. Many countries
are exploiting this industry for reasons of economic growth. The high amount of labor
involved in garment production has caused garment industries to seek locations with lower
wage employees for reduced production costs. Garment industries in developing countries
have low cost labor advantage compared to developed countries. In this regard Ethiopia has a
comparative advantage in producing garment.
Though EGIs have market opportunity, low cost labor comparative advantage and incentives
by government, they are not yet competitive in the global market. One of the main reasons is
low productivity. For instance the human productivity achieved by EGIs is 10 t-
shirts/worker/day and 30 trousers/worker/day whereas the best practices2 are 50 t-
shirts/worker/day and 80 trousers/worker/day [30]. The productivity factors of EGIs are
multidimensional related to human, capital, material, method, control, process and product
that require organized and sustainable productivity improvement program.
2
Best practice is taken from garment industries of two countries, namely Turkey and Romania. The benchmark
is done by Romanian experts in cooperation with MOI and UNIDO, Ethiopia.

Low skilled employees, shortage of adequate training, low employees satisfaction level,
absenteeism, capacity underutilization, work in process, high rework and scrap rate, low
product quality, low volumes of production, long lead time, waiting time, downtime, setup
time and poor inventory management system are some of the specific problems of EGIs.
Currently EGIs and the case company use disorganized and reactive problem solving
approach which is not effective for productivity improvement. The main reasons for not using
organized and sustainable productivity improvement program are lack of understanding
where to start productivity improvement, lack of identifying critical success factors, lack of
addressing the possible productivity factors, lack of defining, measuring and analyzing
productivity indicators (except human productivity), and lack of identifying the intervention
areas for productivity improvement.
It is believed within this study that productivity improvement is an essential criterion for the
competitiveness and success of a manufacturing company. Without productivity a company
will not be able to compete and will therefore not survive in a long-term perspective.
Therefore, in this study by considering the existing situation of EGIs and the case company, a
method that supports productivity improvement of EGIs has been developed.
1.3-Objective of the Study
The general objective of the study is to develop a method that supports productivity
improvement of EGIs. In order to achieve this general objective the specific objectives are:
To assess existing productivity measurement improvement practices of EGIs

To identify critical success factors and productivity indicators
To identify productivity factors and define their status
To measure and analyze productivity
To identify intervention areas for productivity improvement
To propose a solution by developing the PIM
1.4-Significance of the Study
Organizations need to know how to manage their productivity effectively. The study gives a
guideline how a method that supports productivity improvement of manufacturing firm is
initiated and implemented. The study can give empirical knowledge about concepts of
productivity, productivity factors, and various tools and techniques of productivity

measurement, analysis and improvement. In general the case company, EGIs, researchers and
academicians are the beneficiary of the study.
1.5-Scope of the Study
The study has been done for EGIs with special reference to Nova Star Garment PLC. The
study is dedicated to development of PIM at firm level. The study mainly uses data collected
from various literatures, organizations like CSA, MOI, UNIDO, TGIDI, ETGMA, 15 EGIs
using survey questionnaire and the case company. The study is limited to internal (firm level)
productivity factors develop the PIM.
1.5-Research Methodology
In order to conduct the study, various literatures are surveyed from various sources like
books, journals and thesis; both primary and secondary are collected from different sources;
then the collected data are organized, analyzed and presented by using different software and
tools.
1.5.1-Literature Survey
A survey has been conducted on the existing literatures to get empirical knowledge about
concepts of productivity, productivity factors, productivity measurement, productivity
analysis, productivity planning and productivity improvement.
1.5.2-Data Collection
The data have been collected using primary and secondary data sources.
The primary data sources are questionnaire, physical observation, interview, formats and
consultation. Survey questionnaire has been prepared and distributed to 30 garment industries
in order to assess the existing productivity measurement and improvement practices, and
productivity factors. The existing layout, internal transport, transfer time and process flow
sequence are collected using physical observation of the case company. Interview is
conducted to know how productivity is understood by managers, experts, checkers,
supporting staffs and operators of the company. Formats are prepared to collect data for
measuring and analyzing productivity. Valuable and timely feedbacks and directions are
found from consultation by the advisor.

The secondary data sources are books, journals, thesis, statistical information and
organization documents. Books, journals and thesis are referred to construct the study. Six
years (i.e. from 2003/4 to 2008/9 G.C.) statistical data has been taken from CSA to assess
productivity of EGIs. The study also uses documents prepared by MOI, UNIDO, TGIDI,
ETGMA and the case company.
1.5.3-Data Analysis and Presentation
Microsoft Office Excel and Microsoft Office Visio have been used to analyze and present the
data. Cause and effect diagram, pie chart, bar graph, line graph, flow process chart, process
mapping, formats and templates are the tools used to analyze and present the data.
After analyzing the data, problems have been identified and intervention areas have been
selected using four fields. Then a solution has been proposed by developing a PIM for the
problems.
Finally, conclusion has been drawn; and important recommendation for current and future
EGIs regarding productivity improvement has been forwarded.
1.6-Organization of the Study
The study has been organized into six chapters. The first chapter introduces the background,
statement of the problem, objectives, scope and problem statement the study. The second
chapter is the literature review that states the study matter. Chapter three presents the
overview and assessment of EGIs. The case study has been presented in chapter four. Chapter
five contains the PIM developed for the solution. The final chapter consists of the conclusion
and recommendation of the study.

Figure 1.1: Organization of the study

Chapter Two
2-Literature Review
The literature review of the study has been organized into eight main parts, namely concepts
of productivity, productivity factors, productivity measurement, productivity analysis,
productivity planning, productivity improvement, overview of productivity improvement
methods and state of the art of productivity.
2.1-Concepts of Productivity
In a formal sense, the first time the word productivity was mentioned in an article by
Quesnay in the year 1766. In 1883, Littre defined productivity as faculty to produce. In 1950,
OEEC give a formal definition to productivity as quotient obtained by dividing output by one
of the factors of production. In 1955, Davis defined productivity change in product obtained
for the resource expended. In 1962, Fabricant defined productivity as always a ratio of output
to input. In 1965, Kendrick and Creamer defined productivity as functional definitions for
partial, total factor and total productivity. In 1976, Siegel defined productivity as a family of
ratios of output to input. In 1979, Sumanth defined total productivity as ratio of tangible
output to tangible input [11].
EPA defined productivity as it is an attitude of mind. It is the mentality of progress, of the

constant improvements of that which exists. It is the certainty of being able to do better today
than yesterday and continuously. It is the constant adaptation of economic and social life to
changing conditions. It is the continual effort to apply new techniques and methods. It is the
faith in progress [1]. Productivity is a state of mind that strives for and achieves the habit for
improvements (NPBS).
Productivity refers to the efficiency of the production system. It is the concept that guides the
management of production system. It is an indicator to how well the factors of production
like land, capital, labor and energy are utilized [1]. Productivity is a measure of system
performance, system efficiency, resource utilization, and the relationship between real output
and inputs [3]. According to the book, IET (ANSI, 1983), productivity is the quantitative and
qualitative results of the inputs of all resources [4]. Productivity is defined as the ratio of
output (goods and services) to input (men, materials and money). It is the most reliable index
of how effectively an enterprise's resources are being utilized [5]. Productivity is a very

important measure in manufacturing operations, besides turnover and profit, because it
provides insight into the efficiency and effectiveness of the operations. Productivity is
concerned with the efficient utilization of resources (inputs) in producing goods and/or
services (output) [3].
In general, input and output are the two pillars that define productivity. A simple firm model
that relates inputs, constraints, outputs and productivity indicators is shown in figure 2.1.
-Technical Constraints
-Financial Constraints
-Targets
-Products/Services
-Information Firm
-Reports
-Resources
Productivity Indicators
Figure 2.1: Simple firm model
To define and measure productivity, defining of the inputs and outputs is very crucial and
mandatory. Inputs and outputs are presented in different approach by different authors.
Yilmaz et al (2009) presents inputs as material, labor, capital, equipment, energy and data;
and outputs as completed product, information (report, plan) and data which can develop
process [27]. Attia et al. (2006) present the inputs of a manufacturing company as materials,
machines, manpower, method, technology, land, building, money, market, management tools
and information [3]. Nakajima (1959) presents production, quality, cost, delivery, safety,
hygiene, environment and morale as outputs [2]. The official United States Department of
Commerce (1954) define national product as it is the market value of the output of (final)
goods and services produced by the nation's economy. Kuznets (1941) define national
product in terms of goods and services needed to satisfy the needs of ultimate consumers,
both present and future. Kendrick (1992) prefers to emphasize that the national product is
basically a net concept, the value of production minus the value of purchased intermediate
products consumed in the production. Fabricant (1940) define output and input as follows:

gross output is equal to aggregate value of goods produced, excluding capital gains, and net
output is equal to gross output minus value of all commodities and services purchased from
other business organizations and consumed in the production. Kendrick and Creamer (1965)
define net output is equal to output minus intermediate goods and services; and total factor
input is equal to man-hour input of the measured period weighted by base-period average
hourly earnings, preferably including fringe benefits plus total capital of the measured period
expressed in base-period prices and weighted by the base-period rate of return, with
depreciation treated as intermediate service. Craig and Harris (1972, 1973) define labor input
as summation of man-hours worked in each classification multiplied by base year wage rate
and/or salary scale for that job classification); raw materials and purchased materials input as
summation of purchased units adjusted for inventory changes multiplied by base-year
material prices; capital input as it is the sum of the annuity values calculated for each asset on
the basis of its base-year cost, productive life, and the firm's cost of capital; and
miscellaneous other inputs as any resources except labor, capital, raw materials/purchased
parts. According APC, capital input is given by total depreciation plus profit relative to the
total assets (i.e., fixed assets plus working capital) employed. Thus, the capital input for any
particular period is equal to depreciation for that period plus the product of return on assets in
base period and current assets employed. Sumanth (1979) define total tangible inputs as value
of (human plus material plus capital) plus energy plus other expense inputs used; and total
tangible output as summation of value of finished units produced, value of partial units
produced, dividends from securities, interest from bonds and other income [1]. The total
tangible inputs are human, capital, material, energy and other expense; and the total outputs
are finished units for sale and internal use, partial units produced for sale and internal use,
dividends from securities, interest from bonds and other income.
Human inputs can be coordinators which involve managers and professionals and producers
include bureaucrats and workers. Capital inputs categorized into fixed and working capital;
fixed capital involves land, buildings and structures, machinery, tools and equipments, and
amortized research and development costs; working capital includes inventory, cash,
accounts receivable and notes receivable. Material inputs are raw materials and purchased
parts. Energy inputs consider oil, gas, coal, water, electricity, etc. Other expenses are travel,
taxes, professional fees, marketing, information processing, offices supplies, research and
development, general administration expenses, etc [11].
For this thesis productivity is defined as is effective and efficient utilization of resources used
to produce products/services that meet customer requirements continuously by applying

appropriate methods and by controlling the parameters. To justify this definition, productivity
is represented by the following conceptual model3.
Method
Firm
Control
Figure 2.2: Conceptual model of productivity
In the above conceptual model, input is represented by inlet of the frustum; firm represented
by volume of the frustum; method and control are represented by volume of the cylindrical
arrow; output is represented by outlet of a frustum; and time is represented by the length of
frustum. The frustum is hollow to represent flow of materials.
The conceptual model is represented as a frustum to show all the input can not be converted
to output and there is waste. Waste increases along the length of the frustum. The basic thing
while thinking productivity improvement is minimizing the waste. Waste is represented by
the difference of volume of the cylinder and frustum. Theoretical (zero waste) conceptual
productivity model is can be represented by cylinder.
In this thesis the inputs of the firm considered are human, capital, material, energy and
miscellaneous inputs. The outputs considered are finished and partial products for sale and
internal use. Method is a means applied to do activities in a better way. Control deals with
regulating activities and parameters to be within acceptable limit. All operation and non-
operation time are considered. Waste is the part of the resources that has no purpose or value
to the firm and customers.
3
The conceptual model is developed after analyzing several concepts of productivity from the literature survey.

2.2-Productivity Factors
Identifying the possible productivity factors is one the basic element for productivity
improvement. Productivity factors can either boost or hinder productivity. The productivity
factors surveyed from different literatures are presented as follows.
ETGMA (2010) identify the following constraints of Ethiopian garment sectors: access to
inputs at competitive price, access to market, low margin operation, high transport cost, high
transaction cost, bureaucratic hurdles, undercapitalization, and threat of foreclosure from the
banks [28].
Kumar et al. (2008) presents controllable (internal) factors and uncontrollable (external)
factors that influence productivity. Product factors, plant and equipment, technology, material
and energy, human factors, work methods, and management style are controllable factors.
Structural adjustment, natural resources, government, and infrastructure are uncontrollable
factors [11].
Belgin (2008) classify productivity factors in to internal and external factors and presents by
the following diagram. The internal factors categorized into materialistic and non-
materialistic. Materialistic internal factor involves product, plant and equipment, technology,
and material and energy; and non-materialistic internal factor includes human, organization,
work methods and management. The external factors categorized into structure, natural
resources and governmental issues. Structure external factor involves ergonomics and social
situation; natural resources external factor includes land, energy and raw material; and
governmental issues external factor involves corporate mechanisms and politics [27].
Grunberg (2007) after analyzing several literatures, he classifies factors influencing

performance of operations into four namely process, control, product and resource. Factors
related to process are lead-times, bottlenecks, material flow, volumes, development,
inventory, integration, losses layout, measurement, cycle-times and transport; factors related
to control are purchasing, ABC analysis, overproduction, total quality, location, financing,
administration, subcontracting, routines, suppliers, customer, outsourcing, planning, cost and
articles; factors related to resource are organization, efficiency, measurement, work methods,
capacity, communication, motivation, satisfaction, accidents, resetting, utilization,
maintenance, scheduling, absenteeism, ergonomics, new technology, competence, losses and
downtimes; and factors related to products are development, design for assembly, product
variants, standardization and modularization [20].

Tangen (2004) shows that productivity is influenced both directly and indirectly. The direct
influence factors are number of products produced as well as resources consumed. The
indirect influence factors involve flow principle and layout, flexibility requirements,
automation, capacity, resetting, maintenance, quality management, production planning and
control, materials supply, customer/supplier relations, information handling, product
complexity, product variety, standardization of parts, competence, work environment, and
work organization [37].
Bheda (2003) by collecting data from small, medium and large garment industry groups and
performing analysis of variance and correlation analysis, he presents the following as factors
associated with garment industry productivity: age of the factory, lead time, work-in-process
level, repair as final inspection, rejection level, number of sewing machine installed, sewing
technology index, production location, organization type, major export destination, major
product category, education level operators, production systems, payment systems, presence
of industrial engineering cell, rewarding creative suggestions, training to
supervisors/managers, operators, induction training and production standards [19].
Yamfwa (2001) presents internal factors and external influences that affect the performance
of the firm. Condition of production process, labor, management, firm level investment,
marketing, organizational structure, firm intellectual property, and firm level technological
capability and effort are typical internal factors. National infrastructure, trade policies, good
governance, political stability, demand and inflation, national investment, national systems of
innovation, and competition and intellectual property are external influences affecting firm’s
performance [14].
Rantanen (1997) classifies productivity improvement factors in to three categories: internal,

external and general obstacles. The internal obstacles are factors that inside the firm and it is
possible to eliminate or weaken them by actions performed inside the firm. Lack of
knowledge and poor production methods are typical internal obstacles. The external obstacles
are factors that are outside the firm. The firm can not affect these factors directly. Legislation
and action of trade unions are typical external obstacles on productivity improvement.
General obstacles are factors that are not so easy to categorize clearly to either internal or
external obstacles. Theoretical problems, measurement problems and lack of public
information can be general obstacles [13].
Sumanth (1979) presents the factors that affect the productivity of United States of America
(USA) are investment, capital/labor ratio, research and development, capital utilization,

government regulations, age of plant and equipment, energy costs, workforce mix, work
ethics, workers’ fear about loss of jobs, unions’ influence and management [11].
2.3-Productivity Measurement
In order to analyze and improve productivity first it should be measured. By itself, a

productivity measure has no meaning. It only gains meaning when compared to productivity
measurements for prior periods or to measurements from comparable facilities producing
similar outputs. Productivity measures attempt to highlight improvements in the physical use
of resources, that is, to motivate and evaluate attempts to produce more outputs with fewer
inputs while maintaining quality. Productivity measurement systems analyze performance
based on actual outputs and inputs in different time periods. The productivity measurement
system can be viewed as a variance analysis of the actual costs incurred in successive periods
[6].
Productivity can be measured as the ratio of output to input; the ratio between the amount
produced and the amount of any resources used in the production; and output per unit of input
[1]. Productivity broadly classify into total productivity and partial productivity. Total
productivity is the ratio of total output to the sum of all inputs. Partial productivity is the ratio
of output to one class of input [3]. There are many different productivity measures. The
choice between them depends on the purpose of productivity measurement and, in many
instances, on the availability of data. Total productivity, partial productivity, multifactor
productivity and total factor productivity indexes are used to measure productivity.
Multifactor productivity is ratio of output to a bundle of inputs [7]. Total factor productivity
is the ratio of net output to the sum of associated labor and capital inputs [3].
Productivity can be measured at international, national, industrial and company level. It can
be measured for short run, medium run and long run. It is also measured at operational level,
tactical level and strategic level.
2.3.1-Productivity Measurement at International Level
2.3.1.1-Benefit of Productivity Measurement International Level
Productivity comparisons based on some systematic approaches at the international level are
valuable tools for understanding and evaluating the impact of productivity on domestic and
international markets of competing countries.

2.3.1.2-Productivity Measurement Approach at International Level
This measurement usually made by economists. Rostas (1955) proposes four measures for
international comparison of productivity:
1. Comparison of the value of the gross output per unit of labor

2. Comparison of the value of the net output per unit of labor
3. Comparison of the physical output (gross as well as net) per unit of labor
4. Comparison of the physical input of materials
Shelton and Chandler (1963) provide the following measures most commonly used to
compare the productivities of countries:
1. Hourly labor cost = E/L

2. Output per man-hour = Q/L
3. Unit labor cost = (E/L)/(Q/L) = E/Q
Where: E = aggregate labor cost (or expenditure), L = man-hours of labor and Q = quantity
of output
The OEEC used two measures for productivity comparison: GNP per capita and GNP per
person employed.
The United States BLS, OPT, used the following for productivity comparisons: GDP per
capita and GDP per employed civilian.
2.3.1.3-Limitation of Productivity Measurement International Level
While using the exchange rates, comparisons often do not consider the prices of similar
goods and services in all countries for a given year.
The available few industrial level comparisons are limited in the number of industries or
countries covered.
Several factors, including social, cultural, political, and economic conditions have not
been studied sufficiently. For this reason, the explanation of international productivity
differences is less than adequate [11].

2.3.2-Productivity Measurement at National Level
2.3.2.1-Benefit of Productivity Measurement National Level
Much attention has been given to the measurement of productivity at the national level,
primarily by the economists. Rostas (1955) outlines some of the benefits of measuring
productivity for the national economy as follows:
Productivity estimates can be used in forecasting national income and output at some
future date, the probable size of the workforce, occupational shifts, labor requirements,
etc.
Being an element in labor costs, productivity can be used to compare the competitive
power of various industries in different national economies.
Being a factor in the distribution of the product of industry, productivity is relevant to
collective bargaining.
The 15th edition of Encyclopedia Britannica (1974) mentions three additional uses of
productivity at the national level:
Productivity is an index of growth because a nation advances by using less to make more.
Labor productivity is an especially sensitive indicator of this growth.
An overall rise in a nation's labor productivity implies a large quantity of goods and
services per worker than before, and hence a potential for higher real income per worker.
Countries with high real wages usually tend to have high labor productivity.
Productivity is also used to measure efficiency. It is also a means to assess the uses to
which resources are being applied, because the extent to which resources flow to various
uses depends, in large measure, on their productivity in each of these uses.
Productivity is an important factor affecting prices and wages. Although economists are
far from a complete knowledge of the interaction of variables, there seems to be
agreement on some fundamental points: Increases in real wages in many countries are
closely related to large increases in labor productivity in these countries; and an increase
in labor or other partial productivities usually brings with it a reduction in costs, and
hence prices and wage increases, or both.
2.3.2.2-Productivity Measurement Approach at National Level
At the national level, productivity measurement efforts have been primarily from the
economists' point of view. Index approach is used to measure productivity at national level.

Mark (1971) divides the various productivity measures at national level into three, namely:
labor productivity indexes, capital productivity indexes, and labor and capital productivity
indexes. Among these indexes, labor productivity appears to be the most commonly used.
The three types of labor productivity indexes commonly employed are BLS indexes, NBER
indexes and Brookings institute indexes.
According to BLS indexes: Labor productivity = [constant dollar value of goods and services
provided/man-hours of employed persons] = [real GNP originating in the private economy or
the/individual sectors man-hours of all persons employed (including proprietors and unpaid
family workers)] = [purchase of goods and services by consumers, gross private domestic
investment (including the change in business investors), net foreign investment, and
government all deflated separately for price changes/human-hours of all persons employed
(including proprietors and unpaid family workers)]
In BLS indexes, the human hour can be paid human hour or actual human hour.
According to NBER indexes defined by Kendrick (1961): Labor productivity =

[output/weighted human hour]
In NBER indexes, the weighting is done by using average earnings.
According to Brooking Institute indexes published by Denison (1962): The procedure to

accomplish this is different from Kendrick's, however, since the adjustment is based on sex,
age, education, and since other changes in the labor force are applied to basic employment
and man-hour measures.
Capital productivity indexes at national level defined by:

Capital productivity = [output/capital input]
Total labor and capital productivity indexes at national level defined by two measure, namely
NBER measures by Kendrick and Denison’s measures.
According to NBER measures by Kendrick: Total labor and capital productivity =

[output/(labor + capital)]
Where: Labor input = man-hours, adjusted for quality change in labor, capital input = net
stock of structure + plant equipment + inventories + working capital + land
Here the inputs are added together with factor prices as weights.

According to Denison’s measures: Total labor and capital productivity = [net domestic
product (excluding depreciation)/weighted sum of capital and labor]
Here, the weights are the base-period share of the dollar output of each of the inputs, labor
and capital.
2.3.2.3-Limitation of Productivity Measurement National Level
Due to the nature of output to input direct quantity measures of output and input are
difficult to obtain. Therefore, in many cases some kinds of approximations or
substitutions are employed.
For the sake of productivity measurement most data are not collected and compiled.
Therefore, some modifications are made to suit the data to such concepts of productivity
measurement as perceived by the researcher [11].
2.3.3-Productivity Measurement at Industry Level
2.3.3.1-Benefit of Productivity Measurement Industry Level
Productivity measures at the industrial level can be helpful economic indicators in tracing
the economic performance of a country. Since productivity measures identify the leading
and lagging industries, potential problem areas can be marked, and then examined in
detail.
Changes in manpower utilization, future manpower projections, trends in labor costs,
effects of technological advancement on industry employment and unemployment can be
analyzed by the industry productivity measures. Productivity progress for particular
industries in different countries can also be compared.
Comparison of performance of individual companies can be done using the industry
productivity measures.
The industry productivity measures can assist the firms and trade associations to forecast
industry growth patterns, future conditions, etc.
2.3.3.2-Productivity Measurement Approach at Industry Level
According to economists there are three basic approaches in measuring the productivity of
industry in general namely, index approach, production function approach and Input-output
approach.
Index Approach: Several researchers and organizations have attempted to develop index-
based measures for the industry in general. And some of the index approaches are:

Mills's Indexes: Mills (1932) was perhaps the first to present productivity indexes for
industries. According to his definition:
Mills productivity index = [output/number of wage earners]
Magdoff's Indexes: Magdoff (I939) defines the following two measures for the industry:
Unit labor requirements index = [relatives of total man-hours/production index]

Productivity index = [1/unit labor requirements index] = [production index/relatives of total
man-hours]
The total man-hours is taken as the measure of labor time, assuming that the labor is
homogeneous and that its unit of measure is an hour of undifferentiated labor; the qualitative
differences in skills, occupations, and the efficiency of the individual employees are ignored.
BLS Indexes: BLS uses two indexes to derive productivity measures for industry: unit man-
hour index and deflated value index. The unit man-hours index is the ratio for two periods of
the total hours expended in the production of a mix of products. The deflated-value index is
identical to the physical output index that makes use of substitute unit value weights. It is
derived from value of production data that relate to total value of products produced by the
industry alone.
Production Function Approach: Solow (1957) developed aggregate production functions,

while Lave (1966), Salter (1966), and Aigner and Chu (1968) dealt with the measurement of
technological change by making use of the production functions.
Input-Output Approach: Most of the efforts using input-output analysis are at the national
and industrial levels. Elliott-Jones (1971) applied input-output analysis to determine the total
output and input in industries. He used the input-output tables to consider inter industry
flows. Blackett (1971) illustrated the application of input-output analysis to determine the
input requirements of industries.
Index approach and production function approach is done by different researchers to measure
manufacturing industries productivity. Siegel (1940) defined unit labor cost index as follow:
Index of unit labor cost = [index of wages/index of production] = [(index of man-hours x

index of average hourly earnings)/index of production] = [index of average hourly
earnings/index of productivity]

Griliches (1968) reported a production function approach in measuring the output of the
manufacturing industry. Also, David (1966) proposed an index for measuring the real net
output, having assumed a production function of the form Q = F (Li, Ki, Mi), where Q =
industry physical output, Li = labor inputs, Ki = capital inputs and Mi = purchased raw
materials. Nadiri (1970) presents an excellent survey on total factor productivity
measurement and production functions.
2.3.3.3-Limitation of Productivity Measurement Industry Level
Mark (1971) mentions three major problems in measuring output at the industrial level:
1. Lack of relevant detailed product data for many industries.

2. Quality changes that result from the development of new products, and changing the
specifications of existing ones.
3. Usually nonexistence appropriate weights [11].
2.3.4-Productivity Measurement at Company Level
2.3.4.1-Benefit of Productivity Measurement Company Level
Researches related to company level and operational unit level productivity measurement is
still in the developmental stages, although interest among academics and practitioners has
been increasing in the last few years.
Sumanth (1981) mentions the following benefits of productivity measurement at company

level.
The organization can evaluate the efficiency of conversion of its resources so that more
goods or services are produced for a given amount of expended resources.
Resource planning can be done through productivity measurement, both on short and long
term basis.
Through productivity measurement effort, the economic and noneconomic objectives of
the organization can be reorganized by priority.
Based on the measured productivity levels now, planned productivity level targets for the
future can be modified realistically.
Strategies for improving productivity can be formulated based on the extent of the gap
between the planned level and the measured level of productivity.
Productivity measurement can be used for comparing the productivity levels between
organizations within a particular category, either at the industry or at the national level.
Productivity values generated as a result of a measurement may be useful in planning the
profit levels in an organization.
The productivity measurement can create competitive action.
Once productivity estimates have been done, collective bargaining can be accomplished
more rationally.
2.3.4.2-Productivity Measurement Approach at Company Level:
For measuring productivity at company level, there are different approaches taken by
economists, engineers, managers, and accountants. Some of them are index approach,
production function approach, input-output approach, utility approach, servo-system
approach, array approach, financial ratios approach, capital budgeting approach and unit cost
approach.
Index Approach: It is used by economists and engineers to measure productivity at company

level. The following index approaches are used to measure productivity at company level.
Kendrick-Creamer Model: Kendrick and Creamer (1965) introduced productivity three

indexes at the company level, namely total productivity, total factor productivity, and partial
productivity.
Total productivity index for a given period = [measured period output in base period
prices/measured period inputs in base period prices]
Where: the sum of inputs in base period prices = output in base period prices in the base
period; and the difference between the sum of inputs in base period prices and the output in
base period prices is the productivity gain (or loss) in the measured period.
Total factor productivity index = [net output/total factor input]
Partial productivity of labor = [output (gross or net) in base period price/labor input in base
period price]
Partial productivity of capital = [output (gross or net) in base period price/capital input in
base period price]
Partial productivity of material = [output (gross) in base period price/purchased intermediate

products in base period price]

Craig-Harris Model: Craig and Harris (1972, 1973) define a total productivity measure at
company level using the following expression.
Pt = [Qt/(L+C+R+Q)]
Where: Pt = total productivity, Qt = total output, L = labor input factor, R = raw material and
purchased parts input factor and Q = other miscellaneous goods and services input factor
Hines's Model: Hines (1976) defines total productivity the same as Craig-Harris model but
he expresses the Craig-Harris model in a more symbolic form. He does not, however, show
the application of his definitions to any numerical example.
APC Model: The APC has been advocating a productivity measure that relates profitability
with productivity and price recovery factor. The way this measure is derived is:
Profitability = [sales/costs] = [output quantities * prices/input quantities * unit costs] =

[output quantities/input quantities] * [prices/unit costs] = [productivity * price recovery
factor]
Price recovery factor is a factor which captures the effect of inflation.
Mundel's Model: Mundel (1976) presents two alternative forms of productivity indices as
follows.
PI = [(OMP/IMP)/(OBP/IBP)] x 100 = [current performance index/base performance index]

* 100
PI = [(OMP/OBP)/(IMP/IBP)] x 100 = [outputs index/inputs index] * 100
Where: PI = productivity index, OMP = aggregated outputs, measured period, OBP =

aggregated outputs, base period, IMP = inputs, measured period and IBP = inputs, base
period
Taylor-Davis Model: Taylor and Davis (1977) forward the following total factor productivity
measure for a firm:
TFP = [((S + C + MP) – E)/((W + B) + (KW + Kf) * Fb * df)] =[total value added output/total
input (labor and capital)]
Where: S = net adjusted sales = net sales billed, deflated to base-year dollars using an
internal company price index = [sales dollars for the period/(price deflator / 100)], C =
inventory change = sum of inventory changes for raw materials, finished goods, 1/2 work in

process (raw material), and 1/2 work in process (finished goods), MP = manufacturing plant
= items that could be purchased from outside sources but are produced internally; for
example, internal maintenance and repair, internally produced machinery and equipment, and
research and development, E = exclusions = [materials and services purchased from outside
the firm + depreciation on buildings, machinery, and equipment + rentals], W = wages and
salaries, B = all benefits, such as overtime, vacation, sickness, insurance, profit sharing,
social security tax, retirement, bonus, Kw = working capital = [cash + notes and accounts
receivable + inventories + prepaid expenses], Kf = fixed capital = [land + buildings +
machinery and equipment + deferred charges], Fb = investor contribution, expressed as a
percentage and df = price deflator
Total Productivity Model (TPM): Recently, Sumanth (1979) developed a productivity

measurement model that considers the impact of all input factors on the output in a tangible
sense. The model is applicable not only as an aggregate tool at the firm level, but it can also
be used at an operational unit level. TPM is a basic model from which several versions are
derived. It is based on total productivity measure and a set of five partial productivity
measures. The model can be applied in any manufacturing company or any service
organization. The TPM is defined as:
Total productivity = [total tangible output/total tangible input]
According to this model, total productivity is at product and firm level. Total productivity of
a product can be found using two approaches namely, as ratio of total outputs to total inputs
and as weighted value of one of its partial inputs. Three approaches are used to measure total
productivity of a firm namely, as ratio of total output to total inputs, as weighted sum of total
productivity of product and as a weighted value of one of its partial inputs.
Total productivity model, which is one of the most important components of total
productivity management philosophy, has been applied in different organizations including
manufacturing, construction, insurance, banking, healthcare, utilities, education, financial
services, engineering consulting, process industries, transportation, mining, fast food business
printing business, computers, heavy equipment, stock brokerage, retail, tourism, government,
defense industry, and many more others [41].
Production Function Approach: It is usually used by economists to formulate some general

mathematical expression for output as a function of input factors.

There are three distinct areas of research in developing this approach appear in the literature:
pure theory of production functions, econometric theory of production functions, and applied
econometric theory of production functions.
Pure Theory of Production Functions: There are three kinds of pure theory of production
functions: the Cobb-Douglas function (CEF), the constant elasticity of substitution (CES)
function, and the variable elasticity of substitution (VES) function.
The Cobb-Douglas Function: The Cobb-Douglas function is given by:

Q = aLdKfeu
Where: Q = output, L = labor input, K = capital input and u = random measurement error
component, and a, d, and f are constants to be estimated
The Constant Elasticity of Substitution (CEF) Function: The CES function was first
proposed by Arrow et al. (1961). It is given by:
Q = a[bL-r + (1-b)K-r]-v/reu
Where: Q = value-added output, L = labor input = total man-hours, K = gross book value of
capital adjusted by capacity utilization coefficient, a = arbitrary constant of proportionality, b
= distribution parameter, r = substitution parameter, v = degree of returns to scale, e = base of
the natural logarithm and u = random measurement error with mean zero and variance
The Variable Elasticity of Substitution (VEF) Function: The VES function is a generalized
form of the CES function and is given by:
Q = [cK-r + dK-mrL-r(1-m)]-1/r
Econometric Theory of Production Function: The econometric theory of production

function involves the use of statistical concepts to study the effect of the random
measurement error.
Applied Econometrics Theory of Production Functions: Applied econometrics theory of

production functions deal with the actual fitting of some functions to sample data from
economics, industries, and firms. Klotz (1970) concentrates his efforts in this area.
Input-Output Approach: Economists used this approach and it is originally applied to study
the flows in national economy. Although much work has been reported using the input-output

approach at the national and industrial levels of productivity measurement, very little has
been done on applying this technique at the firm level.
Utility Approach: Engineers used this approach. Stewart's (I978a, 1978b) used this approach
for measuring manufacturing productivity by defining productivity "as the ratio of
performance toward organizational objectives to the totality of input parameters". The
essence of his approach is to combine various "surrogate measures" to produce a single
number. He defines a surrogate measure as "one which is used in place of another and is often
used when the desired measure is unobtainable".
Servo-System Approach: Engineers used this approach. Hershauer and Ruch (1978) provide
a servo-system model of worker productivity by defining productivity “as it relates input to
output through a conversion process". The servo-system model does not used to measure a
company's productivity in terms of numbers. However, recognition of the complex nature of
factors affecting the productivity of one input, the worker, is valuable in forming a partial
basis for future development of productivity models.
Array Approach: Managers used this approach. De Witt (1970, 1976) forwards a quantitative
technique for measuring the productivity of management. The method uses arrays (numbers
of mathematical elements arranged in rows and columns) as an evaluation tool. The method
requires the management be evaluated on the basis the performance of the managed firm, the
relationship of enterprise performance to the resources that have been used to achieve this
performance, and the position of the firm in its competitive environment.
Financial Ratios Approach: Managers used this approach to measure of productivity of the
company. [current assets/current liabilities] and rate of return are some of the measures listed
and discussed by Tucker (1961). In recent years, it has been suggested that some productivity
measures reflect the financial health of an organization. And two of such measures are
proposed by Gold (1976) and Aggarwal (1979).
Gold's Model: Gold (1976) focuses on the rate of return on investment. He combines product
prices, unit costs, utilization of facilities, productivity of facilities and allocation of capital
resources between fixed and working capital by the following expression:
Profit/total investment = [(product revenue/output) – (total costs/output)] * [output/capacity]

* [capacity/fixed investment] x [fixed investment/total investment]

Aggarwal's Model: Aggarwal (1979) proposed a composite productivity index based on four
financial ratios:
Composite productivity index = [a(net profit/total investment) + b(value added/number of

weighted man-hours) + c(total sales revenue/number of customers) + d(total dollar
purchases/number of suppliers)]
The coefficients a, b, c, and d can be determined only when the company has past data on
eight variables of the equation for five or more periods so that a linear regression can be run.
The idea is to use the composite productivity index to compare the relative performance of a
company from period to period.
Capital Budgeting Approach: Accountants used this approach. Mao (1965) demonstrated the
use of the capital budgeting technique in measuring the "productivity" of public investment.
According Mao, the productivity of a project is the savings, both tangible and intangible, that
accrue to it. His approach is to compute a rate of return for each of the projects and then rank
the projects according to their rates of return, and to determine the cost of social capital and
use it as the cutoff rate for the projects.
Unit Cost Approach: It is one of the indirect ways of measuring productivity used by
accountants. Adam et al. (1981), advocate a method called quality productivity ratio (QPR)
which considers unit costs of processing and rework separately, to account for the quality
changes in an organization [11].
QPR1 = [number of items not rejected/((total number of items * processing cost per item) +
number of error items x reject processing cost per item))]
QPR2 = [number of items not rejected/(total number of items * processing cost per item)]
QPR3 = [number of items not rejected/(number of error items * reject processing cost per
item)]
In addition to the above production measurement approaches, many researches have been
done on productivity measurement. For instance the following ways of productivity
measurement are forwarded by different authors.
Shabrawy et al. (2006) present productivity index as function of effectiveness divided by

function of efficiency. Effectiveness is related to performance, is the degree of
accomplishment of objectives and how well a set of results is accomplished. Efficiency is

related to resource utilization, is the degree of resource utilization and how well the resources
are utilized to achieve the results [3].
Bheda (2003) proposed a productivity measurement system for apparel industry and it have
the following elements: work for all tasks, productivity reports for internal and external bench
marking, review performance and plan improvement, communicate performance, generation
of productivity reports, garment analysis sheets and worker allocation, practice of hourly
productivity data collection, and communication of time standards to workforce. He presents
three types of three types of productivity measurement methods, namely: physical
productivity measurement method, value productivity measurement method and value-added
productivity measurement method. Productivity measurement method uses the quantity of
output and input as a data for calculating productivity. Value productivity measurement
method uses the monetary value of output and input as a data to for calculating productivity.
Value-added productivity measurement method uses value-added expressed in momentary
units as a data for calculation [19].
Wilson (1993) prescribed a new approach, oriented towards the goals of management, in
measuring productivity at the National Standard Company. It was characterized as a weighted
multi-factor productivity model, where the total productivity for a given firm is a function of
various partial productivity. Each partial productivity possesses a distinct magnitude of
influence on the overall productivity measure (i.e. a weighted influence) [22].
Pradip et al. (1992) provided the details of the sensitivity analysis of the factors considered in
the Ray-Sahu model of productivity measurement for multi-product manufacturing firms.
And the information obtained through sensitivity analysis determines the possible
combinations of production factors with which management would be able to increase the
total productivity of each of the products [18].
Sink (1985a) developed the multi-factor productivity measurement model (MFPMM) by

modifying the total factor model developed for by the American original work by Davis
(1958) [23].
2.4-Productivity Analysis
Productivity analysis is a powerful systematic methodology to measure system performance,

system efficiency, system effectiveness, resource utilization and profitability. Productivity

analysis helps decision makers to identify the driving factors of productivity, adopt the
appropriate action and monitor its consequences [3].
Sumanth (1979) developed methodologies to analysis total productivity for any given product
between two periods two successive periods and within a given period. To analyze total
productivity, the tasks undertaken are:
Develop an expression for the change in total productivity between two successive time
periods, and then derive the possible ways that this change could occur
Develop two methods for obtaining budgeted values of total productivity, and compare
them with corresponding actual values
Establish a step-by-step procedure for analyzing total productivity between any two
successive time periods and within a given time period
Illustrate the methodology with a numerical example [11].
2.5-Productivity Planning
Scott (1965) define planning as it is an analytical process which encompasses an assessment

of the future, the determination of desired objectives in the context of that future, the
development of alternative courses of action to achieve such objectives and the selection of a
course or courses of action from among these alternatives.
Cotton (1976) recognizes the importance of productivity planning and suggests a three-step
procedure:
1. Develop an effective planning process and structure in the organization

2. Prepare productivity goals and permeate the planning process with specific objectives
based on these goals
3. Establish productivity surveillance, assistance, and coordination in a manner tailored to
the organization's needs
Sumanth (1979) identifies two types of formal productivity planning, namely: short-term
productivity planning and long-term productivity planning. According to him, the
responsibility for short-term productivity planning should be at plant or division level and the
responsibility for long-term productivity planning should be at corporate level. He indicates
five forecasting methods to prepare short-term productivity planning; the methods are
weighted partial productivity model, productivity evaluation tree (PET) model, linear trend

model, comparative productivity evaluation model and seasonal variation model. Also he
presents two models for long-term productivity planning namely, total productivity
maximization model and total productivity profit model [11].
2.6-Productivity Improvement
Improving productivity have a positive impact on the direct costs of the products, as the same
output is produced with less input or as the same inputs are producing more output. This can
create new opportunities and improve the competitiveness of the manufacturing operations.
Low productivity indicates that an enterprise is wasting its resources, and this means that it
will eventually lose its international competitiveness and thereby reduce the scale of its
business activities. Low productivity decreases the growth of a nation's industries and
economy as a whole. Improving productivity is especially important for export oriented
industries since it is the only viable option for competing in the long term [5].
Patra et al. (2009) present the following ten commandments to improve productivity:
leadership commitment, manage change, organize and plan, people are the assets, organize
training, process is the backbone, metrics based approach, assess and evaluate, improved
communication, and focus on benefits [26].
Belgin (2008) stated five ways of increasing productivity: more output and less input, more
output and same input, much more output and more input, same output and less input, and
less output and much less input [27].
Roman (2008) examines how changes made to an existing team based incentive plan affects
labor productivity, product quality, and worker absenteeism using data from three production
units of a large manufacturing plant that employs production teams in its assembly operations
[18].
Grunberg (2008) develop and evaluate a performance improvement method which has seven
steps. Step 1-planning, step 2-pre-study, step 3-process mapping, step 4-process
measurement, step 5-analysis, step 6-implementation and step 7-evaluation [20].
Attia et al. (2006) presents a four phase productivity improvement cycle. Phase I-
measurement, phase II-evaluation, phase III-planning and implementation, and phase IV-
control and updating. Once the productivity level of an organization is measured in the
current time period (for example, the current month, quarter, or year), it must be compared
with the target level set up in the preceding period. Based on this evaluation, a new

productivity level must then be planned for the next coming period. Finally, depending on the
nature and level of the planned target of productivity, improvement must take place in the
next period. To determine if the planned level has in fact been achieved, productivity must be
measured again in the next period. The entire cyclic process repeats for as long as an
organization formally manages its productivity level and growth rate.
Herron et al. (2006) describe a model which has been developed to direct and generate
productivity improvement in a group of manufacturing companies. The methodology
developed has three clearly defined steps, the first step is a productivity needs analysis
(PNA), which gives an overview of the current manufacturing condition of the company,
identifies the key productivity measures for the plant and forms the basis for a detailed study
of production efficiency. The second step is a manufacturing needs analysis (MNA) in which
the plant processes and problems are defined and associated with the appropriate tools and
metrics, and generates an initial 1-year improvement plan for a particular manufacturing unit.
The third step is a training need analysis used to ensure that the tools which are found to be
efficacious are fully embedded within the company by combining PNA and MNA [17].
Huang et al. (2003) develop a systematic methodology for productivity measurement and
analysis at the factory level. Metrics of overall equipment effectiveness (OEE) and overall
throughput effectiveness (OTE) are introduced and developed to improve manufacturing
productivity then validate the methodology with simulation [12].
Bheda (2003) presents the following strategies for productivity improvement in apparel
manufacturing industry: initiate supervisor and manager training, strengthen work
measurement and methods improvement, setup operator selection and training procedures,
introduce productivity measurement system, strengthen quality system, improve worker
involvement and working conditions, strategic technology up gradation, strengthen
production planning and scheduling, introduce incentive scheme, and introduce information
system for productivity improvement [19].
Sumanth (1998) develop a ten step total productivity management methodology. Step 1-
customer satisfaction survey, Step 2-mission statement development, step 3-total productivity
analysis, step 4-management goals development, step 5-fishbone analysis and action plan
development, step 6-productivity and quality training, step 7-implementation of action plans,
step 8-assessment of management goals, step 9-total productivity gain sharing analysis and
step 10-new goals development [39].

Daniels (1997) productivity improvement does not rely for its success on the application of
specific productivity techniques. It depends much more on the commitment and creativity of
all members of the organization. He presents value analysis, Pareto analysis, cause and effect
diagram, method study, cost-benefit analysis and work measurement as productivity
improvement techniques [15].
Sumanth et al (1983) proposed a six step procedure for improving the total productivity of an
organization: step 1-data collection, step 2-computation of productivity changes and data file
compilation, step 3-determination of productivity improvement coefficients, step 4-evaluation
of the productivity improvement coefficients and technique usage, step 5-final selection of
the productivity improvement techniques and step 6-implementation of the selected
techniques [21].
Ramadan proposes a mathematical framework that addresses an improvement planning

program for the organization level. A proposed model based on the concept of total
productivity is presented to determine the best programs among those productivities'
improvement programs. The proposed framework eliminates the lack of the current known
model, analytical productivity improvement model (APIM) [24].
Sumanth cataloged more than fifty different techniques of productivity improvement in a

comprehensive survey of the literature. These techniques classified into seven basic groups:
1-Technology based techniques includes computer applications, computer graphics (Auto-
Cad), computer aided design (CAD), computer aided process planning (CAPP), computer
aided manufacturing (CAM), group technology, new production lines / machines, rebuilding
old machines, maintenance planning & control and layout; 2-Material based techniques
includes inventory control, material requirements planning (MRP), quality control, material
handling improvement, material reuse / recycling and new materials; 3-Product based
techniques includes research & development (R&D), product design, product standardization,
product reliability improvement and value engineering; 4-Employee based techniques
includes individual financial incentives, group financial incentives, training & education,
quality circles, brain storming, working conditions improvement, communication
improvement and job rotation; 5-Task based techniques includes work study, job evaluation,
job safety, human factors engineering (ergonomics), computer aided data processing and
scheduling; 6-Management based techniques includes marketing management, production
management, quality management, cost management, maintenance management, material
management and resource management; and 7-Investment based techniques includes

reducing the administration cost, increasing value added, increasing contribution and
increasing profit [3].
2.7-Overview of Productivity Improvement Methods
There are several productivity improvement methods developed so far. Sumanth categorized
the methods into seven basic categories namely, employee based, material based, task based,
management based, technology based, product based and investment based. And any other
techniques can be grouped in any of these categories [3]. Kanthi and Samuel (2006)
summarized manufacturing system productivity improvement methods into operation
research based, system analysis based, continuous improvement based and performance
metrics based. Grunberg (2007) represented the productivity improvement methods into the
following categories: logistics, quality, production engineering and others [20].
2.7.1-Total Quality Management
Total quality management focuses on control of business processes and customer satisfaction.
Activities such as improvement, statistical control, supply control and quality engineering are
ingredients of total quality management [20].
2.7.2-Six Sigma
Six sigma is a concept to decrease variation in manufacturing processes using statistical tools
[20]. It is a disciplined methodology for process improvement that deploys a wide set of tools
based on rigorous data analysis to identify sources of variation in performance and ways of
reducing them [35].
2.7.3-Total Productive Maintenance
Total productive maintenance is a waste reducing approach to stabilize the utilization of

equipment. It focuses on improving machine availability and includes monitoring of machine
equipment called overall equipment efficiency to visualize losses of utilization [20].
2.7.4-Just In Time
Just in time is a logistic approach to reduce waste and throughput-time for an ideal stockless
production with planned elimination of waste [20].

2.7.5-Lean Manufacturing
The ultimate goal of lean manufacturing to reduce lead time that is to length to be acceptable
to customers [20].
2.7.6-Business Process Reengineering
Business process reengineering concentrates on radical change to improve operations. The

radical change allows new revolutionary ideas to evolve which can help to improve
operations [20]. It is an approach to review and redesign organizational processes in order to
achieve improved performance in terms of cost, quality of service and timeliness [35].
2.7.7-Balanced Scorecard
Balanced scorecard is a multi-dimensional framework for managing strategy by linking

objectives, initiatives, targets and performance measures across key corporate perspectives
[35].
2.7.8-Work Study
Work study is a generic term for method study and work measurement which are used in the
examination of human work in all its contexts. And which lead systematically to the
investigation of all the factors which affect the efficiency and economy of the situation being
reviewed, in order to effect improvement [1].
2.7.9-Supply Chain Management
Supply chain management aims to create efficient resource flows from the source to the end
customer [20].
2.7.10-Theory of Constraints
Theory of constraints pays attention on bottlenecks. It is important to increase throughput to

the maximum in production bottlenecks [20].
2.7.11-Five S
Five S have five steps which contain workable aspects to improve efficiency. The steps are
sort (arranging), set in order (neatness), shine (cleanup), standardize (discipline) and sustain
(ongoing improvements) [20].

2.7.12-Kaizen
Kaizen is the Japanese word for continuous improvement. It originates from a Japanese work
method, which uses a continuous work method, which in turn was adopted from Deming and
Juran [20]. It is short term and intensive performance improvement approach to improving
business processes [35].
2.7.13-Total Productivity Management
Total productivity management as it is generally known, provides a system for coordinating

all the various improvement activities occurring in a company so that they contribute to goals
for the entire company [36]. Starting with a corporate vision and broad goals, these activities
are developed into supporting objectives, or targets, throughout the organization. Total
Productivity Management is a proactive, pragmatic, innovative and unique concept,
management philosophy, and systematic process, based on the industrial engineering and
behavioral sciences. The concept of total productivity management is generic; therefore, it is
easily adapted to any type of organization or enterprise, as has been demonstrated during the
last 10 years in many countries around the world [41].
The following criterion have been used to evaluate the above productivity improvement
methods: compatible knowledge and skill (i.e. easy to use) (1), compatible with existing tools
and techniques (2), addressing the possible productivity factors (3), being continuous
improvement tool (4), having clearly defined productivity targets setting, measurement and
analysis framework (5), and having flexibility to apply from operation to firm level (6).
Table 2.1: Evaluation of the productivity improvement methods
Criteria
Method
S.No.
1 2 3 4 5 6
1 Total Quality Management No Yes Yes Yes No No
2 Six Sigma No Yes No Yes No No
3 Total Productive Maintenance No Yes No Yes No No
4 Just In Time No Yes No Yes No No
5 Lean Manufacturing No Yes No Yes No No
6 Business Process Reengineering No Yes Yes Yes No No
7 Balanced Score Card No Yes Yes Yes No No
8 Work Study No Yes No No No Yes
9 Supply Chain Management No Yes No No No No

10 Theory of Constraints No Yes No No No No
11 Five S No Yes No No No No
12 Kaizen No Yes Yes Yes No No
13 Total Productivity Management Yes Yes Yes Yes Yes Yes
As shown in table 2.1, only total productivity management fulfills the important criterion of
productivity improvement. In state of the art of productivity, a method developed based on
total productivity management philosophy is demanded.
2.8-State of the Art of Productivity
The term productivity is not new over two centuries. Traditionally, productivity is viewed
mainly as efficiency concept. Today, productivity has four dimension namely, time, quantity,
quality and cost. Time and quantity are a measure of effectiveness, and quality and cost are a
measure of efficiency. Hence productivity is a combination of effectiveness and efficiency
[3].
The most commonly used productivity indicators are partial productivity, total factor
productivity, multifactor productivity and total productivity but these are direct
measurements based on tangible outputs and inputs. Today productivity ranges from direct
measurements to indirect measurements that are not based on tangible outputs and inputs like
rates of turnover, absenteeism, customer satisfaction, disruption in work flow, morale, loyalty
and job satisfaction [25].
Productivity can be measured at international, national, industrial, company and operational

unit level. Productivity measurement at company and operational unit level is at
developmental stage Sumanth (1979) i.e. there are no enough researches done on productivity
measurement at company and operational unit level [11]. The productivity measurement
model developed by Sumanth (1979) is applied for both company and operational unit. This
model is used to measure total productivity and partial productivity but neglects surrogate
productivity and process indicators measurement. On the other hand, Grunberg (2007) define
the importance of measuring surrogate productivity and process indicators for performance
improvement of operations but gives less emphasis on measuring and analyzing partial and
total productivity indicators for improvement [20].
According Tangen (2004) productivity is directly and indirectly influenced [37]. Therefore
measuring, analyzing and improving both productivity influencing factors is very important.

The directly productivity influence factors are measured by partial and total productivity
indicators. Whereas the indirectly productivity factors are measured by surrogate productivity
and process indicators.
In Addis Ababa University, many studies related to productivity has been done at Master
level under Industrial Engineering Stream. But the studies do not consider both the directly
and indirectly measured productivity indicators. In addition, the studies do not have clearly
defined framework for target setting, measuring and analyzing productivity. For instance,
Nigus (2006) developed a model for productivity improvement of EGIs using work study
approaches but the model does not have clearly defined framework for target setting,
measuring and analyzing productivity. In addition, work study does not address the possible
productivity factors [38]. Miskir (2004) conducted a study to improve the productivity of
Ethiopian leather industries through efficient maintenance management. But maintenance is
one factor of productivity from several productivity factors. In addition, the study does not
have clearly defined framework for target setting, measuring and analyzing of productivity
[39].
This study gives emphasis on productivity improvement of EGIs by considering both directly
measured productivity indicators (i.e. partial and total productivity) and indirectly measured
productivity indicators (i.e. surrogate productivity and process indicators) and by formulating
clearly defined framework for target setting, measuring and analyzing productivity.

Chapter Three
3-Overview and Assessment of Ethiopian Garment Industries
3.1-Overview of World Textile and Garment Sector
The garment industries in developed countries are now always on a lookout for cheap source
of garment production. The days are gone when garment industry was concentrated in the
consumption hubs of US, EU and other developed countries of the world. The garment
wholesale supply is increasing worldwide in all the sectors of the industry, whether it is
men’s clothing, women’s clothing, kids wear or infant wear. The elimination of global export
quotas has led to a shift towards low cost countries having strong and established garment
industry especially the Asian countries [40].
3.1.1-Major Trends in World Textile and Garment Sector
• Global garment exports are valued at more than 310 billion USD a year, of which the
world's top 15 garment exporters account for more than 80%.
• China continues to develop its textile and garment exports despite the re-imposition of
quotas by the US, EU and some other developing countries till December 2008 as a
temporary safeguard measure on exports from China. The gain is due to the strategy of
China to divert its garment wholesale destinations from US and EU to other Asian
countries.
• Developing countries in Asia continue expanding their textile and garment sector due to
their very low cost production. Apart from China, the true gainers of the post quota period
are India, Bangladesh, Cambodia and Vietnam.
• India is the second most preferred country after China for textile and garment sourcing.
Its garment industry is likely to achieve an export target of 25 billion USD by 2010/11.
The rise of exports in India is due to several factors like vast sources of raw materials,
low labor costs, entrepreneurship and design skills of Indian traders, changes in the
policies to open up Indian economy to the outside world etc.
• Bangladesh has emerged as a key player in RMG sector (Ready Made Garment Industry).
76% of its total textile and clothing export earnings comes from the garment industry.
The chief factor behind this is abundant and cheap labor force available here.
• Turkey and Brazil are the emerging markets for investment by garment manufacturers
and traders.

• In the first quarter of 2008, sales of Vietnamese garment in the US market were grown by
over 30%.
• Cambodia's garment industry is continuing to attract new investors and increase its
garment exports. This is due to EU and US restraints on China and also because of its
positive 'sweat-shop free' reputation on labor standards. It is the ninth largest supplier to
the American market. Its garments exports to the EU are also rising [40].
3.1.2-Future Strategy for World Textile and Garment Sector
Textile and garment sector has been under the hands of large retail firms who look for few
vendors with bulk orders and thus select for vertically integrated companies. Hence, there is a
need for integrating the operations from spinning to garment making in order to gain
advantage from the changed scenario. Trade skills, design capabilities, textile technology,
management and negotiating skills will also be significant determinants.
To conclude, it can be said that in future, the factors that will affect the rise or fall of the
clothing industry of sourcing countries include labor standards, tariff preferences, access to
materials and supplies, political and economic stability among others. With the increase in
demand for performance apparel, the sectors like industrial clothing and sportswear will
experience growth and due to the increased fashion consciousness globally, fashion clothing
will also see an upward trend [40].
3.2-Overview of Ethiopian Textile and Garment Sector
Textiles and garment sector has been one of the leading branches of manufacturing industry
in terms of its contribution to output, employment and trade. The sector’s collective output
was 95 million USD in 2009/10 and it employed over 20,000 people directly in 2007/8 (CSA,
2009). The sector generated 21.8 million USD in terms of foreign exchange in 2009/10. The
level of output, employment and foreign exchange earned from the sector is by far small
compared to the opportunities and the potentials available in the country. This improving
competitiveness in this labor intensive sector has become one of the critical issues for export
led growth and poverty reduction efforts.
Many countries in South East Asia with much lower comparable resource with that of
Ethiopia has made the textile and garment industries an engine of growth for their economy.
In 2007, textile and garment constituted around 80% of the total exports of Bangladesh
providing direct employment to 3 million people; 45% of the total exports of Sir Lanka

employing 1.8 million people; 55% of the total exports of Pakistan employing 15 million
people; and around 12% of the total exports of India employing 1.8 million people. This was
achieved through the joint effort of the government and the private sector.
The Ethiopian textile and garment industry not only as earner of foreign currency but also
play a significant role in saving foreign exchange. At present, Ethiopia imports large volume
of textile and garment products annually. According to the data obtained from Ethiopian
Revenue and Custom Authority the country imported textile and garment products that worth
birr 3 billion in 2009. This accounts 4% of the total import. Substantial amount enters
through illegal trade. Several studies made by researchers indicate that the demand for textile
and garment increases by 40% as a result of population growth and by 60% as a result of
income growth. The per capita consumption of textile and garment in 2008 in developing
countries was 9.2 kg. This was estimated to grow by 2.3 per annum as result of population
and income growth [28].
According to the benchmarking study of the Ethiopian textile industry made by the Ministry
of Trade and Industry, local textile mills has installed with a capacity of 377 million square
meters woven fabrics and 16,134 tons of knitted fabrics. The actual capacity attained is 192
million square meters of woven fabrics and 8,103 thousand tons of knitted fabrics. This is
about 50% capacity utilization for woven fabrics and 50% for knitted fabrics.
The current supply from 16 local textile mills does not match the requirements of the garment
industries and does not meet more than 27% of the country’s demand for the product. The
balance 73% is imported in the form of fabrics readymade garments costing the country’s
huge foreign exchange and loss of revenue due to large volume of illegal trade.
In addition to inadequacy of supply of fabrics from local textile in relation to the demand
underutilization of installed capacity, there is huge mismatch between the supply of fabrics
and the type demanded by garment industries for domestic and export market. Garment
industries can manage to source only small quantity of fabrics from local textile mills as a
result they depend on imported fabrics or CMT4 production.
Absence of backward integration of the garment industries to textile mills to the ginneries to
cotton farms has resulted in lower value addition in the value chain with lower overall
contribution to the national economy.
4
In CMT production system, the customers give the required fabrics and accessories for their order, the task of
garment industries are to give cut, make and trim service.

Garment industries were encouraged and promoted during SDPR and PASDEP in
anticipation of upstream development in the textile mills and cotton farms but contrary to the
expectation not much exchange has been observed since then through the operation of market
forces. This calls for government interventions to correct market failures.
Table 3.1: Capacity utilization in Ethiopian textile and garment sector (Source: Benchmarking of the Ethiopian
textile industry)
Description Available Capacity Actual Capacity Utilization (%)

Land Suitable for Cotton Cultivation 2.6 million hectares 85,000 hectares 3%
Ginneries 200,000 tons <100,000tons <50%
Spinning 37,625 tons 25,858 tons 69%
2 2
Weaving (Woven Fabrics) 377 million m 192 million m 50%
Weaving (Knitted Fabrics) 16,134 tons 8,103 tons 50%
Knitting 15,959 tons 7,610 tons 40%
Garment - - <40%
As shown in table 3.1, the ginneries and textile mills operate at the capacity of 50-70% where
as the cotton farms and garment industries are operating at 3% and 40% capacity
respectively. Capacity utilization rates are compared to with potential or installed capacity
and not with market demand. When compared with the level of demand the coverage is much
lower than that of installed capacity utilization as the larger proportion of demand is covered
by imports. This unsatisfactory state affairs in the whole value chain to be investigated in
detail to lead to clear policy decision in order to improve performance and benefit from this
branch of industry.
Until local textile mills are modernized and begin to produce fabrics of quality and variety for
global market, the garment industries have no choice but to depend on imported inputs to
supply the domestic and export market.
Ethiopian garment industries producing for export are operating under duty free import of
raw materials. However they are not competitive enough in the global market due to high
shipping, inland transport and handling costs of suppliers. Moreover their capacity is very
small compared to large orders of big customers. In some cases, garment export from
Ethiopia has to be shipped to South East Asia for consolidation and bound to United States
market which makes buying from Ethiopia more expensive [28].

3.3-Incentive Mechanism to Promote Ethiopian Textile and Garment Sector
The government of Ethiopia has granted a range of incentives to promote the textile and
garment sector. The following are among the incentives.
Long term financing at concessional rate of interest: The Development Bank of

Ethiopia provides long term funds to the sector at an interest rate of 7.5% per annum. The
loan is payable over a period of 5-15 years which includes a moratorium period of up to 3
years. The bank covers 70% of the total investment and 30% from the owners.
Duty free import of machinery and spare parts: This incentive is provided for all sectors
of the economy and the textile and garment sector is also beneficial from this package.
This incentive lowers the investment requirements of projects and encourages further
investment. It also facilitates operation by lowering the cost and to ensure the availability
of spare parts. For those exporting the finished products duty free import of raw materials
under different schemes such as duty drawback scheme, voucher scheme and bonded
warehouse scheme were granted.
Tax holiday for a period of 2-7 years depending on location: This incentive is
motivational for industries that are making profit. Garment industries as a whole are loss
making and are not benefiting from the tax holidays.
Cheap land lease: This is motivational when industries are operating and make profit
because it lowers investment cost of the business. At present the garment industries as a
going concern do not see much benefit as they are not making any money from the
business.
Capacity building support by way of meeting the cost of hiring expatriate and towards
cost of training (local and oversea): Not all garment industries are beneficial from this
package. Even if the benefit is less as it does not translate to the efficiency of industries
since they are not fully operational.
There are other incentives that can be negotiated on the merit of the case. In light of the
above incentives there is a need to look into other forms of arrangement that can make
this branch of industry fully operational and benefit all stake holders i.e. banks,
government, entrepreneur and the country at large [28].
3.4-Export Market Performance of Ethiopian Garment Industries
In 2009, the global garment industry grew by 2.1% year-on-year, to reach a value of 1,078
billion USD; by 2014, the global garment industry is forecast to have a value of 1.2 trillion

USD. The largest segment of the global garment industry is women’s wear, accounting for
over half (51.3%) of the industry's total value, followed by men's wear, women’s underwear,
and children's wear. The largest market is the Americas which accounts for over a third of the
global apparel retail industry value (35.7%). The largest exporter of garment in general and
clothing in particular is China: by 2009, one-third of world’s garment exports came from
China compared to less than 10% twenty years earlier. Other major exporters of clothing are
the EU countries (30% of world exports in 2009), followed by Turkey, India, Bangladesh and
Vietnam, each country accounting for roughly 3 percent share of the world garment exports.
Sub-Saharan Africa (SSA) in general and Ethiopia in particular plays a limited role in the
international market for clothes and other apparel. In 2009, all SSA countries exported
roughly 2 billion USD worth of garment, which constitutes little less than 1 percent of the
global exports of garment [29].
Table 3.2: World, Africa and SSA countries garment export market performance (Source: Global Development
Solutions LLC)
Garment Export Values ('000 US Dollars)

Exporters % of World % of SSA
2006 2007 2008 2009
World 340,626,012 383,678,608 408,126,132 359,532,180 100 -
Africa 8,959,393 10,325,969 11,525,187 10,267,308 2.9 -
SSA 2,539,483 2,970,069 3,022,420 2,014,444 0.6 -
Mauritius 771,922 884,065 843,054 552,645 - 27.9
Madagascar 347,450 502,897 888,173 461,626 - 23.3
Lesotho 418,649 413,895 370,149 303,433 - 15.3
Kenya 279,255 286,231 288,419 215,847 - 10.9
South Africa 171,282 157,512 168,305 159,969 - 8.1
Swaziland 150,204 48,059 133,546 99,888 - 5.0
Tanzania 29,181 69,128 76,678 70,205 - 3.5
Malawi 43,047 34,919 27,637 31,489 - 1.6
Zimbabwe 61,394 79,677 49,328 25,326 - 1.3
Botswana 148,941 347,636 30,835 21,976 - 1.1
Cote D'Ivoire 17,352 15,623 20,116 16,823 - 0.8
Senegal 5,891 6,255 7,657 12,840 - 0.6
Ethiopia 8,196 10,927 10,753 7,904 - 0.4

1.000.000
900.000 Mauritius
Madagascar
800.000
Lestho
700.000 Kenya
600.000 South Africa
Swaziland
500.000
Tanzania
400.000
Malwai
300.000 Zimbawe
200.000 Botswana
Cote D'Ivoire
100.000
Senegal
- Ethiopia
2006 2007 2008 2009
Figure 3.1: Garment

Garm export market performance of World, Africa and SSA courtiers
12.000
10.000
8.000
6.000
4.000 Ethiopia
2.000
-
2006 2007 2008 2009
Figure
ure 3.2: Garment export market performance trend of Ethiopia
Eth
By: Azemeraw Tadesse (2011)

1) Page 42
South Africa; 8,1
Kenya;
10,9
Swaziland; 5,0
Zim
Zimbawe; 1,3
Lestho;; 15,3
Tanzania; 3,5
Malwai; 1,6
Bo
Botswana; 1,1
Other; 4,3
Madagascar;
scar; 23,3
2
Cote D'Ivoire; 0,8
Se
Senegal; 0,6
Mauritius; 27,9
Et
Ethiopia; 0,4
Figure 3.3: Garme

rment export market performance of SSA countries by percentage
per in 2009
Ethiopia exports roughly

ghly 7 to 10 million USD worth of garment each year. Although exports
have increased significan
nificantly from earlier periods (4 million USD in 2002), the country
remains an insignificant
icant player in the global and regional garment
rment trade. From the SSA
countries Mauritius has the
th largest percentage of garment exportt value (27.9%) and Ethiopia
is has the least percentag
entage value (0.4%). Even at these comparatively
atively low export volumes,
however, the Ethiopian
pian textile
te and garment sector is a major contributor
contri to the country’s
industrial production:
n: for the year ending in June 2010, the sector
tor accounted
ac for 7% of the
country’s industrial production.
produc
3.5-Benchmarking of Eth
Ethiopian Garment Industries
The benchmark wass performed

perfo at the request of MOI and sponsored
nsored by UNIDO Ethiopia.
Scope of this study is to benchmark
b Ethiopian garment industry with other
o 4 countries and to
assess the major factors
tors of
o the industry. Target of this study is to create
crea an understanding of
the Ethiopian status in 2008
20 and create foundation for a further preparation
prepa of a master plan
on the garment industry.
Four countries are selected

selecte for benchmarking by considering two factors.
f The first is by
choosing reference countries:
countri countries with best practices to which
ich Ethiopia
Eth need to compare
and target on long term. And the second is by choosing competitor
petitor countries: competitor
countries of Ethiopiaa are taken
ta for a better understanding of the market
arket conditions.

1) Page 43
Reference countries are Romania (an important EU supplier of high quality garments mainly
on CMT basis with imported fabrics) and Turkey (second major supplier of garments in EU
after China, Turkey is well known for their technical capabilities to deliver FOB5 garments
with fabrics produced within the country). Competitor countries are Bangladesh (an
important garment supplier for EU and US, which almost 75% from the exports is textile and
garment and hence Bangladesh is a competitor of Ethiopia which face the same
characteristics within the industry); and Egypt (an African country which have a policy to
attract textile & garmenting companies from Turkey and EU, definitely being competitor of
Ethiopia) [31].
The bench mark analysis using different parameters like countries general profile, general
export market performance, textile and garment export market performance, factors scoring
and others are shown below.
Table 3.3: Benchmarked countries general profile comparison (Source: [30])
Parameter Ethiopia Egypt Turkey Romania Bangladesh

2
Country Area (Km ) 1,127,127 980,869 783,562 238,391 144,000
Population (million) 81.5 81.7 71.8 22.2 153.5
Labor Force in 2007 (million) 45.3 22.1 24.7 9.3 69.4
GDP (USD/person) 700 5,244 9,600 11,100 1,400
GDP Growth in 2007 (%) 11.1 7.1 7 6 6.3
Inflation in 2007 (%) 17.2 9.5 8.7 4.8 9.1
FDI in 2006 (billion USD) 0.37 10.4 20.2 11.2 0.63
From table 3.3, Ethiopia has large land area and the smallest one is Bangladesh. The highest
populated country is Bangladesh and the lowest is Romania. Labor force is highest in
Bangladesh and lowest in Romania. Romania GDP is highest and the lowest GDP is recorded
by Ethiopia. GDP growth is highest in Ethiopia and lowest in Romania. Ethiopia faces
highest inflation and inflation is lowest in Romania. The highest FDI is for turkey and the
lowest is for Ethiopia.
Ethiopia has the second largest labor force, but Ethiopian economy is the lowest as value
GDP. Agricultural extensive is the specificity of Ethiopian economy.
The comparison of growth of the GDP and FDI as visible there are huge difference between
Romania/Turkey on one side and Ethiopia/Bangladesh on the other side, regarding the
5
In FOB production system, the customers give order only, the garment industries produce based on the order.
It is a full package production system.

capacity to attract Foreign
Foreig Direct Investment, which bring the financial
finan and “know-how”
power for that country
try out of which GDP would benefit.
Romania and Turkey

y are considered
c medium industrialized countries
tries with
w a strong growth of
the economy in thee past 5 years. The industry is oriented to machines
ma and equipment
production, and generally
lly to technologies, and gives importance to value
val added products like
automotives, electronics
nics and
a heavy industry. Good infrastructure
re especially
esp in Turkey; and
both countries have massively
massi invested in education at all levels,
s, which
whi create a future base
for the growth of thee industry
indus [31].
Table 3.4:
.4: General
G export market performance comparison (Sour
Source: [30])
General Export Market Performance

ce (Billion
(Bi USD)
Country
2004 2005 2006 2007
Ethiopia 0.59 0.8 1 1.2
Egypt 12.3 16 19 24.4
Turkey 63.1 73.3 85.1 107.2
Romania 23.5 27.7 28.4 29.3
Bangladesh - 8.4 10.3 12.5
120
100
80 Ethiopia
Billion USD
Egypt
60
Turkey
40 Romania
Bangladesh
20
0
2004 2005 2006 2007
F
Figure 3.4: General export market performance trend
nd
From table 3.4 andd figure

fig 3.4, all countries show increasing
ing general
g export market
performance except Romania.
Roma The highest export market performance
mance is achieved by turkey
and the lowest is by Ethiopia.
Ethio In 2007, the difference between Turkey
Turke and Ethiopia general
export market performanc
rmance is 106 billion USD.

1) Page 45
Table 3.5: Textile
xtile and garment export market performance comparison
ison (Source: [30])
Textil and Garment Export Market Performan

Textile rmance (Billion USD)
Country
2000 2005 2006 2007
Ethiopia 0.002 0.007 0.011 0.14
Egypt 1.1 1.1 1.3 1.8
Turkey 10.2 18.8 19.5 22.6
Romania 2.56 5.3 5.26 3.9
Bangladesh 4.3 6.6 8 9.12
25
20
Ethiopia
Billion USD
15 Egypt
10 Turkey
Romania
5
Bangladesh
0
2000 2005 2006 2007
Figure
ure 3.5: Textile and garment export market performance
nce trend
t
From table 3.5 and figure 3.5, from Ethiopia, Turkey, Romania and Bangladesh
B show textile
and garment export performance
perfo growth by 71.4%, 45.7%, 51.7%
.7% and
an 34.8% respectively.
All countries show increasing
incr textile and garment export market
marke performance except
Romania. The highest
st export
exp market performance is achieved by
y turkey
turke and the lowest is by
Ethiopia. In 2007, the difference
dif between Turkey and Ethiopiaa textile
texti and garment export
market performance is 22.46
22. billion USD.
Table 3.6: Scored

ored values of key factors for each benchmarked countries
tries (Source: [30])
Scoring
Key Factors
Ethiopia Egypt Turkey Ro
Romania Bangladesh
Price Competitiveness 5 5 1 2 5
Social Compliances 2 2 5 3 2
Availability of Raw Material
aterials 2 4 5 3 4
Value Added 1 3 5 4 3
Management Abilities 2 2 5 5 2
Technology 3 3 5 5 3

1) Page 46
Quality Control 2 3 5 5 3
Productivity 1 2 4 5 3
Technical Flexibility 3 4 5 5 3
Infrastructure 1 4 5 4 2
Certifications and Testing Labs 1 2 5 4 4
Machine Suppliers and Services 1 3 5 5 4
Fairs and Trade Shows 1 3 5 5 3
Business Environment 1 3 5 5 4
Lead Times 1 2 5 4 3
Product Development 1 2 5 4 3
Marketing Abilities 1 3 5 4 3
Average Employees Skill 2 3 5 5 3
Availability of Technology 1 3 5 5 3
Transportation 1 3 5 4 2
Industrial Parks 3 5 5 5 4
Banking 1 4 4 5 2
The methodology of comparison, contain evaluation of key points among apparel industry
which are graded based on a scoring from 1 to 5 (poor to excellent). And the evaluation of the
key points creates an overview of the capabilities of that country and finally ranks the
competitiveness of the country.
Turkey apparel production is high value added products where the preproduction stage is
very well developed as well as the skills of the people in performing FOB using Turkish
fabrics and raw material availability at high quality standards (integrated textile industry from
cotton to finished goods; Turkey is the 6th major producer of cotton in the world). There are
massive investments in technology and Product development which sustain the
competitiveness of Turkey for a long time ahead despite the fact that it is one of the most
expensive countries within the major supplier countries. Turkey score 5, the highest.
Romania produced one of the finest apparel productions in the world in a CMT bases since
Romania textile infrastructure does not exist and Romanian producers did not develop their
capabilities of purchasing. Productivity is the highest within the benchmarks countries, but
because of the CMT structure of the export and increasing costs after joining EU in January
2007, Romania is losing its competitiveness year by year, its export fails down and apparel
industry is shrinking at the moment with a rate of 15-20% per year. Romania score 4.

Egypt has been trying to absorb FDI because of the relocation of factories from EU and
Turkey. The industry is mostly based on food, cotton and textiles. Infrastructure is medium
but sea port access makes an advantage for Egypt to exchange goods with all EU countries.
Apparel productivity is low, the skill does not exist, and Egypt is in process of upgrading the
Industry. Egypt score 3.
Bangladesh is the largest country for population among the selected benchmark countries,
having a poor level of FDI comparing with population size. The infrastructure is poor and
creates problems to the industry; the textile export represents 73% from the total exports in
FOB system, Bangladesh is using her ability to grow cotton and silk as well benefit from the
proximity of India and Pakistan where can source fabrics mainly denim and knits from
cotton. Productivity is medium, the technology used is also medium but because country is
very competitive price wise (very low salaries). Bangladesh score 3.
Ethiopia is the least developed country among the benchmarked ones; the level of industrial
development is low, with low level of FDI. Textile is only 1% from the export, poorly
developed; the level of skills is low, depending on poor infrastructure. However, because
Ethiopia is a cotton producer, in the long term, this could be an advantage to develop a strong
apparel industry. Ethiopia score 2, the least.
Table 3.7: Benchmarked countries garment comparison (Source: [30])
Parameter Ethiopia Egypt Turkey Romania Bangladesh

Average Sewing Rework Rate (%) 5-10 30 5 5 10
Average Second Quality Fallout Rate (%) 2 10 4 3 7
Average Overall Efficiency (%) 30 40 75 80 50
Productivity-Trouser (pcs/worker/day) 10 15 40-50 50 30
Productivity-T-shirt (pcs/worker/day) 30 40 70 80 50
Average FOB Selling Price-Trouser (USD/pcs) 0.85-CMT 7.5-10 20 25 -
Average FOB Selling Price-T-shirt (USD/pcs) 0.45-CMT 2.5 10 10-12 -
Average SAM-Trouser (min/pcs) 20-30 15-20 15-30 25-35 15-25
Turkey and Romania are from far expensive countries which compensate their labor cost with
high productivity and value added products. Bangladesh and Ethiopia have the lowest level of
minute cost which makes them extremely interesting. Bangladesh and Egypt have strong
advantage over Ethiopia due to the abilities of producing FOB [31].

3.6-SWOT Analysis of Ethiopian Garment Industries
3.6.1-Strength
Political and social stability

Involvement of key funding organizations: UNIDO, GTZ, Italian Cooperation
Labor availability
Population which is open to learning and develop
Good climatic conditions
Government is active in promoting development of the industry
Low cost labor and other operational costs country
3.6.2-Weakness
European Union buyers do not know Ethiopian opportunities

No preproduction abilities like merchandising, planning, purchasing and sampling
Social complains are poor
Low level of investment in the factories
Low level of automation and workstation engineering which result a low productivity
level
Managerial procedures and systems are not implemented
Poor managerial skills at the line supervisors and managers level
Poor target attitude oriented, there is no industrial experience available in Ethiopia
Lack of experience in international market
Difficult to access sea ports, transportation costs are high
Poor infrastructure especially roads and railways
Poor facilities for training
Working in CMT bases is not bringing profit and opportunities on the long perspective
Communication through emails and phones are not reliable yet
Missing industrial mentality of workforce and management
3.6.3-Opportunity
Duty free and quota free US market access through AGOA

Approaching EU market
Attracting FDI especially from EU countries (Germany, Italy, Romania) and Turkey,
companies ones investing in Ethiopia bring know-how and competitiveness

Preparing and develop a curricula for training centre and university as a base for a
professional training for a future skilled workforce
Possible production relocation of factories from East EU (Romania and Bulgaria),
Turkey, China
Internal market consumption and proximity African markets of neighboring countries
3.6.4-Threat
Increasing costs of oil and food will create social movements which could affect the
industry competitiveness
Difficult sea port access can create risks in the future especially if social problems occur
with the neighbors
Undeveloped infrastructure will reduce drastically the development of the industry.
Infrastructure develop too slow comparing with needs of Industry
Time frame of actual agreements with US and EU could be cancelled at certain time
Global market competition, Ethiopia is not prepared for it at this moment
Bureaucracy
Electric power availability in case of quick development of the industry.
Capability of local managers to efficiently implement programs and systems
3.7-Productivity Assessment of Ethiopian Garment Industries
The productivity assessment of EGIs is done by using the following six years (i.e. from
2003/4 to 2008/9 G.C.) data from CSA of Ethiopia [32], [33].
Let the following items are represented for technical purpose in the following table.
Table 3.8: Representation of items
S.No. Description of Item Unit Representation

1 Volume of Production pieces VOP
2 Value of Production birr VAP
3 Number of Employee number NE
4 Value of Human Input birr VAH
5 Value of Material Input “ VAM
6 Value of Energy Input “ VAE
7 Human Productivity by Volume pcs/emp HPVo
8 Human Productivity by Value birr/birr HPVa
9 Material Productivity by Value “ MPVa

10 Energy Productivity by Value “ EPVa
11 Multifactor Productivity by Value “ MFPVa
Then the data is summarized as follows.
Table 3.9: Source data for productivity assessment (Source: [32], [33])
Fiscal Year
Item 2003/4 2004/5 2005/6 2006/7 2007/8 2008/9
VOP 3,283,704 1,681,164 2,482,644 3,327,060 7,032,900 13,315,644
VAP 86,511,000 62,612,000 80,516,000 273,249,000 388,351,000 409,329,000
NE 3,806 2,606 4,099 7,604 7,613 7,793
VAH 20,914,000 12,984,000 25,458,000 61,335,000 73,045,000 61,324,000
VAM 37,061,000 - - - - 176,611,000
VAE 737,000 - - - - 44,198,000
The productivity assessment of EGIs focuses on partial and multifactor productivity

measurement and analysis.
3.7.1-Human Productivity
The human productivity for a period of one year is given as follows:
HPVo = volume of output/volume of human input
HPVa = value of output/value of human input
HPVo for fiscal year 2003/4:
HPVo = 3,283,704/3,806 = 863 pcs/emp
HPVa for fiscal year 2003/4:
HPVa = 86,511,000/20,914,000 = 4.1 birr of output/birr of human input
Analogously, HPVo and HPVa for other fiscal years are done and summarized in the
following table.
Table 3.10: Human productivity of Ethiopian garment industries
Fiscal Year
Item 2003/4 2004/5 2005/6 2006/7 2007/8 2008/9
VOP 3,283,704 1,681,164 2,482,644 3,327,060 7,032,900 13,315,644
VAP 86,511,000 62,612,000 80,516,000 273,249,000 388,351,000 409,329,000

NE 3,806 2,606 4,099 7,604 7,613 7,793
VAH 20,914,000 12,984,000 25,458,000 61,335,000 73,
73,045,000 61,324,000
HPVo 863 646 606 438 924 1,709
HPVa 4.1 4.8 3.2 4.5 5.3 6.7
2000
1500
HPVo
1000
500
0
2003/4
03/4 2004/5 2005/6 2006/7 2007/8
200 2008/9
Figure 3.6:: Hu
Human productivity trend of Ethiopian garment industrie
stries by volume
From the above line graph,

graph HPVo shows a decreasing trend from fiscal year 2003/4 to 2006/7
then after shows an increasing
incre trend. The minimum HPVo is obtained
obtain in 2006/7; and the
maximum is achieved
ed in 2008/9.
2
The maximum human

an productivity
pro (HPVo) is 1,709 pcs/emp/year.
ar. By considering one fiscal
year has 300 days and
nd 60% of the total employees are direct workers,, the
t direct worker based
human productivity by volume
vo (HPVo) becomes 10 pcs/worker/day which is lower than the
best practices (i.e. 50 t-shi
shirts/worker/day and 80 trousers/worker/day)).
6
HPVa
0
2003/4 2004/5 2005/6 2006/7 200
2007/8 2008/9
Figure 3.7:: Hu
Human productivity trend of Ethiopian garment industri
ustries by value
From the above line graph,

graph HPVa shows an increasing trend from 2003/04
2003 to 2004/05; shows
a decreasing trend from
rom 2004/5
20 to 2005/6 then after shows an increasin
reasing trend. The minimum
HPVa is achieved in 2005/6;
2005 and the maximum is obtained in 2008/9.
08/9.
3.7.2-Material Productiv
ductivity
The material productivity

tivity for a period of one year is given as follows:
ows:
1) Page 52
MPVa for fiscal year 2003/4:
MPVa = value of output/value of material input
MPVa = 86,511,000/37,061,000 = 2.33 birr of output/birr of material input.
Analogously, MPVa for fiscal year 2008/9 is 2.32 birr of output/birr of material input.
From the above analysis, MPVa for fiscal year 2003/4 is slightly greater than MPVa for fiscal
year 2008/9. This indicates material productivity is not improved.
3.7.3-Energy Productivity
The energy productivity for a period of one year is given as follows:
EPVa for fiscal year 2003/4:
EPVa = value of output/value of energy input
EPVa = 86,511,000/737,000 = 117.38 birr of output/birr of energy inputs
Analogously, EPVa for fiscal year 2008/9 is 9.26 birr of output/birr of energy input.
From the above analysis, EPVa for fiscal year 2003/4 is greater than EPVa for fiscal year
2008/9. This indicates energy productivity is not improved.
3.7.4-Multifactor Productivity
The multifactor productivity for a period of one year is given as follows:
MFPVa for fiscal year 2003/04:
MFPVa = value of total output/value of (human + material + energy) inputs
MFPVa = 86,511,000/(20,914,000 + 37,061,000 + 737,000) = 1.47 birr of total output/birr of

bundle of inputs.
Analogously, MFPVa for fiscal year 2008/9 is 1.45 birr of total output/birr of bundle of
inputs.
From the above analysis, MFPVa for fiscal year 2003/4 is greater than MFPVa for fiscal year
2008/9. This indicates total productivity is not improved.

The productivity evaluation of the Ethiopian garment industries using CSA data is done by
calculating change in productivity between 2003/4 and 2008/9 fiscal years; and summarized
as follows.
Table 3.11: Productivity analysis of Ethiopian garment industries
Item Productivity in 2003/4 Productivity in 2008/9 Change (%) Status

HPVo 863 1,709 49.5 Growth
HPVa 4.1 6.7 38.8 Growth
MPVa 2.33 2.32 -0.4 Decline
EPVa 117.38 9.26 -1,167.6 Decline
MFPVa 1.47 1.43 -2.8 Decline
From table 3.11, except human productivity which shows productivity growth, the other
productivity measures show productivity decline. HPVo and HPVa increased by 49.5% and
38.8% respectively. MPVa, EPVa and MFPVa declined by 0.4%, 1,167.6% and 2.8%
respectively.
3.8-Survey Questionnaire Analysis and Synthesis
In order to assess existing productivity measurement and improvement practices of Ethiopian

garment industries, and their productivity factors, the survey questionnaire is prepared and
distributed to 30 garment industries physically and through internet (one questionnaire to one
company). Only 15 industries (50%) are responded to the questionnaire (refer annex 3).
The survey questionnaire has four major parts. The first part is about respondent information
which involves position, qualification and work experience in the current company. The
second part focuses on company information such as company name, year of establishment,
market segment, number of total employees, average working days per year, average working
days per month, average working days per week, number of working shifts per day and
number of working hours per shift. The third and the fourth part focus on assessment of
existing productivity measurement and improvement practices, and productivity factors of
EGIs respectively. The analysis is done for each part of the survey questionnaire as follows.
Note that some results of the survey questionnaire (especially on the existing productivity
management practices) in annex 2 contradict with information gained from literature survey,
secondary data and the case study. In this case, the results are justified why they contradicts.
In general, the main reasons for contradictions are due to lack of understanding of

productivity in the current
curren perspective; and some of the respondents
ndents fill the questionnaire
carelessly.
3.8.1-Respondent Inform
nformation
The positions of thee respondents

resp are general manager, production
tion and
an technique manager,
marketing manager, production
produ head, planning and controlling head,
ead, training
t head, designer,
and information technolog
hnology expert. The qualifications of the respond
spondent are B.Sc. in textile
engineering, B.Sc. in industrial
ind engineering, B.Sc. in information
tion technology,
te diploma in
textile technology, and
nd diploma
dip in mechanical engineering. The respondents
respon work experience
in the company is below
elow one year, between one and five years,
s, and above five years. The
respondent information
ion is
i summarized as shown below.
Table 3.12: Position

n of the respondents by number and percentage (Source:
ce: SSurvey questionnaire)
S.No. Positions Number Share (%)

1 General
Genera Manager 1 7.7
2 Production
Produc and Technique Manager 4 30.8
3 Marketing
Marke Manager 1 7.7
4 Production
Produc Head 3 23.1
5 Planning
Plannin and Controlling Head 1 7.7
6 Training
Trainin Head 1 7.7
7 Designer
Design 1 7.7
8 Information
Inform Technology Expert 1 7.7
Total 13 100
General Manage
anager
7,7 7,7 Production

n and Technique
T Manager
7,7
Marketing Manager
Mana
7,7 Production
n Head
30,8
7,7 Planning and
nd Controlling
Co Head
Training Head
23,1 7,7 Designer
Information
n Technology
Tec Expert
Figure 3.8: Percen

rcentage share of the respondents position (Source: Surve
urvey questionnaire)
From table 3.12 and

nd figure
fig 3.8, most of the respondents aree production
prod and technique
department managers.

1) Page 55
Table 3.13: Qualification
tion of
o the respondents by number and percentage (Source
urce: Survey questionnaire)
S.No. Qualifica
alifications Number Share (%)
1 B.Sc.
c. in Textile Engineering 6 54.5
2 B.Sc.
c. in IIndustrial Engineering 1 9.1
3 B.Sc.
c. in IInformation Technology 1 9.1
4 Diploma
ploma in Textile Technology 2 18.2
5 Diploma
ploma in Mechanical Engineering 1 9.1
Total 11 100
B.Sc.
c. in T
Textile
9,1 Engineeri
ineering
B.Sc.
c. in IIndustrial
18,2
Engineeri
ineering
54,5 B.Sc.
c. in IInformation
9,1 Technolo
hnology
9,1 Diploma
loma in Textile
Technolo
hnology
Figure 3.9: Percentag

entage share of the respondents qualification (Source: Survey
Sur questionnaire)
From table 3.13 and figur

igure 3.9, most of the respondents have bachelo
achelor degree. And most of
them are textile engineers.
ineers.
Table 3.14: Work experience

ience of the respondents by number and percentage (Sou
ource: Survey questionnaire)
S.No. Wor Experience

Work Number Sha (%)
Share
1 Below
Belo one year 6 46.2
2 Between
Betw one and five years 4 30.8
3 Above
Abo five years 3 23.1
Total 13 100
Below
elow oone year
23,1
46,2 Betwee
etween one and five
years
30,8 Above
bove ffive years
Figure 3.10: Percentage

ntage share of the respondents work experience (Source:
ce: SSurvey questionnaire)

1) Page 56
From table 3.14 and
d figure
figur 3.10, most of the respondents have work experience below one
year in the current compan
ompany.
3.8.2-Company Informat
ormation
From the survey question

estionnaire (refer annex 2), about 58.3% off the garment industries are
established before 2000;
000; and
a the rest 41.7% are established after 2000. 26.7% of the garment
industries produce for local
loc market, 20% for export market, and
nd 53.3%
53. for both local and
export market. On average
avera a single garment industry created
d a job
jo opportunity of 188
permanent and 35 tempor
emporary employees. The average working days
ays per
p year, per month and
per week are 295, 26
6 and 5.5 respectively. The garment industries
es work
wor for one shift; and on
average there are 7.5
5 working
work hours per shift. The percentage share
are of market segment of the
garment industries are
re shown
sho below using pie chart.
26,7 Local
Export
53,3
20 Local
cal and Export
Figure 3.11:: Percentage

Pe share of market segment (Source: Surveyy questionnaire)
qu
From figure 3.11, it is shown

sho that most of the garment industriess produce
prod for both local and
export market.
3.8.3-Existing Productivi
uctivity Measurement and Improvement Practi
ractices of EGIs
From annex 2 it is seen

een that,
th 80% and above of the garment industries
stries respond that they have
clear vision, goals and targets for their productivity; and identify
identi problems of their
productivity improvement
ement. These are done only for human productivity
ctivity but not consider other
productivity indicators.
As shown on the survey questionnaire, the response of 80% and above of the garment
industries indicates that top
t managers, middle managers, lower manage
anagers and experts of have
awareness and basic
ic understanding
un of productivity. But the scope
sco of awareness and
understanding is limited
ited to human productivity.
Form the results off the survey questionnaire it is seen that, the working
w definitions of
productivity applied by 80%
8 and above of the garment industries
ies is the ratio of volume of
outputs to man-hour
ur of labor inputs. In other words the only working
w definition of

1) Page 57
productivity practically
ally applied
ap by the garment industries is as the ratio
rat of volume of output
to volume of human inputs (i.e. pieces/employee/shift)
The results gained the questionnaire

qu shows that 80% and above of the garment industries
measure human productiv
oductivity, machine productivity, material produc
roductivity, skill level and
absenteeism. But practical
actically, material productivity is not measured.
To rate the productivity

ctivity of the workforces, total point and percentage
perc share of each
workforces are calculated
lated by giving 3 for high, 2 for medium and 1 for low.
Table 3.15: Total point and

nd percentage
p share of workforces productivity level (Source:
(Sou Survey questionnaire)
S.No. Workforces
orces High Medium Low Total
tal Po
Point Share (%)
1 Top Managers
anagers 9 4 1 36 15.8
2 Middlee Manager
Managers 7 7 0 35 15.4
3 Lower Managers 7 5 2 33 14.5
4 Experts 9 4 1 36 15.8
5 Checkers 7 6 1 34 14.9
6 Supporting
rting Staff
Staffs 2 5 7 23 10.1
7 Operators 6 5 3 31 13.6
Total 47 36 15 228 100
13,6 15,8 Top Managers

Mid Managers
Middle
10,1 Low Managers
Lower
15,4 Exp
Experts
14,9 Che
Checkers
Sup
Supporting Staffs
14,5 Ope
Operators
15,8
Figure 3.12: Percenta

entage share of workforces productivity level (Source:: Survey
Sur questionnaire)
From table 3.15 and

d figure
figur 3.12, top managers and experts havee the highest total point and
percentage share whereas
ereas supporting staffs has the least total point and percentage share. This
indicates that top manage
anagers and experts productivity is rated ass the highest
h and supporting
staffs productivity ass the least.
le
From the results of the survey questionnaire, computer applicat

plications, new production
lines/machines, rebuilding
uilding old machines, layout improvement, invent
entory control, marketing
management, production
ction management, quality management, cost management,
m resource

1) Page 58
management, increasing
sing value
v addition and increasing profit are applied
applie by 80% and above of
the garment industries.
But the above productivit

uctivity improvement techniques are not well organized
org for continuous
improvement. The garment
garme industries do not have well establish
ablished system to support
effective and efficient
nt implementation
imp of the techniques.
3.8.4-Productivity Factors
Factor of EGIs
The impact level of the processes

pr on productivity is given as follows
lows by
b using total point and
percentage share. Thee total
tota point and percentage share of each process
ocess are shown below.
Table 3.16: Total point

int and
a percentage share of impact of processes on produc
oductivity (Source: Survey
questionnaire)
S.No. Processes 1 2 3 Total Point Share (%)

1 Production 1 2 11 38 20.9
2 Sales and Marketing 3 5 6 31 17.0
3 Procurement and Property
Prope Administration 3 7 4 29 15.9
4 Human Resource Development
Devel and Property Administration 3 5 6 31 17.0
5 Finance and Accounting
unting 2 11 1 27 14.8
6 Research and Developm
velopment 3 10 1 26 14.3
Total 15 40 29 182 100
Production
ction
14,3 Sales and Marketing

M
20,9
Procuremen
rement and Property
14,8 Administrati
nistration
17,0 Human n Resource
Reso Development
and Propery
ropery Administration
17
17,0 Finance
ce and Accounting
15,9
Research
rch and
an Development
Figure 3.13: Percentage

age share of impact of processes on productivity (Source:
rce: Survey questionnaire)
From table 3.16 and figure 3.13, production process has the highest
est total
tota point and percentage
share whereas research
arch and
a development process has the leastt total point and percentage
share. This shows that production process has the highest impact,
impa and research and
development processs has the least impact on the productivity of the
he garment
gar industries.

1) Page 59
The impact level of the input
in factors on productivity is given as follows
follow by using total point
and percentage share. The total point and percentage share of each partial
p input are shown
below.
Table 3.17: Total pointt and percentage share of impact of partial inputs on productivity
prod (Source: Survey
questionnaire)
S.No. In
Input Factors 1 2 3 Total Point Share (%)
1 Human Inputs 2 1 11 37 23.4
2 Capita Inputs
Capital 2 7 5 31 19.6
3 Materi Inputs
Material 2 3 9 32 20.3
4 Energy Inputs 2 7 5 31 19.6
5 Miscel
Miscellaneous Inputs 3 9 2 27 17.1
Total 11 27 32 158 100
Human
man IInputs
17,1 23,4 Capital
pital Inputs
I
19,6 Material
aterial Inputs
19,6 Energy
ergy Inputs
I
20,3 Miscella
iscellaneous Inputs
Figure 3.14: Percentagee share

sh of impact of partial inputs on productivity (Source
urce: Survey questionnaire)
From table 3.17 andd figure

figur 3.14, human inputs have the highest
st total
share whereas miscellane
ellaneous inputs have the least total point and percentage
p share. This
indicates that human
n inputs
inpu have the highest impact and miscellaneou
laneous inputs have the least
impact on the productivity
ctivity of the garment industries.
The impact level of the productivity

p is given as follows by using
g total
share. The total pointt and percentage share of each factor are shown
wn below.
be
Table 3.18: Total point and

nd percentage
p share of impact of productivity factors (Source:
(Sou Survey questionnaire)
S.No. Produc
roductivity Factors 1 2 3 T
Total Point Share (%)
1 Knowledge and
nd Skill
Ski 3 3 8 33 2.62
2 Motivation and
nd Morale
Mo 1 4 9 36 2.86
3 Employee Satisfact
tisfaction 1 5 8 35 2.78
4 Attitude and Culture
Cultur 2 6 6 32 2.54
5 Life Standard 0 9 5 33 2.62
6 Absenteeism 2 4 8 34 2.70
7 Turnover 4 5 5 29 2.30

1) Page 60
8 Human Capability 2 5 7 33 2.62
9 Technical Capability 2 3 9 35 2.78
10 Technological Capability 1 4 9 36 2.86
11 Process Capability 1 4 9 36 2.86
12 Maintenance 1 4 9 36 2.86
13 Depreciation 1 8 5 32 2.54
14 Speed Loss 2 5 7 33 2.62
15 Rejection 2 6 6 32 2.54
16 Rework 1 7 6 33 2.62
17 Scrap 4 7 3 27 2.14
18 Shortage 3 4 7 32 2.54
19 Rules and Regulations 1 5 8 35 2.78
20 Procedures 1 8 5 32 2.54
21 Work Instructions 1 4 9 36 2.86
22 Working Formats and Templates 2 7 5 31 2.46
23 Incentive Schemes 2 2 10 36 2.86
24 Ergonomics 1 3 10 37 2.94
25 Work Study 2 3 9 35 2.78
26 Other Productivity Improvement Techniques 2 7 5 31 2.46
27 Quality Control 2 5 7 31 2.46
28 Inventory Control 2 5 7 31 2.46
29 Production Control 2 3 9 35 2.78
30 Process Control 2 2 10 36 2.86
31 Environment Control 2 7 5 31 2.46
32 Standard Time 1 3 10 37 2.94
33 Lead Time 1 5 7 32 2.54
34 Waiting Time 0 8 5 31 2.46
35 Transfer Time 0 8 5 31 2.46
36 Downtime 0 3 10 36 2.86
37 Setup Time 0 9 4 30 2.38
38 Internal Transport 1 9 3 28 2.22
Total 58 199 269 1,259 100
As shown in table 3.18, there is no significant difference among the total point and
percentage share of the productivity factors. And hence this shows that all factors are
important for productivity improvement of the garment industries.

Chapter Four
4-Case Study
4.1-Objective of the Case Study
The main objective of undertaking the case study is to make the study practical and realistic.
Novastar Garment PLC has been taken for the case study.
4.2-Overview of the Company
4.2.1-Background of the Company
In 2003 a family of overseas business professionals eagerly embarked on the establishment of

a new garment factory in their native country Ethiopian. Recent governmental efforts to
improve Ethiopia’s economy coupled with business incentives provided under AGOA6 were
key factors in the realization of the company. The building was completed in 2005.
The company founders received their business education and technical training in the United
States of America. Collectively they hold over thirty years of experience in the Western
market. They have combined their extensive overseas business training and knowledge of
Ethiopian language, dialects and culture to establish a solid and innovative infrastructure.
The merger of Western and African business culture contributes to high quality yet lower cost
manufacturing attractive to overseas wholesalers.
4.2.2-Location of the Company
The factory and head office of Novastar Garment PLC is located in Gelan, Oromiya Zone,
near to Atlas Resort on Debreziet road. The company has also branch office in United States
of America.
6
AGOA has already started giving a positive boost to the growth of garment industry in SSA. It offers
beneficiary SSA duty free and quota free US market access for essentially garment products.

4.2.3-Vision, Vision and Values of the Company
4.2.3.1-Vision
To win the respect and love of our clients and work force alike, recognized as a manufacturer
of high quality clothing, and become the manufacturer of choice as a leading garment factory
in the sub-Saharan region.
5.2.3.2-Mission
To make each client the focal point of our operation by ensuring delivery of high quality
merchandise with a very competitive price consistently on a timely basis delivery. To be
considered as a major contributor in the effort to grow the Ethiopian textile industry and
better life of the workers.
4.2.3.3-Values
Team work, initiative, focus in a diverse work environment where ethical treatment and equal
opportunity are the foundation of the core value of the company. Fairness and trust in a
familial setting is fostered and protected.
4.2.4-Machinery and Equipment of the Company
To keep abreast with the latest in fashion world, the company possesses a well equipped
production, backed by hi-tech machines and latest technology. It has a retinue of modern
machinery. It consists of high performance multiple needle machines, tufting machines and
CAD systems.
Alongside, it is also equipped with capacious warehouses that facilitate storage of

voluminous stock to meet all kinds of demand eventualities.
The latest machinery and well trained manpower ensure that the company’s customers get
true value for their needs.
4.2.5-Products of the Company
The company produces garments both for the local and export markets. The range of products
produced by the company can be classified into the following: tops, t-shirts, polo shirts,
shirts, bottoms, pants and uniforms.

Tops, t-shirts, polo shirts, shirts, bottoms and pants have three main categories, namely plain,
screen printed and industrial embroidery. Uniforms are produced for different target markets,
namely export market, corporate bodies, tourists and local market.
The export production volume of the company in 2008/9, 2009/10 and 2010/11 are 514,784,
607,206 and 577,527 pieces respectively.
Figure 4.1: Some of the products of the company
4.2.6-Quality Control of the Company
Being a quality driven company, the company laid emphasis on the quality of the products.
There is quality control division even though it is not well organized in terms of staff,
equipment and laboratory. The quality inspection begins from the receiving of raw materials.
Once cleared, the raw materials are adopted for production.
All the company products are subject to in-house inspection. The products matching the
quality criteria in a given stage of development pass to the succeeding stage.
4.2.7-Human Resource of the Company
Currently the company has on average 492 employees. Most of the employees are
young. Most of the employees are direct workers which directly participate in the production
of products. The current organizational structure of the company is shown in annex 4.
4.3-Productivity Awareness of the Company
Top managers, middle managers, lower managers and experts of the company have
awareness and basic understanding of human productivity whereas checkers, supporting

staffs and operators of the company do not have awareness and basic understanding of human
productivity. Total productivity and most of surrogate productivity are not understood by the
company.
4.4-Working Definition of Productivity in the Company
In the company, productivity is defined as the ratio of volume of output to volume of human
inputs (i.e. pieces/employee/shift).
4.5-Critical Success Factors of the Company
The critical success factors of the company are productivity, quality, efficiency, customer
satisfaction, sales volume, market share and profit.
4.6-Productivity Factors of the Company
The productivity factors of the company are resource factors, method factors, control factors,
process factors and product factors. The resource factors classified into three categories,
namely factors related to human, factors related to machine, factors related to material.

Figure 4.2: Productivity factors of the company

Product Material Capital Human
Product Quality Material Quality Machine Hour Utilization Technical Capability

Absenteeism Knowledge and Skill
Inventory Technological Capability
Style Construction Turnover Motivation and Moral
Cash Process Capability
Pattern Marker Efficiency Human Hour Utilization Employee Satisfaction
Accounts Receivable Maintenance
Grade Shortage Human Capability Attitude and Culture
Notes Receivable Depreciation
Speed Loss Life Standard
Productivity
Quality Control Lead Time Capacity
Incentive Schemes Rules and Regulations Waiting Time Rejection
Inventory Control
Transfer Time Rework
Ergonomics Procedures Production Control
Downtime Scrap
Work Study Work Instructions Process Control
Setup Time Work In Process
Others Working Formats and Templates Environment Control Internal Transport Standard Time
Method Control Process
Figure 4.3: Productivity factors of the company using cause and effect diagram
The explanations and measurements of each productivity factors are summarized as shown
below.
Table 4.1: Explanations and measurements of productivity factors of the company
S.No. Factors Explanation Measurement

1 Human Factors
Describes how well an employee is able to
1.1 Knowledge and Skill # Skilled employees
perform a job.
Are the employees motivated to do their job to
1.2 Motivation and Moral # Motivated employees
meet demands?
1.3 Employee Satisfaction Are the employees satisfied with their work? # Satisfied employees
Commitment, team work, obeying company
1.4 Attitude and Culture rules and regulations, and being cooperative # Committed employees
for change.
Living standard of the employees with respect # Employees who secure their basic
1.5 Life Standard
to human needs. needs
Employees’ non attendance time without pre-
1.6 Absenteeism Hour
known reasons.
Number of employees terminating to work for
1.7 Turnover # Turnover
the company.
The ratio of utilized human hour to total
1.8 Human Hour Utilization % Utilized human hour
human hour for specific period of time.
Describes how well an employee is fit to
1.9 Human Capability # Fit employees
perform a job.
2 Capital Factors
Describes how well a machine is technically fit
2.1 Technical Capability # Technically fit machines
to perform a job.
Describes how well a machine is
2.2 Technological Capability # Technologically fit machines
technologically fit to perform a job.

Describes how well a machine is
2.3 Process Capability Process capability index
technologically fit to perform a job.
Keeping machines at good operating
2.4 Maintenance Overall equipment efficiency
condition.
Decline in value of fixed assets especially due
2.5 Depreciation Birr
to wear and tear.
Describes the reduction of production rate of
2.6 Speed Loss Change in production rate
machine.
The ratio of utilized machine hour to total
2.7 Machine Hour Utilization % Utilized machine hour
machine hour for specific period of time.
2.8 Inventory Describes the materials in stock Square meters, pieces or birr
2.9 Cash Money in the form of coin or note. Birr

Money collected from customers who bought
2.10 Accounts Receivable Birr
products.
Money collected from creditors who borrowed
2.11 Notes Receivable Birr
money.
3 Material Factors
Describes the amount of materials pass Amount of materials pass without
3.1 Material Quality
without rejection. rejection
Describes fabric variants by construction type #Fabric by construction type, #fabric
3.2 Construction
and shading. by shading
The ratio of area of pattern in the marker plan % Area of pattern in the marker
3.3 Marker Efficiency
to total area of the marker plan plan
Amount of materials unavailable
3.4 Shortage Materials unavailable within the required time.
within the required time.
4 Method Factors
# Effectively applied rules and
4.1 Rules and Regulations Governing laws of the company.
regulations
Describe the sequence of activities how a job
4.2 Procedures # Effectively applied procedures
is performed.
Describe the guidelines how a job is to be # Effectively applied work
4.3 Work Instructions
performed. instructions
Documents developed to record data and # Effectively applied formats and
4.4 Work Formats and Templates
information. templates
# Employees satisfied by the
4.5 Incentive Schemes Incentive systems to encourage employees.
incentive schemes
Relationship between employees and their
4.6 Ergonomics # Bad operations
working environment.
Enhancing productivity by eliminating waste
4.7 Work Study # Time, distance
and unnecessary operations.
5 Control Factors
Measuring and comparing the quality of
5.1 Quality Control Quality specification
products; and taking corrective action.
Controlling the level of inventory by Economic order quantity, maximum
5.2 Inventory Control determining how much to order and when to and minimum inventory level,
order. reorder point
Controlling the production to go as per the
5.3 Production Control Production efficiency
required volume, quality and time.
Controlling the process to produce within the
5.4 Process Control Statistical process control
desired control limits.

Assessing and controlling factors that affect # Environmental unfriendly
5.5 Environment Control
environment. operations
6 Process Factors
6.1 Capacity Describes ability to produce. Pieces

Products rejected due to not meeting the
6.2 Rejection Square meters or pieces
specifications.
Products reworked due to not meeting the
6.3 Rework Pieces
specifications.
Describes fabric rags in cutting and sewing
6.4 Scrap Square meters
operations.
Partially produced products available within
6.5 Work In Process Pieces
the production line.
Standard allowed minutes required to
6.6 Standard Time Minutes
accomplish a job.
The time passed between ordering and
6.7 Lead Time Minutes
receiving outputs.
6.8 Waiting Time Time elapsed due to waiting for inputs. Minutes
Time elapsed due to flow materials from raw
6.9 Transfer Time Minutes
materials store to finished products store.
6.10 Downtime Off operation time of the machines. Minutes
6.11 Setup Time Time elapsed for preparation to start operation. Minutes
Distance travelled due to flow materials from
6.12 Internal Transport Meters
raw materials store to finished products store.
7 Product Factors
Describes the amount of products pass without Amount of products pass without
7.1 Product Quality
rework. rework
Describes the number and complexity of
7.2 Style # Product styles
product style produced.
Describes the number of patterns per product
7.3 Patten # Patterns per style
style.
7.4 Grade Describes range of sizes of product style. # Grades per style
4.7-Status of Productivity Factors
The status of productivity factors of the company is defined by using colors namely, green-if
there are no problems associated with the factor, red-if there are problems associated with the
factor and gray-if the factor is not applicable. The data collection approaches for defining the
status of productivity factors are interviewing sewing line-I 75 employees, considering
sewing line-I 50 machines, comparing the company performance with the target and
international benchmarking values (refer annex 5), the existing and improved layout of the
company (refer annex 6 and 7), and discussion with accountants, supervisors, heads and
managers. The status of each productivity factors and the associated comments is given as
follows.

Table 4.2: Status productivity factors of the company
S.No. Factors Status Comments
1 Human Factors
1.1 Knowledge and Skill From sewing line-I 75 employees, only 40% have
high skill for the job. The main reasons for this are
low education level and lack of adequate training.
1.2 Motivation and Morale From sewing line-I 75 employees only 26.7% are
motivated. The main reasons for this are
unattractive salary, employee benefit and incentive
schemes, and poor leadership in good working
environment.
1.3 Employee Satisfaction From sewing line-I 75 employees, only 8% are

satisfied. The main reasons for problem are
unattractive salary, employee benefit, and incentive
schemes and poor leadership in creating good
working environment.
1.4 Attitude and Culture From sewing line-I 75 employees, only 8% have
good industrial culture. The reasons for the
problem are resistance for change, lack of
accepting new work method, lack of commitment
and being not punctual.
1.5 Life Standard Only 8% of sewing line-I 75 employees secure

their basic needs (i.e. food, cloth and shelter). The
main reason for this is low salary scale and
incentive.
1.6 Absenteeism The average absenteeism rate is 1.5%. The

international benchmarking value and the average
target value is less than 1%.
1.7 Turnover The average turnover rate is 4.9%. The

target value are 10% and 3% respectively. The
average turnover rate is less than the average target
value.
1.8 Human Hour Utilization The human hour utilization for the year 2010/11 is
90.8%. The rest 9.2% has been elapsed due to

absenteeism and other types of leave.
1.9 Human Capability Only 73.3% of sewing line-I 75 employees are

capable to do the job.
2 Capital Factors
2.1 Technical Capability The company installed new established machines

that are not working for long period of time; and
they are fabricated by genuine material with
sufficient spare parts.
2.2 Technological Capability The company installed newly established machines.
2.3 Process Capability The production process has been producing within
the specification limit.
2.4 Maintenance There is no maintenance plan and hence no planned

maintenance. There is corrective maintenance. The
maintenance is not well organized even to perform
corrective maintenance in terms of workshop,
equipment, and maintenance crews. There is no
workshop.
2.5 Depreciation The fixed asset of the company has been declined
from time to time. For example, the depreciation
cost of company in the year 2009/10 is 755,380
birr.
2.6 Speed Loss The machines are capable to run at their maximum
speed.
2.7 Machine Hour Utilization Considering sewing line-I 50 machines, the

machine hour utilization is 97.2%. The rest 2.8% is
elapsed due to downtime.
2.8 Inventory The company does not set the minimum and
maximum inventory level. There is no economic
order quantity and reorder point.
2.9 Cash The company does not face cash constraint.
2.10 Accounts Receivable Yearly on average, the company can collect

accounts about 75% of its expectation. According
to finance and accounting division, the company
should collect 90% and above.

2.11 Notes Receivable Currently there are no notes to be collected.
3 Material Factors
3.1 Material Quality The material quality rate is greater than 99%. The
average target value is greater than 98%.
3.2 Construction The company uses well constructed woven and

knitted fabrics. The fabrics are in the form of plain
or strip shading. The shading is uniform.
3.3 Marker Efficiency The average marker efficiency for knit products is
83.8%. The international benchmarking value and
the average target value is 90%.
3.4 Shortage The company faces less than 1% of material

shortage. According to the company, value is
considered as small amount when compared to the
large quantity of material consumed. For example
in the year 2010/11 the company consumed about
743,711 m2 fabrics.
4 Method Factors
4.1 Rules and Regulations Most of the rules and regulations of the company
like timetable, leave, employee benefit and
administrative measures are clearly known by most
of employees.
4.2 Procedures Most of the procedures of the company are not

clearly applied by most of employees.
4.3 Work Instructions Except verbal communication, there are no written

work instructions especially for shop floor
employees. The employees do not have written job
description.
4.4 Working Formats and Templates The working formats and templates of the company
are used for reporting. There are no enough
working formats and templates that define how to
apply a certain activity.
4.5 Incentive Schemes From sewing line-I 75 employees, only 46.7% are
satisfied by the incentive scheme. Currently the
company applied both individual and group

financial incentive scheme.
4.6 Ergonomics The company only provides clinical, cafeteria,

transportation, shower and toilet. The employees do
not have locker. The workstations on production
area are not ergonomically designed.
4.7 Work Study Except time study other techniques of work study
are not implemented.
5 Control Factors
5.1 Quality Control The company quality control division is not well
organized in terms staff, equipment and laboratory.
There is no laboratory. Statistical quality control is
not applied. The quality control is reactive and is
not process based.
5.2 Inventory Control Except periodic items inventory counting, the

company does not apply inventory management
system. The company only uses bin card system to
control inventory.
5.3 Production Control Though there is production planning and control

section, it is not organized. Daily, weekly, monthly
and yearly production planning is not done and
hence it is difficult to control production.
5.4 Process Control For instance, statistical process control techniques

are not applied.
5.5 Environment Control The company does not have environmental

management program. There is only inclinator to
burn dry waste.
6 Process Factors
6.1 Capacity The company uses about 47.8% of the attainable

capacity. The capacity is underutilized mainly due
lack of scheduling, low skill employees, low
motivation to work, absenteeism and other types of
leave, downtime, waiting time, transfer time and
setup time.
6.2 Rejection The average rejection rate of knit products is

0.08%. The international benchmarking value and

the average target value 2% and 0% respectively.
6.3 Rework The average rework rate of knit products is 11.2%.

The international benchmarking value and the
average target value is 2%.
6.4 Scrap The average scrap rate for knit products is 16.2%.
6.5 Work In Process For example, the monthly work in process for the
BP3 within the production line is 19,244 pcs. But
according to the target, the monthly work in
process expected to be 1,653 pcs.
6.6 Standard Time The average standard time required to produce one
piece of knit t-shirt is 12.3 mins. The international
benchmarking value and the average target value is
5 mins.
6.7 Lead Time The average marketing lead time is 7 weeks. The
target value is 5 weeks.
6.8 Waiting Time From sewing line-I 75 employees hour, 1.8% is

elapsed due to waiting.
6.9 Transfer Time Due to layout problem there is extra transfer time
(about 2 mins/trip).
6.10 Downtime From sewing line-I 50 machines hour, 2.8% is

elapsed due to downtime.
6.11 Setup Time From sewing line-I 75 employees hour, 3.5% is

elapsed due to setup.
6.12 Internal Transport Due to layout problem there is extra distance

travelled (about 50 mts/trip).
7 Products Factors
7.1 Product Quality The average knit products quality rate is 88.8%.
7.2 Style The product styles produced in the company are not
complicated. This makes patter making, sample

making, marker making, cutting and sewing easy.
7.3 Pattern The number of patterns per style of product are not
that much large. This makes patter making, sample
making, marker making, cutting and sewing easy.
7.4 Grade The company has clearly defined grades for its
products based on USA anthropometric data.
4.8-Productivity Indicators of the Company
The company has partial, total and surrogate productivity indicators. The indicators can be
identified at firm, process, sub-process or operation level.
4.8.1-Partial and Total Productivity Indicators
Partial productivity indicators of the company are the measure of its input factors. The
company has five input factors namely, human, capital, material, energy and miscellaneous
inputs.
Human inputs involves involve operators, supporting staffs, checkers, experts and managers.
Supporting staffs involve co-operators, material handlers, clerks, maintenance crews and the
like. Capital inputs involve fixed capital and working capital. Fixed capital involves land,
buildings, machines, tools, equipment, amortized costs and the like. And working capital
involves inventory, cash, accounts receivable, note receivable and the like. Material inputs
involve raw materials (fabrics) and purchased parts (accessories). Purchased parts
(accessories) involve threads, buttons, elastics, zippers, labels, tags, packing materials and the
like. Energy inputs involve electricity, water, fuel and the like. Miscellaneous inputs involve
travel, tax, marketing, product development, office supplies, information, consultants, general
administration and the like.
Therefore the partial productivity indicators of the company are human, capital, material,
energy and miscellaneous inputs productivity.
Total productivity indicator is one of the productivity indicators of the company to be

measured as function of total outputs to total inputs and as a function of partial productivity
indicators.

4.8.3-Surrogate Productivity Indicators
Surrogate productivity indicators of the company are the measure of surrogate factors. Like
partial and total productivity indicators, surrogate productivity indicators are not directly
measures as ratio of output to input.
The surrogate productivity indicators identified are employee satisfaction rate, motivation
rate, skill level rate, absenteeism rate, turnover rate, human hour utilization, speed loss rate,
machine hour utilization, material quality, marker efficiency and product quality rate.
The productivity indicators of production process are presented below.
Figure 4.4: Productivity indicators of production process
4.9-Process Mapping
Process mapping can be done for processes, sub-processes or operations. The process map of
production process of the company is given below.

Figure 4.5: Process map of production process
As shown in the process map, production process has inputs, process factors and outputs. The
inputs of production process are fabrics, accessories, human, capital, energy and
miscellaneous inputs; and outputs are finished products, semi-finished products, rejections,
reworks and scraps. For the detail, the production process is represented by the flow process
chart as shown below.

Order Receiving Raw Material Store Finishing
Fabric Inspection Final Inspection

No
Order
Approved?
No No No
Yes Conforms? Reject
Reject Conforms?
Pattern Making
Yes
Yes
Spreading
Packing
No
Pattern
Approved?
Cutting
Auditing
Yes
Ticketing
Sample Making
No
Conforms?
Bundling
No Fusing, Embroidering
Sample Yes
and Printing
Approved?
Sewing
Finished Product
Store
Yes
Inspection
Marker Making
No No
Reject Conforms?
No Yes
Marker
Approved?
Yes
Figure 4.6: Flow process chart of production process
Order Receiving: Getting specification from customers about style, quantity, quality, delivery
date and the like.
Order Approving: Accepting the order.
Pattern Making: Changing body measurements in to a paper pattern in such a way it shall fit
the 3D shape of a human body in its final assembly. In the company pattern is made both
manually or using CAD software.
Pattern Approving: Accepting the pattern.
Sample Making: Preparing the representative new product before going to mass production.
Sample Approving: Accepting the sample.
Marker Making: Preparing the most efficient layout of pattern pieces for a specified style,
fabric and distribution of sizes. In the company marker is made using CAD software.

Marker Approving: Accepting the marker.
Fabric Inspection: Examine the fabric whether it fulfill the quality specification or not.
Spreading: Placing the number of plies of fabric that the production planning process has
dictated, to the length of the marker plan, in the colours required, and correctly aligned as to
length and width without tension.
Cutting: Separating fabric parts as replicas of the pattern pieces in the marker plan.
Ticketing: Giving a unique number to each cut parts of fabric so that the cut pieces of
different sizes and colors do not get mixed.
Bundling: Fastened together the same size and color cut parts of fabric for the purpose of
better handling and work in process controlling in the line.
Fusing: Bonding the interlining to the outer fabric by means of thermoplastic resin.
Embroidering: Decorating fabric with design stitches in strands of threads using a needle.
Embroidery may also incorporate other material such as metals, pearls, beads, quilts, and
sequins.
Printing: Stamping with different pattern and color.
Sewing: Assembling cut parts of fabric with accessories to produce garment products.
Inspection: Examine each sewn product whether it fulfill the quality specification or not.
Finishing: Ironing, tagging and folding the ready sewn, trimmed and quality checked
products from the sewing lines.
Final Inspection: Examine each finished product whether it fulfill the quality specification or
not.
Packing: Poly-packing the finished products dozen wise, color wise, size ratio wise; bundling
and packing in the cartoon so that ready to ship or dispatch.
Auditing: Assessing whether the finished products are packed correctly or not.
The inputs and outputs of each of the above sub-process and operation are given as follows.

Table 4.3: Inputs and outputs of each sub-process and operation of production process
S.No. Inputs Sub-Process and Operation Outputs
1 Customer Specification, Human, Energy Order Receiving Order Receipt

and Miscellaneous Inputs
2 Order Receipt, Human, Energy and Order Approving Approved Order,

Miscellaneous Inputs Rework or Rejection
3 Approved Order, Human, Capital, Energy Pattern Making Pattern

4 Pattern, Human, Energy and Miscellaneous Pattern Approving Approved Pattern,

Inputs Rework or Rejection
5 Approved Pattern, Human, Capital, Sample Making Sample

Material, Energy and Miscellaneous Inputs
6 Sample, Human, Energy and Miscellaneous Sample Approving Approved Sample,

Rework or Rejection
7 Approved Sample, Human, Capital, Energy Marker Making Marker

8 Marker, Human, Energy and Miscellaneous Marker Approving Approved Marker,

Inputs Rework or Rejection
9 Fabric, Human, Capital, Energy and Fabric Inspection Inspected Fabric,

Miscellaneous Inputs Rejection
10 Approved Marker, Inspected Fabric, Spreading Spread Fabric

Human, Capital, Energy and Miscellaneous
Inputs
11 Spread Fabric, Human, Capital, Energy and Cutting Cut Parts, Scrap,
Miscellaneous Inputs Rework
12 Cut Parts, Human, Capital, Energy and Ticketing Ticketed Parts

Miscellaneous Inputs
13 Ticketed Parts, Human, Capital, Energy and Bundling Bundled Parts

Miscellaneous Inputs
14 Bundled Parts, Human, Capital, Energy and Fusing Fused Parts, Rejection
Miscellaneous Inputs or Rework

15 Bundled Parts, Human, Capital, Energy and Embroidering Embroidered Parts,
Miscellaneous Inputs Rejection or Rework
16 Bundled Parts, Human, Capital, Energy and Printing Printed Parts,

Miscellaneous Inputs Rejection or Rework
17 Bundled Parts, Fused Parts, Embroidered Sewing Sewn Products,

Parts, Printed Parts, Human, Capital, Scraps, Rejection or
Energy and Miscellaneous Inputs Rework
18 Sewn Products, Human, Capital, Energy Inspection Inspected Products,

and Miscellaneous Inputs Rejection or Rework
19 Inspected Products, Human, Capital, Finishing Finished Products,

Energy and Miscellaneous Inputs Rejection or Rework
20 Finished Products, Human, Capital, Energy Final Inspection Inspected Products,

and Miscellaneous Inputs Rejection or Rework
21 Inspected Products, Human, Capital, Packing Packed Products

Energy and Miscellaneous Inputs
22 Packed Products, Human, Capital, Energy Auditing Audited Products,

and Miscellaneous Inputs Rework
As shown in table 4.3, each sub-processes and operations have their own input and output.
4.10-Data Collection and Organization
For measuring partial and total productivity, a three year (i.e. 2008/9 to 2010/11) data has
been collected. And for measuring surrogate productivity and process indicators daily (i.e.
31/08/11) and monthly (16/05/11 to 24/05/11) BP3 have been taken. The product BP3 has
been selected because it is frequently ordered and produced in large quantity. BP3 is a knit
trouser produced in three colors, namely white, grey and black.
Table 4.4: Data for measuring partial and total productivity (Source: Finance and accounting division and
commercial division of the company)
Year
S.No Parameters
2008/9 2009/10 2010/11
1 Value of Human Inputs 458,522 276,487 309,665
2 Capital Inputs 2,476,722 2,763,108 3,094,681
3 Value of Material Inputs 14,732,876 17,377,949 19,283,309

4 Value of Energy Inputs 32,609 37,446 41,940
5 Value of Miscellaneous Inputs 4,292,384 3,515,216 3,937,042
6 Value of Total Outputs (birr) 22,139,750 29,004,137 29,508,701
7 Value of Total Inputs (birr) 21,993,113 23,970,206 26,666,637
Table 4.5: Data for measuring surrogate productivity (Source: Human resources development division and
production division of the company)
S.No. Item Value Remark

1 Total Number of Employees in Sewing line 1 (#) 75 Daily BP3 production
2 Satisfied Employees in Sewing Line 1 6 “
3 Motivated Employees in Sewing Line 1 20 “
4 Skilled Employees in Sewing Line 1 30 “
5 Absenteeism (hrs) 16,875 For the year 2010/11
6 Turnover (#) 25 “
7 Total Number of Employees 492 “
8 Utilized Human Hour (hr) 1,026,769 “
9 Total Human Hour (hrs) 1,130,616 “
10 Utilized Machine Hour in Sewing Line 1(hr) 372 Daily BP3 production
11 Total Machine Hour in Sewing Line 1 (hrs) 383 “
2
12 Total Fabrics Pass without Rejection (m ) 70,255 Monthly BP3 production
2
13 Total Inspected Fabrics (m ) 70,255 “
14 Total Products Pass without Rework (pcs) 40,059 “
Table 4.6: Data for measuring process indicators (Source: production division of the company)
S.No. Item Value Remark

1 Attained Capacity (pcs) 35,858 Monthly BP3 production
2 Attainable Capacity (BP3) 75,000 Per month for BP3
3 Total Rejects (pcs) 0 Monthly BP3 production
4 Total Reworks (pcs) 3,858 “
5 Total Inspected Products (pcs) 43,917 “
6 Total scraps (m2) 9,836 “
2
7 Total Consumed Fabric (m ) 70,255 “
8 Production Line Input (pcs) 55,102 “
9 WIP within Production Line (pcs) 19,244 “
10 Standard Time for BP3 (mins/pcs) 25.5 Across the production line
11 Lead Time for BP3 (mins/pcs) 20.4 “
11 Total Human Hour in Sewing Line-I (hrs) 575 Daily BP3 production
13 Waiting Time in Sewing Line-I (mins) 626 “
14 Transfer Time (mins/trip) 5.04 “

15 Downtime (mins) 645 “
16 Setup Time (mins) 1,195 “
17 Internal Transport (m/trip) 126 “
4.11-Productivity Measurement
4.11.1-Partial Productivity Measurement
Human Productivity (HPt) = Value of Total Outputs/Value of Human Inputs
HPt = 22,139,750/458,522 = 48.3 for the year 2008/9. Analogously, the human productivity
for the year 2009/10 and 2010/11 are 104.9 and 95.3 respectively.
Capital Productivity (CPt) = Value of Total Outputs/Value of Capital Inputs
CPt = 22,139,750/2,476,722 = 8.9 for the year 2008/9. Analogously, the capital productivity
Material Productivity (MPt) = Value of Total Outputs/Value of Material Inputs
MPt = 22,139,750/14,732,876 = 1.5 for the year 2008/9. Analogously, the material
productivity for the year 2009/10 and 2010/11 are 1.7 and 1.5 respectively.
Energy Productivity (EPt) = Value of Total Outputs/Value of Energy Inputs
EPt = 22,139,750/32,609 = 678.9 for the year 2008/9. Analogously, the energy productivity
Miscellaneous Inputs Productivity (XPt) = Value of Total Outputs/Value of Miscellaneous

Inputs
XPt = 22,139,750/4,292,384 = 5.2 for the year 2008/9. Analogously, the miscellaneous inputs
productivity for the year 2009/10 and 2010/11 are 8.3 and 7.5 respectively.
4.11.2-Total Productivity Measurement
In this case, total productivity of the company at firm level has been found by two
approaches: as function of total outputs and total inputs and as a function of partial
productivity.
As a function of total outputs to total inputs
Total Productivity (TPFt) = Value of Total Outputs/Value of Total Inputs

TPFt = 22,139,750/21,993,113 = 1.01 for the year 2008/9. Analogously, the total productivity
As a function of partial productivity
Total Productivity of Firm (TPFt) = Weight of Input j * Partial Productivity of Input j
TPF୲ = W୨ PP୨୲
Wj = Partial Inputs j for the Firm/Total Inputs
Wj = Ijt/ITt
Weight of Human Inputs (WH) = Value of Human Inputs/Value of Total Inputs
WH = 458,522/21,993,113 = 0.021 for the year 2008/9. Analogously, weight of human inputs
Weight of Capital Inputs (WC) = Value of Capital Inputs/Value of Total Inputs
WC = 2,476,722/21,993,113 = 0.113 for the year 2008/9. Analogously, weight of capital

inputs for the year 2009/10 and 2010/11 are 0.115 and 0.116 respectively.
Weight of Material Inputs (WM) = Value of Material Inputs/Value of Total Inputs
WM = 14,732,876/21,993,113 = 0.670 for the year 2008/9. Analogously, weight of material

inputs for the year 2009/10 and 2010/11 are 0.725 and 0.723 respectively.
Weight of Energy Inputs (WE) = Value of Energy Inputs/Value of Total Inputs
WE = 32,609/21,993,113 = 0.0015 for the year 2008/9. Analogously, weight of energy inputs
Weight of Miscellaneous Inputs (WX) = Value of Miscellaneous Inputs/Value of Total Inputs
WX = 4,292,384/21,993,113 = 0.195 for the year 2008/9. Analogously, weight of

miscellaneous inputs for the year 2009/10 and 2010/11 are 0.147 and 0.148 respectively.
TPFt = WH*HPt = WC*CPt = WM*MPt = WE*EPt = WX*XPt
TPFt = 0.021*48.3 = 0.113*8.9 = 0.670*1.5 = 0.0015*678.9 = 0.195*5.2 = 1.01 for the year
2008/9. Analogously, the total productivity for the year 2009/10 and 2010/11 are 1.21 and
1.11 respectively.

From the result of the partial and total productivity measurement, year 2009/10 has greater
value than the year 2008/9 and 2010/11. And hence 2009/10 can be taken as a base period.
4.11.3-Surrogate Productivity Measurement
The surrogate productivity measurement values are summarized as shown below.
Table 4.7: Surrogate productivity measurement value
S.No. Indicators Value

1 Employee Satisfaction Rate (%) 8
2 Motivation Rate (%) 26.7
3 High Skill Rate (%) 40
4 Absenteeism Rate (%) 1.5
5 Turnover Rate (%) 5.1
6 Human Hour Utilization (%) 90.8
7 Machine Hour Utilization (%) 97.2
8 Material Quality Rate (%) 100
9 Marker Efficiency (%) 86
10 Product Quality Rate (%) 91.2
4.11.4-Process Indicator Measurement
Process indicators are the measure of process factors. The process indicators measurement
values are summarized as shown below.
Table 4.8: Process indicators measurement value
S.No. Indicators Value

1 Capacity Utilization (%) 47.8
2 Rejection Rate (%) 0
3 Rework Rate (%) 8.8
4 Scrap Rate (%) 14
5 Work In Process Rate (%) 34.9
6 Standard Time (min) 25.5
7 Lead Time (min) 20.4
8 Waiting Time Rate (%) 1.8
9 Transfer Time Rate (%) 7.7

10 Downtime Rate (%) 2.8
11 Setup Time Rate (%) 3.5
12 Internal Transport (m) 882
4.12-Productivity Analysis
4.12.1-Partial and Total Productivity Analysis
Partial and total productivity analysis has been done by comparing the current partial and
total productivity with the target.
The partial and total productivity target for the year 2010/11 has been found using
exponential smoothing forecasting technique.
P’t+1 = αPt + (1-α)P’t
α = [2/(m+1)]
Where: P’t+1 is the forecasted value of productivity for next period; Pt is actual current period
productivity; P’t is the current period forecasted value of productivity; α is smoothing
constant lies between 0 and 1; and m is number of periods.
In this case m = 2 since two periods moving average is taken, hence α = [2/(2+1)] = 0.67
The human productivity target for the year 2010/11 = 0.67*95.3 + 0.33*100.1 = 95.6
Analogously, the capital productivity, material productivity, energy productivity,
miscellaneous inputs productivity and total productivity targets for the year 2010/11 are 10.2,
1.6, 758.8, 7.7 and 1.18 respectively.
Table 4.9: Productivity analysis against target
Target Actual Deviation

S.No. Indicators Status
(2010/11) (2010/11) (%)
1 Human Productivity 95.6 95.3 -0.3 Under Target
2 Capital Productivity 10.2 9.3 -9.7 Under Target
3 Material Productivity 1.6 1.5 -6.7 Under Target
4 Energy Productivity 758.8 703.6 -7.8 Under Target
5 Miscellaneous Inputs Productivity 7.7 7.5 -2.7 Under Target
6 Total Productivity 1.18 1.11 -6.3 Under Target

0,0
-2,0
-4,0
-6,0
-8,0
-10,0
-12,0
Miscellaneo
Mis
Human
Hum Capital Material Energy Total
us Inputs
Produc
Productivity Productivity Productivity Productivity Productivity
Prod
Productivity
Deviation (%) -
-0,3 -9,7 -6,7 -7,8 -2,7 -6,3
Fig
Figure 4.7: Productivity analysis bar chart against targe
arget
As shown in table 4.9 and figure 4.7, the actual measurement value
valu of partial and total
productivity indicators of the company show under target productiv
ductivity performance when
compared to the target.
4.12.2-Surrogate Produc
roductivity Analysis
The surrogate productivity

ctivity analysis is done by comparing the measurem
asurement value of surrogate
productivity indicators with
wi the proposed targets. The targets are
re proposed
pro by referring the
company’s international
onal benchmarking
b system and through discussion
ssion.
Table 4.10:
4 Surrogate productivity analysis against proposed
sed target
S.No. Indic
Indicators Target Actual Deviatio
eviation (%) Status
1 Employee Satisfaction
Satisf Rate (%) 90 8 -1,025 Decreased
2 Motivation
n Rate (%) 90 26.7 -237 “
3 High Skill Rate (%)
( 80 40 -100 “
4 Absenteeism
sm Rate
Ra (%) 1 1.5 33.3 Increased
5 Turnover Rate (%)
(% 3 5.1 41.2 “
6 Human Hour
ur Utilization
Uti (%) 95 90.8 -4.6 Decreased
7 Machine Hour
our Utilization
U (%) 98.5 97.2 -1.3 “
8 Material Quality
uality Rate (%) 100 100 0 No Change
9 Marker Efficienc
ficiency (%) 90 86 -4.7 Decreased
10 Product Quality
uality Rate (%) 98 91.2 -7.5 “

1) Page 87
200
0
-200
-400
-600
-800
-1000
-1200
1 2 3 4 5 6 7 8 9 10
Deviation (%) -1025
- -237,1 -100 33,3 41,2 -4,6 -1,3 0 -4,7 -7,5
Figure 4.8:: Surrogate

S productivity analysis bar chart against propo
roposed target
As shown in table 4.10 and figure 4.8, except material quality rate,
ra all other surrogate
productivity indicators
ors show
sho poor status.
4.12.3-Process Indicator
cator Analysis
The process indicator

or analysis
ana is also done by comparing the measure
easurement value of process
indicators with the proposed
propo targets. The targets are proposed by referring
re the company’s
international benchmarkin
arking system, improving the layout and through
ough discussion.
Table
able 4.11: Process indicator analysis against proposedd target
tar
S.No. Indic
Indicators Target Actual Deviation
ation (%) Status
1 Capacity
ty Utilization
Util (%) 90 47.8 -88.3 Decreased
2 Rejection
on Rate
Rat (%) 0 0 - No Change
3 Rework Rate (%) 2 8.8 77.3 Increased
4 Scrap Rate
ate (%)
(% 10 14 28.6 “
5 Work Inn Process
Proc Rate (%) 3 34.9 91.4 “
6 Standard
d Time
Tim (min) 22 25.5 13.7 “
7 Lead Time
ime (min)
(m 17.6 20.4 13.7 “
8 Waiting Time Rate (%) 1 1.8 44.4 “
9 Transferr Time Rate (%) 6.1 7.7 20.8 “
10 Downtime
me Rate
Ra (%) 1 2.8 64.3 “
11 Setup Time
ime Rate
R (%) 2 3.5 42.9 “
12 Internall Transport
Trans (m) 700 882 20.6 “

1) Page 88
150,0
100,0
50,0
0,0
-50,0
-100,0
1 2 3 4 5 6 7 8 9 10 11 12
Deviation (%) -88,3
- 77,3 28,6 91,4 13,7 13,7 44,4 20,8
0,8 64,3 42,9 20,6
Figure 4.9
.9: Process indicator analysis bar chart against propose
posed target
As shown in table 4.11

.11 and
an figure 4.9, except rejection rate, all other
ther process indicators show
poor status.
4.13-Intervention Areas
reas
As mentioned earlier, the

here are several productivity factors which
ich affect
aff productivity of the
company. All thesee productivity
prod factors do not have equal impact
impac on productivity. In
addition, the resources are limited to solve all the problems associated
ociated with the productivity
factors. Therefore, deciding
decid the intervention areas which aree potential
pote for productivity
improvement is very important.
impo To decide the intervention areas, the productivity
p factors are
located in the four field
fields based on the effort (i.e. resource requireme
uirement) and the impact on
productivity. The current
urrent status of productivity factors has been used to estimate the effort
required and impact on productivity.
pro

1) Page 89
Absenteeism, Human Hour
Utilization, Machine Hour
Utilization, Inventory,
Marker Efficiency, Rework,
Accounts Receivable Scrap, Work In Process,
Standard Time, Lead Time,
Waiting Time, Downtime,
Setup Time and Product
Quality
Knowledge and Skill,

Employee Satisfaction,
Motivation and Morale,
Implementation of tools and Attitude and Culture, Life
techniques which are Standard, Turnover, Human
ineffective and inefficient Capability, Maintenance,
Depreciation, Capacity,
Transfer Time and Internal
Transport
Low Impact High Impact
Figure 4.11: Intervention areas using four fields
As shown in 4.11, there are four fields namely, low effort-low impact, low effort-high
impact, high effort-low impact and high effort-high impact. The low effort-high impact is
most preferred field whereas the high effort-low impact is least preferred field. Low effort-
low impact and high effort-high effort could be preferred fields.
Productivity factors in the fields low effort-low impact, low effort-high impact and large
effort-large impact can be taken as intervention areas but the productivity factors within low
effort-high impact field should be given first priority. Therefore, decreasing absenteeism,
increasing human and machine hour utilization, managing inventory, increasing marker
efficiency, minimizing rework, scrap and work in process, decreasing standard time, lead
time, waiting time and setup time, and improving product quality are potential for
productivity improvement at low effort.
4.14-Proposed Solution
In general, the results obtained from the assessment of EGIs and the case company show that
the productivity of EGIs and the case company is low when it compared with the best
practices and target value. The human productivity of EGIs is lower than the best practice by

100%. The human, capital, material, energy, miscellaneous inputs and total productivity of
the case company are decreased by 0.3%, 9.7%, 6.7%, 7.8%, 2.7% and 6.3% from the target
values respectively. In addition, most of the productivity indicators of the case company
show poor status. The productivity factors are multidimensional ranging from human to
capital to material to method to control to process to product factors. The intervention areas
are related human, capital, material and process. And this requires organized and sustainable
productivity improvement program to solve the problems associated with productivity.
Therefore, a PIM7 based on this requirement has been developed.
7
The principal basis of the PIM is improvement approaches by Grunberg (2007), Attia et al. (2006) and
Sumanth (1979, 1998).

Chapter Five
5-The Productivity Improvement Method
5.1-Introduction
The PIM aims to improve productivity of garment industry.
The important characteristics which make the PIM preferable are compatibility with
knowledge and skill of the user (i.e. easy to use); compatibility with existing tools and
techniques; addressing the possible productivity factors; being continuous improvement tool
based on Deming cycle (i.e. plan-do-check-act); having clearly defined productivity targets
setting, measurement and analysis framework; and flexibility to apply from operation to firm
level.
The PIM needs management commitment for its implementation. The target user groups of
this method are all processes of the company.
5.2-Overview of the PIM
The PIM is formulated after analyzing the following sources:
Literature survey
Assessment of EGIs
Case study
The method has been divided into ten steps.
Step 1-Define Processes of the Firm: For making productivity manageable, classifying the
firm into defined processes, the process in to sub-processes and the sub-process into
operations is essential. It also focuses on defining the major functions, and identifying critical
success factors and productivity indicators.
Step 2-Assess Productivity Factors: Identifying the productivity factors, and defining status
of the productivity factors.
Step 3-Set productivity targets: Setting productivity target for productivity indicators.
Step 4-Map the process: Making the process maps of each defined process, sub-process and
operation so that to have a clear picture for further actions.

Step 5-Collect and organize data: The required data for productivity measurement and
analysis are collected and organized.
Step 6-Measure productivity: Measuring productivity by defining formula for the

productivity indicators to know the productivity level.
Step 7-Analyze productivity: Productivity analysis is done to know whether the productivity
is grown or declined, and over or under performance.
Step 8-Formulate productivity improvement plan: Performing cause and effect analysis,
deciding intervention areas, and developing action plan for productivity improvement.
Step 9-Implement productivity improvement plan: Implementing the action plan by

allocating reasonable amount of resources.
Step 10-Evaluate results: Evaluating the results gained in order to get feedbacks for next
round.
Act Plan
Check Do
Figure 5.1: The PIM with ten steps

6.3-Detials of the PIM
Here, the ten steps are discussed in detail to give the users a comprehensive guide how to use
the PIM. The details of the PIM consist of major tasks of each step, various formats and
templates, and formulas for productivity measurement and analysis. The details of the PIM
can be considered as user manual of the PIM.
6.3.1-Define Processes of the Firm
This is the first step of the PIM which involves four major tasks. Task 1-to classify the firm
into defined processes, task 2-to define major functions of the process, task 3-to identify
critical success factors of the process and task 4-to identify productivity indicators of the
process. The ultimate goal of this step is to make productivity manageable.
6.3.1.1-Classify the Firm into Defined Processes
The purpose of classifying the firm into processes is to make productivity manageable. Based
on the overall activities performed and organizational structure, the firm can be classified into
defined processes using template 1.
Firm
Process 1 Process 2 Process 3 Process 4 Process N
Figure 5.2: Template 1 to classify processes of the firm
Using template 1, the firm can be divided into the following processes as shown below.

Nova Star Garment
PLC
Human Resource Procurement and

Finance and
Production Development and Property Sales and Marketing
Accounting
Administration Administration
Figure 5.3: Processes of the firm using template 1
Analogously, a process can be classified into sub-processes and a sub-process into operations
using template 1. Production process of Novastar Garment PLC has three sub-processes
namely, cutting, sewing and finishing.
5.3.1.2-Define Major Functions of the Process
5.3.1.2.1-Production Process
The major functions of this process are production of products, production planning and
control, maintenance planning and control, and quality control.
5.3.1.2.2-Human Resource Development and Administration Process
Proper utilization of employee, hiring necessary employee based on human resource

planning, conducting training to upgrade skills of employee, preparing job description for
individual employees, giving clinical, transportation and office services, creating conducive
working areas, follow up the proper implementation of human resource management policies,
procedures and manuals, and performance appraisal of each department and individual
employees are the major functions of this process.
5.3.1.2.3-Finance and Accounting Process
The major functions of this process are proper utilization of finance, preparing interims and
yearly financial statements, collecting and paying accounts, follow up the proper
implementation of financial as well as cost and budget manuals, and controlling the bank
reconciliation activities.

5.3.1.2.4-Procurement and Property Administration Process
Procuring and supplying of materials, organizing and controlling the materials movement and
the materials handling, purchasing the right materials from right place at the right time, right
price and right quality, establishing maximum and minimum stock level, and identifying the
fast and slow moving items are the major functions of this process.
5.3.1.2.5-Sales and Marketing Process
The major functions this process are conducting different market research, increase sales
volume, expanding marketing segment, promoting the sales activities, receiving sales orders
from customers, following up the orders, and delivering the products at right quantity,
quality and time.
In addition to the above functions of the processes, the sub-processes and operations can have
their own functions.
5.3.1.2.6-Relationship among Processes
To perform overall activities of the firm the above processes should be integrated. When the
productivity of production process increases, the other processes can function well. When
human resource development and administration process hires relevant employees, gives
adequate training and establish accident minimization program, productivity of the processes
can be increased. When finance and accounting process allocates adequate cash and budget
by controlling the finance, the productivity of the processes can be increased. By purchasing
the right material from right source at right quantity, quality, time and price and
implementing inventory control system, using procurement and property administration
process can increase the productivity of the process. The sales and marketing process which
is responsible for conducting market research and selling the right product at right quantity,
time and price, the productivity of the processes can be increased.
From the above it is concluded that the relationship among processes is directly proportional.
In other words when one process possesses weak performance, it will retard the performance
of other processes; and vice versa. The relationship is presented by the following diagram.

Figure 5.4: Relationship diagram among processes
In current business environment firms are customer driven (i.e. customers take the upper
hand). In the firm more values to the customer are added by production process. And hence
this thesis focuses on one of the defined processes (i.e. production process).
5.3.1.3-Identify Critical Success Factors of the Process
The critical success factors of production process can be productivity, production efficiency,
production volume, employee satisfaction, quality and lead time. The critical success factors
can be done using the format in annex 8.1.
5.3.1.4-Identify Productivity Indicators of the Process
Productivity indicators can be identified at firm, process, sub-process or operation level. The
productivity indicators can be partial, total and surrogate.
5.3.1.4.1-Partial and Total Productivity Indicators
Partial productivity indicators are the measure of partial inputs and they are directly measured
as ratio of output to input. Each processes of the firm utilize five partial inputs to deliver
outputs. The inputs are human, capital, material, energy and miscellaneous input which are
tangible. Finished product and partial (semi-finished) products produced for sale and internal
use are tangible outputs of the production process. Other processes of the firm deliver
services which considered as intangible outputs.
The partial and total productivity indicators for period t are human productivity (HPt), capital
productivity (CPt), material productivity (MPt), energy productivity (EPt), miscellaneous
inputs productivity (XPt) and total productivity (TPt).

5.3.1.4.2-Relationship between Partial and Total Productivity Indicators
Partial inputs affect the total productivity. In other words the total productivity depends on
the partial productivity. Total productivity can be found as weighted value of one of the
partial productivity indicators. Mathematically, TPFt = WH*HPt = WC*CPt = WM*MPt =
WE*EPt = WX*XPt
5.3.1.4.3-Surrogate Productivity Indicators
Surrogate productivity indicators are the measure of surrogate factors and they are not
measured directly as ratio of output to input. Focusing on the production process, the
surrogate productivity indicators considered are Employee Satisfaction Rate (ESt),
Motivation Rate (Mt), Skill Level Rate (SLt), Absenteeism Rate (At), Turnover Rate (Tt),
Human Hour Utilization (HHUt), Speed Loss Rate (SLt), Machine Hour Utilization (MHUt),
Quality of Material Rate (QMt), Marker Efficiency (MEt) and Quality of Product Rate (QPt).
5.3.1.4.4-Relationship between Partial and Surrogate Productivity Indicators
The productivity of each partial input depends on two or more surrogate factors. Hence
partial productivity measures are dependent variable; and surrogate productivity measures are
independent variable.
For example human productivity (HP) can be affected by employee satisfaction, motivation,
absenteeism, skill level, turnover and human hour utilization ; capital productivity (CP) by
speed loss (SL) and machine hour utilization; and material productivity (MP) by quality of
material and marker efficiency.
The productivity indicators of the process can be identified using template 2:

Figure 5.5: Template 1 to identify productivity indicators
5.3.2-Assess Productivity Factors
This step of the PIM which involves two major tasks, namely task 1-to identify the
productivity factors and task 2-to define the status of productivity factors. This step is used to
find the productivity improvement potentials.
5.3.2.1-Identify the Productivity Factors
This major task focuses on identifying and categorizing the productivity factors with their
explanation and measurement. This task can be done using the format in annex 8.2.
5.3.2.2-Define the Status of Productivity Factors
Here the status of each productivity factors is defined by using colors. And comments are
given to each productivity factors status. Knowing the status of productivity status is
important whether there are problems associated with the factor or not.
Table 5.1: Colors for defining status of productivity factors
If there are no problems associated with the factor

If there are problems associated with the factor
Not Applicable

The format in annex 8.3 can be used for defining the status of productivity factors.
5.3.3-Set Productivity Targets
In order to analyze and improve productivity, first setting productivity targets is very crucial.
Productivity target setting can be done at firm, process, sub-process or operation level. The
major task of this step is productivity target setting.
Productivity targets can be done by trend analysis and by using forecasting techniques for
each productivity measures.
Figure 5.6: Productivity targets setting framework
5.3.3.1-Trend Analysis
Here productivity targets are based on historical data. The targets can be set by experts and
management. This technique can be used to set targets for surrogate productivity and process
indicators.
5.3.3.2-Forcasting
Productivity targets can be also set by using forecasting techniques especially exponential
smoothing. This technique is used to found the forecasted values of partial and total
productivity. The forecasted value of productivity for period t is given as follows.
P’t+1 = αPt + (1-α)P’t
α = [2/(m+1)]

Where: P’t+1 is the forecasted value of productivity for next period; Pt is actual current period
productivity; P’t is the current period forecasted value of productivity; α is smoothing
constant lies between 0 and 1; and m is number of periods.
The target values of partial, total, surrogate productivity and process indicators can be
summarized by the format in annex 8.4.
5.1.4-Map the Process
Process mapping is useful tool to visualize and understand how processes, sub-processes or
operations are organized to deliver products and services. It assists to indentify inputs and
outputs of each process, sub-process or operation, and non-value activities performed in the
processes, sub-processes or operations. Process mapping of a process, sub-process or
operation can be done using template 2.
Figure 5.7: Template 2 for process mapping
5.1.5-Collect and Organize Data
In order to measure productivity the required data should be collected and organized. The
major task of this step is to collect and organize data of productivity indicators by using
different formats from annex 8.5 to 8.25.
5.3.6-Measure Productivity
The major task of this step is to measuring productivity in order to know the productivity
level for productivity analysis and improvement. Productivity measurement is done for

partial, total, surrogate productivity and process indicators at firm, process, sub-process or
operation level.
5.3.5.1-Partial Productivity Measurement
The partial productivity of this process for period t is given below.
5.3.5.1.1-Human Productivity
Human productivity can be measured monetary and physically for general and specific case
respectively.
General monetary measurement of human productivity,
Human Productivity (HPt) = Value of Outputs/Value of Human Inputs
Specific physical measurement of human productivity,
Human Productivity (HPt) = Volume of Outputs/Volume of Human Inputs
Human Productivity (HPt) = Volume of Outputs/Human Hour of Human Inputs
Where: Human inputs involve operators, supporting staffs, checkers, experts and managers.
Supporting staffs involve co-operators, material handlers, clerks, maintenance crews and the
like.
5.3.6.1.2-Capital Productivity
Capital productivity can be also measured monetary and physically for general and specific
case respectively.
General monetary measurement of capital productivity,
Capital Productivity (CPt) = Value of Outputs/Value of Capital Inputs
Specific physical measurement of capital productivity,
Capital Productivity (CPt) = Volume of Outputs/Volume of Machine Inputs
Capital Productivity (CPt) = Volume of Outputs/Machine-Hour of Machine Inputs
Where: Capital inputs involves both working and fixed capital. Fixed capital involves land,
buildings, machines, tools, equipment, amortized costs and the like. And working capital
involves inventory, cash, accounts receivable, note receivable and the like.

5.3.6.1.3-Material Productivity
Material productivity can be also measured monetary and physically for general and specific
case respectively.
General monetary measurement of material productivity,
Material Productivity (MPt) = Value of Outputs/Value of Material Inputs
Specific physical measurement of material productivity,
Material Productivity (MPt) = Volume of Outputs/Volume of Material Inputs
Where: Material inputs involve raw materials (fabrics) and purchased parts (accessories).
Purchased parts (accessories) involve threads, buttons, elastics, zippers, labels, tags, packing
materials and the like.
5.3.6.1.4-Energy Productivity
Energy productivity can be also measured monetary and physically for general and specific
case respectively.
General monetary measurement of energy productivity,
Energy Productivity (EPt) = Value of Outputs/Value of Energy Inputs
Specific physical measurement of material productivity,
Energy Productivity (EPt) = Volume of Outputs/Volume of Energy Inputs
Where: Energy inputs involve electricity, water, fuel and the like.
5.3.6.1.5-Miscellaneous Inputs Productivity
Miscellaneous inputs productivity can be generally measured monetary.
Miscellaneous Inputs Productivity (XPt) = Value of Outputs/Value of Miscellaneous Inputs
Where: Miscellaneous inputs of garment production process involves travel, tax, marketing,
product development, office supplies, information, consultants, general administration and
the like for base period t.

5.3.6.2-Total Productivity Measurement
Total productivity the firm can be measured using two approaches: as function of total output
to total inputs and as a function of partial productivity.
5.3.6.2.1-Total Productivity as a Function of Total Outputs to Total Inputs
Total productivity for period t as a function of its total outputs and total inputs is given by:
Figure 5.8: Total productivity measurement framework as a function of total outputs to total inputs
TPt = Total outputs/Total inputs
TPt = (Value of Outputs)/(Value of IH + Value of IC + Value of IM + Value of IE+ Value of IX)
Where: OTt and ITt are value of total outputs and total inputs for period t respectively; IH, IC,
IM, IE and IX are value of human input, capital input, material input, energy input and
miscellaneous input for period t respectively; and TPt is total productivity for period t.
5.3.6.2.2-Total Productivity as a Function of Partial Productivity
The total productivity for period t as function of partial productivity is given as follows:
TP୲ = W୨ PP୨୲
Wj = Value of Partial Inputs j/Value of Total Inputs
Wj = Ijt/ITt
Where: ITt is total inputs for period t; Ijt is value of partial inputs for period t; PPjt is partial
productivity for period t; TPt is total productivity period t; and Wj depicts the weight
corresponding to partial inputs.
5.3.6.3-Surrogate Productivity Measurement
Here the measurement of the following surrogate productivity indicators is made indirectly.
5.3.6.3.1-Employee Satisfaction Rate
For period t, the employee satisfaction rate (ESt) is given by:
ESt = Number of Satisfied Employees/Total Employees
The target to improve labor productivity is to increase ESt.
5.3.6.3.2-Motivation Rate
For period t, the employee satisfaction rate (Mt) is given by:
ESt = Number of Motivated Employees/Total Employees
The target to improve productivity is to increase Mt.
5.3.6.3.3-Skill Level Rate
For period t, the high skill rate (HSt), medium skill rate (MSt) and low skill rate (LSt) are
given by:
MSt = Number of High Skill Employees/Total Employees
MSt = Number of Medium Skill Employees/Total Employees
LSt = Number of Low Skill Employees/Total Employees
The target to improve productivity is to increase HSt, and decrease MSt and LSt.
5.3.6.3.4-Absenteeism Rate
The absenteeism rate for period t (At) is given by:

At = Absenteeism/Total Human-hours
The target to improve labor productivity is to decrease At.
5.3.6.3.5-Turnover Rate
The turnover rate for period t (Tt) is given by:
Tt = Turnovers/Total Number of Employees
The target to improve productivity is to decrease Tt.
5.3.6.3.6-Human Hour Utilization
The human hour utilization for period t (HHUt) is given by:
HHUt = Utilized Human Hour/Total Human Hour
The target to improve productivity is to increase HHUt.
5.3.6.3.7-Machine Hour Utilization
The Machine hour utilization for period t (MHUt) is given by:
HHUt = Utilized Machine Hour/Total Machine Hour
The target to improve productivity is to increase MHUt.
5.3.6.3.8-Speed Loss Rate:
The speed loss rate for period t (SLt) is given by:
SLt = (Current Production Rate – Previous Production Rate)/Current Production Rate
The target to improve productivity is to decrease SLt.
Where: Production Rate = Total Amount of Products/Production Time
5.3.6.3.9-Material Quality Rate
The material quality rate for period t (QMt) is given by:
QMt = Total Fabrics Pass without Reject/Total Inspected Fabrics
The target to improve productivity is to increase QMt.

5.3.6.3.10-Marker Efficiency
The marker efficiency for period t (MEt) is given by:
MEt = Area of Pattern in the Marker Plan/Total Area of the Marker Plan
The target to improve productivity is to increase MEt.
5.3.6.3.11-Product Quality Rate:
The product quality rate for period t (QPt) is given by:
QPt = Total Fabrics Pass without Reject/Total Inspected Products
The target to improve productivity is to increase QPt.
5.3.6.4-Process Indicator Measurement
In order to know the level of process indicators, process indicator measurement is done for
the following process indicators.
5.3.6.4.1-Capacity Utilization
The capacity utilization for period t (CUt) is given by:
CUt = Attained Capacity/Attainable Capacity
The target to improve productivity is to increase CUt.
5.3.6.4.2-Rejection Rate
The rejection rate for period t (Rjt) is given by:
Rjt = Total Rejects/Total Inspected Products
The target to improve productivity is to decrease Rjt.
5.3.6.4.3-Rework Rate
The rework rate for period t (Rwt) is given by:
Rwt = Total Reworks/Total Inspected Products
The target to improve productivity is to decrease Rwt.

5.3.6.4.4-Scrap Rate
The scrap rate for period t (Sct) is given by:
Sct = Total Scraps/Total Consumed Fabrics
The target to improve productivity is to decrease Sct.
5.3.6.4.5-Work In Process Rate
The work in process rate for period t (WIPt) is given by:
WIPt = Number of Work In Process/Total Number of Inputs
The target to improve productivity is to decrease WITt.
5.3.6.4.6-Standard Time
The standard time for period t (Kt) is given by:
Kt = [Normal Time + Allowance]
Where: Normal Time = Average Value of Observed Time.
5.3.6.4.7-Lead Time
For period t, the lead time (Lt) is given by:
Lt is the sum of all times elapsed between placing and receiving the order.
The target to improve productivity is to decrease Lt.
5.3.6.4.8-Waiting Time Rate
For period t, the waiting time rate (Wt) is given by:
Wt = Total Waiting Time/Total Human Hour
The target to improve productivity is to decrease Wt.
5.3.6.4.9-Transfer Time Rate
For period t, the transfer time rate (Trt) is given by:
Trt = Total Transfer Time/Total Material Handlers Hour

The target to improve productivity is to decrease Trt.
5.3.6.4.10-Downtime Rate
For period t, the waiting time rate (Dt) is given by:
Dt = Total Downtime/Total Machine Hour
The target to improve productivity is to decrease Dt.
5.3.6.4.11-Setup Time Rate
Setup time affects productivity of production process. For period t, the setup time rate (Sut) is
given by:
Sut = Total Setup Time/Total Human Hour
The target to improve productivity is to decrease Sut.
5.3.6.4.12-Internal Transport
Internal transport affects the productivity of production process. The internal for period t (ITt)
is given by the sum of all distances covered by the flow of material from input destination to
output destination.
The target to improve productivity is to decrease ITt.
After measuring productivity, the values can be summarized by the format in annex 8.26.
5.3.6-Analyze Productivity
The major function of this step is to evaluate and interpret productivity. The productivity
analysis can be done by comparing the current productivity with previous productivity, the
productivity targets and best practices. It is shown below.

Figure 5.9: Productivity analysis framework
From the above framework, change in productivity and deviation are used to evaluate and
interpret the productivity for period t. They are given as follows.
5.3.6.1-Change In Productivity
Change In Productivity (∆Pt) = Current Productivity (Pt) – Previous Productivity (Pt-1)
∆Pt indicates productivity growth, no productivity change or productivity decline. To know

by how much percent the productivity is grown or declined, the following formula is used.
[∆Pt/Pt]*100
5.3.6.2-Deviation
Deviation (Dt) = Current Productivity (Pt) – Target Productivity (P’t)
Dt tells that whether there is over target productivity performance, exact target productivity
performance or under target productivity performance. To know by how much percent the
productivity is over or under target, the following formula is used.
[Dt/Pt]*100
The result of productivity analysis can be summarized by the format in annex 8.27.
5.3.8-Formulate Productivity Improvement Plan
To improve productivity by achieving the goals and targets, productivity improvement plan
should be formulated. The major tasks of this step are task 1-cause and effect analysis, task 2-
to decide intervention areas and task 3-to develop action plan.

5.3.8.1-Cause and Effect Analysis
After finding the difference between current productivity and previous productivity, current
productivity and target productivity and current productivity with best practice, the causes for
the deference is identified. The cause and effect analysis can be done using template 4.
Figure 5.10: Template 4 for cause and effect analysis
5.3.8.2-Decide the Intervention Areas
After identifying the causes using cause and effect analysis, they should be organized and
prioritized based on their significance and contribution to productivity improvement. Four
fields and Pareto analysis are two management tools for this purpose. Template 5 and
template 6 below are used for four fields and Pareto analysis respectively.
Figure 5.11: Template 5 for four fields

In four fields a factor is evaluated by its impact and the effort required for solving the
problems.
90
80
70
60
50
40 Effect
30
20
10
0
Ca use 1 Ca use 2 Ca use 3 Cause 4 Cause N
Figure 5.12: Template 6 for four field method
In Pareto analysis different factors effect on productivity is evaluated then the vital few
factors are selected from the trivial many factors.
5.3.8.3-Develop Action Plan
After deciding the intervention areas, action plan is developed to take preventive and
corrective actions.
Figure 5.13: Action plan framework
The action plan should be developed by setting goals, clear objective, defining activities,
assigning responsibility, allocation reasonable amount of resources (finance, people, material
and time). The format in annex 8.28 can be used for developing the action plan.

5.3.9-Implement Productivity Improvement Plan
Once the productivity improvement plan has been formulated, top management should be
committed to it and should implement it in practice. Continuous support from top
management in setting goals and targets, allocating resources and creating awareness is
essential to the success of its implementation. Effective implementation requires a sound
understanding of the underlying principles and ideas of the productivity improvement plan. In
order to ensure success of implementation, it is critical to educate and train relevant
employees involved. In addition, reasonable amount of resources should be provided for
implementing the plan. Note that the productivity improvement plan is nothing if it cannot be
implemented by the company.
5.3.10-Evaluate Results
This is the final step of one full cycle of the PIM. By evaluating the results gained from the
PIM, it is possible to learn and prepare for further improvement in the next round. To
evaluate the results, the format in annex 8.29 can be used.
5.4-Benefits of the PIM
The PIM is used to define the processes, sub-processes and operations to make productivity
manageable, identify critical success factors, productivity indicators, productivity factors and
intervention areas, and for productivity target setting, measurement and analysis. The PIM
can improve partial and total productivity by enhancing effective utilization resources like
human, capital, material, energy and miscellaneous inputs; improve quality by minimizing
rates of rejection, rework and scrap; increase capacity by increasing human hour utilization
and machine hour utilization; increase both internal and external customer satisfaction; and
reduce cost by minimizing waste of resources. For academicians and researchers, the PIM
can be used as guideline how to develop a method that supports productivity improvement of
manufacturing company.

Chapter Six
6-Conclusion and Recommendation
6.1-Conclusion
Based on the data analysis and presentation, the following concluding remarks have been
made.
In today’s global market, success and survival of manufacturing firms demands on

competitiveness. Productivity is one of the major determinants that enable manufacturing
firms to compete in the global market. So, improving productivity can be taken as critical
task of a manufacturing firm.
Garment is one of the basic needs of mankind. Garment industry in today’s modern
market place is a truly global industry. Therefore, EGIs and the case company face high
competition within this global industry.
The results obtained from the assessment of EGIs and the case company show that the
EGIs and the case company possess low productivity. This low productivity makes them
to face challenges in the global competition.
The human productivity of EGIs is lower than the best practice by 100%. The human,
capital, material, energy, miscellaneous inputs and total productivity of the case company
are decreased by 0.3%, 9.7%, 6.7%, 7.8%, 2.7% and 6.3% from the target values
respectively. In addition, most of the productivity indicators of the case company show
poor status.
The productivity factors are multidimensional ranges from human to capital to material to
method to control to process to product factors. But all these factors do not have equal
effect on productivity. And the resources are limited to solve all the problems associated
with the productivity factors. Therefore, deciding the intervention areas which are
potential for productivity improvement is very important.
Decreasing absenteeism, increasing human and machine hour utilization, managing

inventory, increasing marker efficiency, minimizing rework, scrap and work in process,

decreasing standard time, lead time, waiting time and setup time, and improving product
quality are potentials for productivity improvement of the case company at low effort.
Currently EGIs and the case company uses disorganized and reactive problem solving
approach. Lack of understanding where to start productivity improvement, lack of
identifying critical success factors, lack of addressing the possible productivity factors,
lack of defining, measuring and analyzing productivity indicators (except human
productivity), and lack of identifying the intervention areas for productivity improvement
are the main reasons for not applying organized and sustainable productivity
improvement.
The PIM developed can be considered as organized and sustainable productivity

improvement program since it has clear defined user manual that states where to start
productivity improvement, how to identify critical success factors, how to address the
possible productivity factors, how to define, measure and analyze productivity indicators,
and how to identify the intervention areas for productivity improvement.
Compatibility with the knowledge and skill of the user (i.e. easy to use), compatibility
with the existing tools and techniques, addressing the possible productivity factors, being
continuous improvement tools, having clearly defined productivity targets setting,
measurement and analysis framework, and flexibility to apply from operation level to
firm level are the important characteristics of the PIM which make it preferable to apply.
Implementing the PIM can improve partial and total productivity by enhancing effective
utilization resources like human, capital, material, energy and miscellaneous inputs; it can
improve quality by minimizing rates of rejection, rework and scrap; it can increase
capacity by increasing human hour utilization and machine hour utilization; it can also
increase both internal and external customer satisfaction; and it can reduce cost by
minimizing waste of resources.

6.2-Recommendation
From the results of study, the following points have been recommended.
Productivity is one of the major determinants of competitiveness. Therefore, EGIs and the
case company should manage their productivity in organized and sustainable way so that
to compete in the market place.
Currently EGIs and the case company apply single partial productivity indicator (i.e.
human productivity) only. This overemphasizing one input factor to the extent that the
effect of the other input factors has been underestimated or even ignored, leading to
incorrect judgments and costly mistakes. Hence this may misdirect productivity
improvement efforts. Therefore, EGIs, in addition to human productivity, should focus on
capital productivity, material productivity, energy productivity, miscellaneous
productivity, total productivity, surrogate productivity and process indicators.
It is recommended that EGIs and the case company will be beneficiary if they use the
newly developed PIM. Because the PIM is organized and sustainable productivity
improvement program developed to improve productivity from operation to firm level.
Productivity improvement through the PIM should be considered as normal task of every
employee within the company. For better coordination of the PIM, EGIs and the case
company should formulate a standing productivity committee. The proposed members of
this committee are general manager as chair of person, representatives from each major
process as member, and industrial engineer as member and secretary. The committee
should facilitate the implementation of the PIM, evaluate the results and report to
management.
Management of EGIs and the case company should be committed in setting goals and
targets, awareness creation and allocation of reasonable resource to implement the PIM.
By involving government, stakeholders, academicians and researchers, EGIs and the case
company should struggle to mitigate external (national level) factors that affect their
productivity.

Currently EGIs and the case company uses disorganized and reactive problem solving
approach even though there are multidimensional productivity factors needing organized
and sustainable productivity improvement program. So, the case company is strongly
advised to use the PIM by involving all its employees.
It is better for the case company to give priority on decreasing absenteeism, increasing
human and machine hour utilization, managing inventory, increasing marker efficiency,
minimizing rework, scrap and work in process, decreasing standard time, lead time,
waiting time and setup time, and improving product quality for its productivity
improvement at low effort.
The case company is advised to implement the improved layout (refer annex 7) to
decrease distance traveled and time taken by 50m/trip and 2m/trip respectively. And to
improve working condition.
Currently the case company does not have research and development process, so it is
recommended to have this process for the design and development of different types of
garment styles by identifying customers’ needs and requirements, and for introducing
new tools and techniques.
6.3-Future Research Work
Manufacturing and service organizations are basic economic elements of a nation. Therefore,
developing a generic method that supports productivity improvement of both manufacturing
and service giving industries of Ethiopia is the research area that should be considered in the
future.

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Annexes
Annex 1-Survey Questionnaire
School of Graduate Studies
Addis Ababa Institute of Technology
Department of Mechanical Engineering
Industrial Engineering Graduate Program
Thesis Title: “Design of Productivity Improvement Method for Ethiopian Garment Industries”
Survey Questionnaire for Ethiopian Garment Industries
By: Azemeraw Tadesse, Mobile: +251910536237, Email: [email protected]
Objective of the Survey Questionnaire:

The general objective of this survey questionnaire is to assess existing productivity measurement and
improvement practices of Ethiopian garment industries and the factors that affect their productivity.
Acknowledgement to the Respondent:

Hereby, I would like to express my gratitude for your dedicated cooperation. Had it not been your genuine
cooperation of filling this questionnaire, it would have not been to conduct this thesis.
This questionnaire is conducted for the purpose of M.Sc. thesis. Therefore, I assure you that the information
obtained from this questionnaire will be kept confidential and will not be transferred to other parties for any
other purpose. For other questions pertaining to this survey questionnaire, please contact the thesis advisors.
Advisor:
Dr.-Ing. Daniel Kitaw (Associate Professor of Mechanical Engineering)
Addis Ababa Institute of Technology, Addis Ababa University
Phone: 0111232439, Fax: 0111239480
Co-Advisor:
Mr. Amare Matebu (PhD Candidate)
Addis Ababa Institute of Technology, Addis Ababa University

Phone: 0111232439, Fax: 0111239480
Terminologies:
“Productivity is effective and efficient utilization of resources used to produce products/services that meet
customer requirements continuously by applying appropriate methods and by controlling the parameters.”
(Azemeraw Tadesse)
“Partial productivity is the ration of output to one class of input. For example labor productivity (the ratio of
output to labor input) is a partial measure. Similarly, machine productivity (the ratio of output to machine
input); material productivity (the ratio of output to material input); energy productivity (the ratio of output to
energy input); and miscellaneous productivity (the ratio of output to energy input) are examples of partial
productivity.
“Multifactor productivity is ratio of output to a bundle of inputs. For example the ratio of output to labor and
machine input; the ratio of output to labor and material input; the ratio of output to machine and material
input; the ratio of output to labor, machine and material input; and the like.”
“Total productivity is the ratio of total output to the sum of all input factors. Thus a total productivity measure
reflects the joint impact of all inputs in producing the output. It is a kind of a higher level of productivity
assessment combining several or many partial productivity measures.”
“Surrogate productivity is used to measure productivity indirectly. It considers surrogate factors like customer
satisfaction (both internal and external customer), skill level, education level, absenteeism, turnover, speed loss,
standard time, downtime, waiting time, lead time, transfer time, work in process (WIP), rejection level, rework
level, scrap level, internal transport and the like.”
“Human inputs involve operators, supporting staffs, checkers, experts and managers. Supporting staffs involve
co-operators, material handlers, clerks, maintenance crews and the like.”
“Capital inputs involve fixed capital and working capital. Fixed capital involves land, buildings, machines,
tools, equipment, amortized costs and the like. And working capital involves inventory, cash, accounts
receivable, note receivable and the like.”
“Material inputs involve raw materials and purchased parts. Purchased parts involve threads, buttons, elastic,
zippers, packing materials and the like.”
“Energy inputs involve electricity, water, fuel and the like.”
“Miscellaneous inputs involve travel, tax, marketing, product development, office supplies, information,
consultants, administration and the like.”
“Outputs of garment manufacturing industry involve finished and partial (semi-finished products produced for
sale and internal use.”

I-Respondent Information:
1-Position:_____________________________
2-Qualification:______________________________________
3-Work experience in this company:_________________________________
II-Company Information:
4-Company name:_______________________________________
5-Year of establishment:_______________________ G.C.
6-Market segment: Local Export Local and Export
7-Number of total employees: Permanent:___________________, Temporary:___________________
8-Average working days per year:_______________________
9-Average working days per month:_______________________
10-Average working days per week:_______________________
11-Number of working shifts per day:_______________________
12-Number of working hours per shift:_______________________
III-Assessment of Existing Productivity Management Practices of Ethiopian Garment Manufacturing

Industries:
13-Does the company establish its clear vision for its productivity? Yes No
14-Does the company set its goals and its targets for its productivity? Yes No
15-Does the company measure and evaluate its productivity regularly? Yes No
16-Does the company identify problems of its productivity improvement? Yes No

17-Please indicate the productivity awareness status of the following workforces? Use the symbol (x) to
indicate. Where 1 = have awareness and basic understanding and 0 = have no awareness and basic
understanding)
S.No. Workforces 0 1
1 Top Managers
2 Middle Managers
3 Lower Managers
4 Experts

5 Checkers
6 Supporting Staffs
7 Operators
18-Please give the performance data of your company for the last five years.
Item 1998 E.C. 1999 E.C. 2000 E.C. 2001 E.C. 2002 E.C.
Sales Volume (Pieces)
Sales Value (Birr)
Local Market Share (%)
Foreign Market Share (%)
Production Cost (Birr)
Net Profit (Birr)
Volume of Finished Products (Pieces)
Value of Finished Products (Birr)
Volume of Partial Products (Pieces)
Value of Partial Products (Birr)
Value of Human Inputs (Birr)
Value of Capital Inputs (Birr)
Value of Material Inputs (Birr)
Value of Energy Inputs (Birr)
Value of Miscellaneous Inputs (Birr)
19-What is/are the company’s working definition of productivity? Please use the symbol (x) to indicate. Where
1 = applied and 0 = not applied. (You can select one or more of the following)
S.No. Possible Definitions of Productivity 0 1

1 Value of Outputs/Value of Human Inputs
2 Volume of Outputs/Man-hour of Labor Inputs
3 Value of Outputs/Value of Labor Inputs
4 Value of Outputs/Value of Capital Inputs
5 Volume of Outputs/Volume of Machine Inputs
6 Volume of Outputs/Machine-hour of Machine Inputs
8 Volume of Outputs/Volume of Material Inputs
9 Value of Outputs/Value of Material Inputs
10 Volume of Outputs/Volume of Energy Inputs
11 Value of Outputs/Value of Energy Inputs
12 Value of Outputs/Value of Miscellaneous Inputs
13 Value of Outputs/Value of a Bundle of Inputs
14 Value of Total Outputs/Value of Total Inputs
Others:____________________________________________________________________________________
__________________________________________________________________________________________

__________________________________________________________________________________________
_____________________________________________________________
20-Please indicate which of measurements applied by your company. Use the symbol (x) to indicate. Where 1 =
applied and 0 = not applied. (You can select one or more of the following)
S.No. Productivity Measurement Practices 0 1

1 Human Productivity
2 Capital Productivity
3 Machine Productivity
4 Material Productivity
5 Energy Productivity
6 Miscellaneous Inputs Productivity
7 Multifactor Productivity
8 Total Productivity
9 Customer Satisfaction (considers both internal and external customers)
10 Skill Level
11 Education Level
12 Absenteeism
13 Turnover
14 Speed Loss
15 Standard Time
16 Downtime
17 Waiting Time
18 Lead Time (the time passing between ordering and receiving goods)
19 Transfer Time
20 Work In Process (WIP)
21 Rejection Level
22 Rework Level
23 Scrap Level
24 Internal Transport (considers flow of material with in the production process)
Others:____________________________________________________________________________________
__________________________________________________________________________________________
__________________________________________________________________________________________
_____________________________________________________________
21-How do you rate the productivity of the following workforces? Please use the symbol (x) to indicate.
S.No. Workforces High Medium Low

1 Top Managers
2 Middle Managers
3 Lower Managers

4 Experts
5 Checkers
6 Supporting Staffs
7 Operators
22-Do you have standard time for each garment style for all tasks required?
Yes No
23-Please give the following labor productivity measurement.
S.No. Garment Type Number of Pieces /Operator/Machine/Shift

1 T-shirt with Long Sleeve
2 T-shirt with Short Sleeve
3 Shirt with Long Sleeve
4 Shirt with Short Sleeve
5 Polo Shirt with Long Sleeve
6 Polo Shirt with Short Sleeve
7 Police Uniforms
8 Military Uniforms
9 Civil Uniforms
10 Sport Wears
11 Pajamas
24-Please give an average percentage of the following data in your company.
S.No. Material Inputs Rejection (%) Rework (%) Scrape (%)

1 Raw Materials
2 Purchased Parts
25-Is the company compares its productivity with its previous performance, national and international standards.
Yes No
26-Please indicate which of productivity improvement techniques implemented by your company. Use the
symbol (x) to indicate. Where 1 = applied and 0 = not applied. (You can select one or more of the following)
S.No. Productivity Improvement Techniques 0 1

1 Computer Applications
2 Computer Aided Design (CAD)
3 Computer Aided Process Planning (CAPP)
4 Computer Aided Manufacturing (CAM)
5 Group Technology
6 New Production Lines/Machines
7 Rebuilding Old Machines

8 Maintenance Planning and Control
9 Layout Improvement
10 Inventory Control
11 Material Requirement Planning (MRP)
12 Material Handling Improvement
13 Material Reuse/Recycling
14 New Material Utilization
15 Research and Development (R&D)
16 Product Design
17 Product Reliability Improvement
18 Value Engineering
19 Financial Incentives
20 Training and Education
21 Quality Circles
22 Brain Storming
23 Working Conditions Improvement
24 Communication Improvement
25 Job Rotation
26 Work Study
27 Job Evaluation
28 Job Safety
29 Human Factor Engineering (Ergonomics)
30 Computer Aided Data Processing
31 Scheduling
32 Operation Research
33 Theory of Constraint
34 Marketing Management
35 Production Management
36 Quality Management
37 Cost Management
38 Maintenance Management
39 Material Management
40 Resource Management
41 Business Process Reengineering (BPR)
42 Bench Marking
43 Balanced Score Card (BSC)
44 Just In Time Manufacturing
45 Lean Manufacturing
46 Reducing Administration Cost
47 Increasing Value Addition

48 Increasing Contribution
49 Increasing Profit
Others:____________________________________________________________________________________
__________________________________________________________________________________________
__________________________________________________________________________________________
_____________________________________________________________
IV-Assessment of Factors Affecting Productivity of Ethiopian Garment Manufacturing Industries:
27-Please rate the impact of each process on the productivity of your company using three scales. Use the
symbol (x) for each process with respect to each scale. Where, 3 = high impact, 2= medium impact and 1 = low
impact.
S.No. Processes 1 2 3
1 Production
2 Sales and Marketing
3 Procurement and Property Administration
4 Human Resource Development and Administration
5 Finance and Accounting
6 Research and Development
28-Please rate the impact of each partial input on the productivity of your company using three scales. Use the
symbol (x) for each partial input with respect to each scale. Where, 3 = high impact, 2= medium impact and 1 =
low impact.
S.No. Partial Inputs 1 2 3

1 Human Inputs
2 Capital Inputs
3 Material Inputs
4 Energy Inputs
5 Miscellaneous Inputs
29-Please rate the impact of each factor on the productivity of your company using three scales. Use the symbol
(x) for each factor with respect to each scale. Where, 3 = high impact, 2= medium impact and 1 = low impact.
S.No. Factors 1 2 3
1 Knowledge and Skill
2 Motivation and Morale
3 Employee Satisfaction
4 Attitude and Culture
5 Life Standard
6 Absenteeism
7 Turnover

8 Human Capability
9 Technical Capability
10 Technological Capability
11 Process Capability
12 Maintenance
13 Depreciation
14 Speed Loss
15 Rejection
16 Rework
17 Scrap
18 Shortage
19 Rules and Regulations
20 Procedures
21 Work Instructions
22 Working Formats and Templates
23 Incentive Schemes
24 Ergonomics (deals with relationship between employees and their
working environment.)
25 Work Study (assessment of methods of working so as to achieve
maximum productivity.)
26 Other Productivity Improvement Techniques
27 Quality Control
28 Inventory Control
29 Production Control
30 Process Control
31 Environment Control
32 Standard Time
33 Lead Time
34 Waiting Time
35 Transfer Time
36 Downtime
37 Setup Time
38 Internal Transport
Others:____________________________________________________________________________________
__________________________________________________________________________________________
__________________________________________________________________________________________
_____________________________________________________________
THANK YOU FOR YOUR COOPERATION!!!

Annex 2-Results of the Survey Questionnaire
Company Information:
1-Year of establishment: 58.3% before 2000 and 41.7% after 2000 G.C.
2-Market segment: Local: 26.7% Export: 20% Local and Export: 53.3%
3-Number of total employees: Permanent: On average 188, Temporary: On average 35
4-Average working days per year: 295
5-Average working days per month: 26
6-Average working days per week: 5.5
7-Number of working shifts per day: 1
8-Number of working hours per shift: 7.5
Assessment of Existing Productivity Measurement and Improvement Practices of Ethiopian Garment

Manufacturing Industries: Pleas use the symbol (x) to indicate.
Yes No
9-Does the company establish its clear vision for its productivity? 80% 20%
10-Does the company set its goals and its targets for its productivity? 80% 20%
11-Does the company measure and evaluate its productivity regularly? 66.7% 33.3%
12-Does the company identify problems of its productivity improvement? 100% 0%
13-Please indicate the productivity awareness status of the following workforces? Use the symbol (x) to
indicate. Where 1 = have awareness and basic understanding and 0 = have no awareness and basic
understanding)
S.No. Workforces 0 1
1 Top Managers 7.1% 92.9%
2 Middle Managers 0% 100%
3 Lower Managers 14.3% 85.7%
4 Experts 0% 100%
5 Checkers 35.7% 64.3%
6 Supporting Staffs 57.1% 42.9%
7 Operators 50% 50%
14-What is/are the company’s working definition of productivity? Please use the symbol (x) to indicate. Where
1 = applied and 0 = not applied. (You can select one or more of the following)

S.No. Possible Definitions of Productivity 0 1
1 Value of Outputs/Value of Human Inputs 21.4% 78.6%
2 Volume of Outputs/Man-hour of Labor Inputs 7.1% 92.9%
3 Value of Outputs/Value of Labor Inputs 42.9% 57.1%
4 Value of Outputs/Value of Capital Inputs 57.1% 42.9%
5 Volume of Outputs/Volume of Machine Inputs 21.4% 78.6%
6 Volume of Outputs/Machine-hour of Machine Inputs 50% 50%
8 Volume of Outputs/Volume of Material Inputs 35.7% 64.3%
9 Value of Outputs/Value of Material Inputs 57.1% 42.9%
10 Volume of Outputs/Volume of Energy Inputs 92.9% 7.1%
11 Value of Outputs/Value of Energy Inputs 85.7% 14.3%
12 Value of Outputs/Value of Miscellaneous Inputs 78.6% 21.4%
13 Value of Outputs/Value of a Bundle of Inputs 50% 50%
14 Value of Total Outputs/Value of Total Inputs 42.9% 57.1%
15-Please indicate which of measurements applied by your company. Use the symbol (x) to indicate. Where 1 =
applied and 0 = not applied. (You can select one or more of the following)
S.No. Productivity Measurement Practices 0 1

1 Human Productivity 0% 100%
2 Capital Productivity 40% 60%
3 Machine Productivity 20% 80%
4 Material Productivity 13.3% 86.7%
5 Energy Productivity 80% 20%
6 Miscellaneous Inputs Productivity 53.3% 46.7%
7 Multifactor Productivity 73.3% 26.7%
8 Total Productivity 40% 60%
9 Customer Satisfaction 40% 60%
10 Skill Level 13.3% 86.7%
11 Education Level 46.7% 53.3%
12 Absenteeism 13.3% 86.7%
13 Turnover 40% 60%
14 Speed Loss 53.3% 46.7%
15 Standard Time 40% 60%
16 Downtime 40% 60%
17 Waiting Time 66.7% 33.3%
18 Lead Time 40% 60%
19 Transfer Time 53.3% 46.7%
20 Work In Process (WIP) 40% 60%
21 Rejection Level 53.3% 46.7%
22 Rework Level 33.3% 66.7%

23 Scrap Level 46.7% 53.3%
24 Internal Transport 80% 20%
16-How do you rate the productivity of the following workforces? Please use the symbol (x) to indicate.
S.No. Workforces High Medium Low

1 Top Managers 64.3% 28.6% 7.1%
2 Middle Managers 50% 50% 0%
3 Lower Managers 50% 35.7% 14.3%
4 Experts 64.3% 28.6% 7.1%
5 Checkers 50% 42.9% 7.1%
6 Supporting Staffs 14.3% 35.7% 50%
7 Operators 42.9% 35.7% 21.4%
17-Do you have standard time for each garment style for all tasks required?
Yes 40% No 60%
18-Is the company compares its productivity with its previous performance, national and international
standards?
Yes 71.4% No 28.6%
19-Please indicate which of productivity improvement techniques implemented by your company. Use the
symbol (x) to indicate. Where 1 = applied and 0 = not applied. (You can select one or more of the following)
S.No. Productivity Improvement Techniques 0 1

1 Computer Applications 20% 80%
2 Computer Aided Design (CAD) 66.7% 33.3%
3 Computer Aided Process Planning (CAPP) 93.3% 6.7%
4 Computer Aided Manufacturing (CAM) 93.3% 6.7%
5 Group Technology 73.3% 26.7%
6 New Production Lines/Machines 6.7% 93.3%
7 Rebuilding Old Machines 20% 80%
8 Maintenance Planning and Control 53.3% 46.7%
9 Layout Improvement 13.3% 86.7%
10 Inventory Control 6.7% 93.3%
11 Material Requirement Planning (MRP) 26.7% 73.3%
12 Material Handling Improvement 40% 60%
13 Material Reuse/Recycling 60% 40%
14 New Material Utilization 40% 60%
15 Research and Development (R&D) 93.3% 6.7%
16 Product Design 26.7% 73.3%
17 Product Reliability Improvement 40% 60%

18 Value Engineering 73.3% 26.7%
19 Financial Incentives 33.3% 66.7%
20 Training and Education 33.3% 66.7%
21 Quality Circles 60% 40%
22 Brain Storming 46.7% 53.3%
23 Working Conditions Improvement 53.3% 46.7%
24 Communication Improvement 40% 60%
25 Job Rotation 46.7% 53.3%
26 Work Study 26.7% 73.3%
27 Job Evaluation 33.3% 66.7%
28 Job Safety 33.3% 66.7%
29 Human Factor Engineering (Ergonomics) 73.3% 26.7%
30 Computer Aided Data Processing 66.7% 33.3%
31 Scheduling 46.7% 53.3%
32 Operation Research 73.3% 26.7%
33 Theory of Constraint 73.3% 26.7%
34 Marketing Management 13.3% 86.7%
35 Production Management 6.7% 93.3%
36 Quality Management 13.3% 86.7%
37 Cost Management 20% 80%
38 Maintenance Management 40% 60%
39 Material Management 26.7% 73.3%
40 Resource Management 20% 80%
41 Business Process Reengineering (BPR) 86.7% 13.3%
42 Bench Marking 46.7% 53.3%
43 Balanced Score Card (BSC) 80% 20%
44 Just In Time Manufacturing 73.3% 26.7%
45 Lean Manufacturing 100% 0%
46 Reducing Administration Cost 33.3% 66.7%
47 Increasing Value Addition 13.3% 86.7%
48 Increasing Contribution 33.3% 66.7%
49 Increasing Profit 13.3% 86.7%
Assessment of Factors Affecting Productivity of Ethiopian Garment Manufacturing Industries:
20-Please rate the impact of each process on the productivity of your company using three scales. Use the
symbol (x) for each process with respect to each scale. Where, 3 = high impact, 2= medium impact and 1 = low
impact.
S.No. Processes 1 2 3
1 Production 7.1% 14.3% 78.6%
2 Sales and Marketing 21.4% 35.7% 42.9%

3 Procurement and Property Administration 21.4% 50% 28.6%
4 Human Resource Development and Administration 21.4% 35.7% 42.9%
5 Finance and Accounting 14.3% 78.6% 7.1%
6 Research and Development 21.4% 71.4% 7.1%
21-Please rate the impact of each partial input on the productivity of your company using three scales. Use the
symbol (x) for each partial input with respect to each scale. Where, 3 = high impact, 2= medium impact and 1 =
low impact.
S.No. Partial Inputs 1 2 3

1 Human Inputs 14.3% 7.1% 78.6%
2 Capital Inputs 14.3% 50% 35.7%
3 Material Inputs 14.3% 21.4% 64.3%
4 Energy Inputs 14.3% 50% 35.7%
5 Miscellaneous Inputs 21.4% 64.3% 14.3%
22-Please rate the impact of each factor on the productivity of your company using three scales. Use the symbol
(x) for each factor with respect to each scale. Where, 3 = high impact, 2= medium impact and 1 = low impact.
S.No. Factors 1 2 3
1 Knowledge and Skill 21.4% 21.4% 51.1%
2 Motivation and Morale 7.1% 28.6% 64.3%
3 Employee Satisfaction 7.1% 35.7% 51.1%
4 Attitude and Culture 14.3% 42.9% 42.9%
5 Life Standard 0% 64.3% 35.7%
6 Absenteeism 14.3% 28.6% 57.1%
7 Turnover 28.6% 35.7% 35.7%
8 Human Capability 14.3% 35.7% 50%
9 Technical Capability 14.3% 21.4% 64.3%
10 Technological Capability 7.1% 28.6% 64.3%
11 Process Capability 7.1% 28.6% 64.3%
12 Maintenance 7.1% 28.6% 64.3%
13 Depreciation 7.1% 57.1% 35.7%
14 Speed Loss 14.3% 35.7% 50%
15 Rejection 14.3% 42.9% 42.9%
16 Rework 7.1% 50% 42.9%
17 Scrap 28.6% 50% 21.4%
18 Shortage 21.4% 28.6% 50%
19 Rules and Regulations 7.1% 35.7% 57.1%
20 Procedures 7.1% 57.1% 35.7%
21 Work Instructions 7.1% 28.6% 64.3%
22 Working Formats and Templates 14.3% 50% 35.7%

23 Incentive Schemes 14.3% 14.3% 71.4%
24 Ergonomics 7.1% 21.4% 71.4%
25 Work Study 14.3% 21.4% 64.3%
26 Other Productivity Improvement Techniques 14.3% 50% 35.7%
27 Quality Control 14.3% 50% 35.7%
28 Inventory Control 14.3% 50% 35.7%
29 Production Control 14.3% 21.4% 64.3%
30 Process Control 14.3% 14.3% 71.4%
31 Environment Control 14.3% 50% 35.7%
32 Standard Time 7.1% 21.4% 71.4%
33 Lead Time 7.7% 38.5% 53.8%
34 Waiting Time 0% 61.5% 38.5%
35 Transfer Time 0% 61.5% 38.5%
36 Downtime 0% 23.1% 76.9%
37 Setup Time 0% 69.2% 30.8%
38 Internal Transport 7.7% 69.2% 23.1%

Annex 3-List of Contacted Garment Industries
S.No. Company Name Location Questionnaire Distribution Response

1 Addis Garment Share Company Old Air Port, Addis Ababa Through Internet No
2 Adei Ababa Yarn Share Company Saris, Addis Ababa Physically No
3 Akaki Garment Share Company Akaki, Addis Ababa Physically Yes
4 Almeda Textile PLC Mekelle, Tigray Through Internet No
5 Ambassader Garment and Trading PLC Yerer, Addis Ababa Physically Yes
6 Ayka Addis Textile and Investment Group Sebeta, Oromiya Physically Yes
7 Best Garment PLC Addis Ababa Through Internet No
8 Birhanu Sahile Garment PLC Lafto, Addis Ababa Physically No
9 Concept International PLC Saris, Addis Ababa Physically Yes
10 Edget Garment PLC Addis Ababa Through Internet No
11 Etab Enter Garment PLC Addis Ababa Through Internet No
12 Feleke Garment PLC Lafto, Addis Ababa Physically Yes
13 Garment Evolution PLC Yerer, Addis Ababa Physically Yes
14 GG Super Garment PLC Debre Zeit, Oromiya Through Internet No
15 GMM Garment PLC Lafto, Addis Ababa Physically No
16 Gullele Garment Share Company Gullele, Addis Ababa Physically Yes
17 Haile Garment PLC Lafto, Addis Ababa Physically Yes
18 Knit to Finish Factory Gelan, Oromiya Physically Yes
19 MAA Garment Factory Mekelle, Tigray Through Internet No
20 Mulat Garment PLC Saris, Addis Ababa Physically No
21 Nazareth Garment Share Company Adama, Oromiya Through Internet No
22 Novastar Garment PLC Gelan, Oromiya Physically Yes
23 Oasis Abyssinia Garment PLC Saris, Addis Ababa Physically Yes
24 Progress Garment and General Import PLC Gergi, Addis Ababa Physically Yes
25 Ras Dashen Textile and Garment Factory Addis Ababa Through Internet No
26 Tays Garment PLC Addis Ababa Through Internet No
27 Wossi Garment Design Factory Saris, Addis Ababa Physically Yes
28 Wow International PLC Gelan, Oromiya Physically Yes
29 Yonis Garment PLC Saris, Addis Ababa Physically Yes
30 Zefmesh Garment PLC Addis Ababa Through Internet No

Annex 4-Organizational Structure of Novastar Garment PLC
General Manager
Deputy General Manager
Factory Manager
Executive Secretary
Finance and Administration

Operation Department Marketing Department
Department
Quality Control Division
Finance and Accounting

Merchandising Division
Development Division
Commerce Division
Production Division
Human Resource
Division

Annex 5-Benchmarking Analysis of Novastar Garment PLC
International Jan, 2011 Feb, 2011 Mar, 2011 Apr, 2011 May, 2011 Average
S.No Performance Indicators Unit Benchmark
Value Target Actual Target Actual Target Actual Target Actual Target Actual Target Actual
1 Manual Pattern Making hours/style 0.5-1 <1 0.48 <1 0.46 <1 0.46 <1 0.46 <1 0.46 <1 0.46
2 CAD Pattern Making Min/style 10-20 10 32 10 31 10 31 10 31 10 30 10 31
3 Average Sampling Making Lead Time days 2-4 NA NA NA NA NA NA NA NA NA NA NA NA
4 Marker Efficiency (Woven) % 90% 90 84 90 84 90 84 90 84 90 83 90 83.8
5 Marker Efficiency (Knit) " 90% 90 78 90 83 90 86 90 83 90 84 90 82.8
6 Edge Wastage (Woven) cm/spreading 2-4 <2.5 3 <2.5 3 <2.5 3 <2.5 3 <2.5 3 <2.5 3
7 Edge Wastage (Knit) cm/spreading 2-4 <3 4 <3 5 <3 5 <3 5 <3 5 <3 5
8 Manual Cutting Productivity (Knit) pcs/shift/person 300-400 400 212 400 300 400 321 400 375 300-400 247 390 291
9 Manual Cutting Productivity (Woven) pcs/shift/person 250-300 300 174 300 165.5 300 179 300 191 300 65 300 154.9
10 Working Minutes min/day 480 460 460 460 460 460 460 460 460 460 460 460 460
11 Sewing Standard Time (Knitted T-Shirt) min/pcs 5 5 12.89 5 22.39 5 10.05 5 9.33 5 7 5 12.3
12 Sewing Productivity (Knitted T-Shirt) pcs/operators/shift 86 86 35.62 86 20.55 86 43.34 86 51.34 86 62 86 42.6
13 Sewing Efficiency (Knitted T-Shirt) % 90 90 68.62 90 62.4 90 50.4 90 59.7 90 72.09 90 62.6
14 Sewing Standard Time (Knitted Trouser) min/pcs 18-22 20 21.04 20 29.26 20 25 20 24 20 19 20 23.7
15 Sewing Productivity (Knitted Trouser) pcs/operators/shift 23 23 21.83 23 19.04 23 19.70 23 19.87 23 18 23 19.7
16 Sewing Efficiency (Knitted Trouser) % 90 90 68.62 90 82.78 90 85 90 86.39 90 78.26 90 80.21
17 Sewing Standard Time (Woven Trouser) min/pcs 18-22 20 30.22 NA NA 20 56.1 20 NA 20 18.5 20 34.9
18 Sewing Productivity (Woven Trouser) pcs/operators/shift 23 23 15.08 NA NA 23 7.76 23 NA 23 14 23 12.3
19 Sewing Standard Time (Woven Top) min/pcs 18-22 20 34.13 20 34.43 20 30.86 20 36.29 20 25.3 20 161
20 Sewing Productivity (Woven Top) pcs/operators/shift 24 24 13.35 24 12.85 24 14.11 24 13.21 24 18.3 24 14.4
21 Sewing Standard Time (Woven Work Wear) min/pcs 18-26 NA NA NA NA NA NA NA NA NA NA NA NA
22 Folding and Packing Productivity (T-shirt) pcs/operators/shift 300 300 201 300 279 300 281 300 307 300 274 300 268.4
23 Manual Ironing Standard Time (Woven T-shirt) Min/pc 0.8-1 NA NA NA NA NA NA NA NA NA NA NA NA
24 Manual Ironing Standard Time (Woven Trouser) " 0.8-1 <1 2.25 <1 2.23 <1 2.34 <1 2.28 <1 2.75 <1 2.4
25 Manual Ironing Productivity (Woven) pcs/operators/shift 460 460 213.13 460 215 460 205 460 210 460 167 460 202

26 Overall Efficiency (Knit) % 90-92 90 68.62 90 83.77 90 84.45 90 89.6 90 82.4 90 81.8
27 Overall Efficiency (Woven) " 85-90 85 55.58 85 64.87 85 64.02 85 69.75 85 68.6 85 64.6
28 Rework Rate (knit) " <2 <2 9 <2 9 <2 18 <2 10 NA 10 <2 11.2
29 Rework Rate (Woven) " <2 <2 13 <2 11 <2 12 <2 10 NA 12 <2 11.6
30 Rejection Rate (Knit) " 2 0 0 0 0 0 0 0 0 NA 0.3 0 0.08
31 Rejection Rate (Woven) " 2.5 0 0 0 0 0 0 0 0 NA 0 0 0
32 Absenteeism " <1 <1 1.17 <1 1.61 <1 1.68 <1 0.95 NA 2 <1 1.5
33 Turnover " 10 <3 4.05 <3 3.8 <3 3.59 <3 5.9 NA 7 <3 4.9
34 Marketing Lead Time weeks 4-6 4-6 6-8 4-6 6-8 4-6 6-8 4-6 6-8 NA 6-8 5 7
35 Number of customers # >5 5 2 5 2 5 2 5 2 NA 2 5 2
36 Average Lead Time for Price Quotation FOB days 1 1 3-5 1 3-5 1 3-5 1 3-5 NA 3-5 1 4
37 Average Lead Time for Price Quotation CMT days 1 1 1 1 1 1 1 1 1 NA 1 1 1
38 Profit Margin FOB % 7-15 15 10 15 10 15 NA 15 NA NA 10 15 10
39 Profit Margin CMT " 10 10 10 10 10 10 10 10 10 NA 10 10 10

Annex 6-Existing Layout8 of Novastar Garment PLC Production Process
Boiler Embroidery
Ironing
INSP
Fusing
Sewing I
Sewing II
Packing
FPS
Cutting
RMS
8
The existing layout is a sketch which has been drawn to determine internal transport and transfer time. Internal
transport and transfer time are productivity factors. Considering the product BP3, the distance travelled and time
taken are 126m and 5.04 minutes per trip respectively. Note that, one trip covers distance from raw materials
store (RMS) to finished products store (FPS) across sewing I.

Annex 7-Improved Layout9 for Novastar Garment PLC Production Process
Embroidery Boiler
Ironing
INSP
Sewing I Sewing II
Packing
FPS
Cutting
RMS
9
The improved layout is also a sketch which is drawn to determine internal transport and transfer time.
Considering the product BP3, the distance travelled and time taken are 100m and 4 minutes per trip respectively.

Annex 8-Various Formats Formulated for the PIM
Annex 8.1-Format for Critical Success Factors
S.No. Critical Success Factors Reasons Potential Benefits Measured Values Target Values
1
2
3
4
N
Total
Annex 8.2-Format for Identifying Productivity Factors
S.No. Productivity Factors Explanation Measurement

1 Category 1
1.1
1.2
1.N
2 Category 2
2.1
2.2
2.N
M Category M
M.1
M.2
M.N
Annex 8.3-Format for Defining Status of Productivity Factors
S.No. Productivity Factors Status Comments

1 Category 1
1.1
1.2
1.N
2 Category 2
2.1
2.2

2.N
M Category M
M.1
M.2
M.N
Annex 8.4-Format for Productivity Targets Setting
S.No. Indicators Unit Targets

1 Human Productivity %
2 Capital Productivity “
3 Material Productivity “
4 Energy Productivity “
5 Miscellaneous Inputs Productivity “
6 Total Productivity “
7 Employee Satisfaction Rate “
8 Motivation Rate “
9 High Skill Rate “
10 Medium Skill Rate “
11 Low Skill Rate “
12 Absenteeism Rate “
13 Turnover Rate “
14 Human Hour Utilization “
15 Speed Loss Rate “
16 Machine Hour Utilization “
17 Quality of Material Rate “
18 Marker Efficiency “
19 Quality of Product Rate “
20 Capacity Utilization “
21 Rejection Rate “
22 Rework Rate “
23 Scrap Rate “
24 Work In Process Rate “
25 Standard Time min
26 Lead Time “

27 Waiting Time Rate %
28 Transfer Time Rate “
29 Downtime Rate “
30 Setup Time Rate “
31 Internal Transport m
Annex 8.5-Format for Collecting Production Data
Volume (pcs) Value (birr)

S.No. Product Type
Plan Actual Plan Actual
1 Local Products
1.1
1.2
1.N
Total
2 Export Products
2.1
2.2
2.N
Total
Grand Total
Annex 8.6-Format for Collecting Human Input Data
S.No. Human Inputs Volume (#) Value (birr)

1 Managers
2 Experts
3 Checkers
4 Supporting Staffs
5 Operators
Total
Annex 8.7-Format for Collecting Capital Input Data
S.No. Capital Inputs Value (birr)

1 Fixed Capitals
1.1 Land

1.2 Building
1.3 Machines
1.4 Tools and Equipment
1.5 Amortized Costs
1.6 Others
Total
2 Working Capitals
2.1 Inventory
2.2 Cash
2.3 Accounts Receivable
2.4 Notes Receivable
2.5 Others
Total
Grand Total
Annex 8.8-Format for Collecting Material Input Data
S.No. Material Inputs Unit Volume Value (birr)

1 Raw Materials (Fabrics)
1.1 m2
1.2 “
1.N “
Total “
2 Purchased Parts (Accessories)
2.1 pcs
2.2 “
2.N “
Total “
Grand Total “
Annex 8.9-Format for Collecting Energy Input Data
S.No. Energy Inputs Unit Volume Value (birr)

1 Electricity kwh
2 Fuel lits
3 Water m3

4 Others NA
Total
Annex 8.10-Format for Collecting Miscellaneous Inputs Data
S.No. Miscellaneous Inputs Value (birr)

1 Travel
2 Tax
3 Marketing
4 Product Development
5 Office Supplies
6 Information
7 Consultants
8 General Administration
9 Others
Total
Annex 8.11-Format for Data Summary of Partial and Total Productivity Indicators
S.No. Items Amount Remark

1 Production (pcs)
2 Production (birr)
3 Human Input (#)
4 Human Input (birr)
5 Capital Inputs (birr)
6 Material Input (m2)
7 Material Input (pcs)
8 Material Input (birr)
9 Energy Input (kwh)
10 Energy Input (lits)
11 Energy Input (m3)
12 Energy Input (birr)
13 Miscellaneous Input (birr)

Annex 8.12-Format for Collecting Employee Satisfaction and Motivation Data
S.No. Employees Total (#) Satisfied (#) Motivated (#)

1 Managers
2 Experts
3 Checkers
4 Supporting Staffs
5 Operators
Total
Annex 8.13-Format for Collecting Skill Level Data
S.No. Employees Total (#) High Skilled (#) Medium Skilled (#) Low Skilled (#)
1 Managers
2 Experts
3 Checkers
4 Supporting Staffs
5 Operators
Total
Annex 8.14-Format for Collecting Absenteeism, Turnover and Human Hour Data
S.No. Employees Total (#) Total Human Hour (hrs) Utilized Human Hour (hrs) Absenteeism (hrs) Turnover (#)
1 Managers
2 Experts
3 Checkers
4 Supporting Staffs
5 Operators
Total
Annex 8.15-Format for Collecting Machine Hour Data
S.No. Machine Group Total (#) Total Machine Hour (hrs) Utilized Machine Hour (hrs)
1
2
3
4
N
Total

Annex 8.16-Format for Collecting Scrap and Material Quality Data
S.No. Fabric Type Inspected (m2) Reject (m2) Scrap (m2) Fabrics Pass without Reject (m2)
1
2
3
4
N
Total
Annex 8.17-Format for Data Summary of Surrogate Productivity Indicators
S.No. Items Amount Remark

1 Total Employees (#)
2 Satisfied Employees (#)
3 Motivated Employees (#)
4 High skill employees (#)
5 Medium Skill Employees (#)
6 Low Skill Employees (#)
7 Total Human Hour (hrs)
8 Utilized Human Hour (hrs)
9 Absenteeism (hrs)
10 Turnover (#)
11 Total Machine Hour (hrs)
12 Utilized Machine Hour (hrs)
13 Total Inspected Fabrics (m2)
14 Rejected Fabrics (m2)
15 Total Fabrics Pass without Reject (m2)
16 Total Products Pass without Rework (m2)
Annex 8.18-Format for Collecting Capacity Data
Product Type Attainable Capacity (#) Actual Capacity (#)

1 Local Products
1.1
1.2
1.N
2 Export Products

2.1
2.2
2.N
Annex 8.19-Format for Collecting Rejection, Rework and Product Quality Data
S.No. Product Type Inspected (pcs) Reject (pcs) Rework (pcs) Products Pass without Rework (pcs)
1 Local Products
1.1
1.2
1.N
Total
2 Export Products
2.1
2.2
2.N
Total
Grand Total
Annex 8.20-Format for Collecting Data for Standard Time
S.No. Operations Time 1 Time 2 Time 3 Time 4 Time 5 Average (mins)

1 Operation 1
2 Operation 2
3 Operation 3
4 Operation 4
N Operation N
Normal Time
Allowance
Standard Time
Annex 8.21-Format for Collecting Data for Lead Time
S.No. Operations Time 1 Time 2 Time 3 Time 4 Time 5 Average (mins)

1 Operation 1
2 Operation 2
3 Operation 3
4 Operation 4
N Operation N
Total

Annex 8.22-Format for Collecting Waiting Time and Setup Time Data
S.No. Workstations Waiting Time (min) Setup Time (mins)

1 Workstation 1
2 Workstation 2
3 Workstation 3
4 Workstation 4
N Workstation N
Total
Annex 8.23-Format for Collecting Transfer Time and Internal Transport Data
S.No. Operations Distance (m) Transfer Time (mins)

1 Internal Transport 1
N Internal Transport N
Total
Annex 8.24-Format for Collecting Downtime Data
S.No. Downtime Reasons Downtime (mins)

1 Material Shortage
2 Absenteeism
3 Human Resource Shortage
4 Machine Breakdown
5 Spare Part Shortage
6 Power Cut
7 Product Style Change
8 By Order
9 Others
Total

Annex 8.25-Format for Data Summary of Process Indicators
S.No. Parameters Amount Remark

1 Attainable Capacity (pcs)
2 Attained Capacity (pcs)
3 Total Inspected Products (pcs)
4 Total Rejects (pcs)
5 Total Reworks (#)
6 Total Scraps (m2)
7 Standard Time (mins)
8 Total Lead Time (mins)
9 Total Waiting Time (mins)
10 Total Transfer Time (mins)
11 Total Downtime (mins)
12 Total Setup Time (mins)
13 Total Internal Transport (m)
Annex 8.26-Format for Productivity Measurement
S.No. Indicators Unit Targets


22 Rework Rate “
23 Scrap Rate “
26 Lead Time “
Annex 8.27-Format for Productivity Analysis
S.No. Indicators Unit Target Previous Current Change (%) Deviation (%)
22 Rework Rate “
23 Scrap Rate “

26 Lead Time “
Annex 8.28-Format for Action Plan
Goals:
Resource
S.No. Activities Responsibility
Finance People Material Time
1
2
3
4
N
Total
Annex 8.29-Format for Evaluation of the Results
S.No. Results Gained Problems Encountered Actions to be Taken

1
2
3
4
N

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ADDIS ABABA UNIVERSITY

SCHOOL OF GRADUATE STUDIES

DESIGN OF PRODUCTIVITY IMPROVEMENT

A Thesis Submitted to School of Graduate Studies of Addis Ababa University in Partial

DESIGN OF PRODUCTIVITY IMPROVEMENT

Approved by Board of Examiners:

_________________________ ________________ ____________

___Dr.-Ing. Daniel Kitaw____ ________________ ____________

____ Mr. Amare Matebu_____ ________________ ____________

_________________________ ________________ ____________

_________________________ ________________ ____________

Azemeraw Tadesse Date

Dr.-Ing. Daniel Kitaw Date

Mr. Amare Matebu Date

Azemeraw Tadesse Mengistu

Addis Ababa University, 2011

By: Azemeraw Tadesse (2011) Page I

Productivity is one of the major determinants that enable manufacturing organizations to

By: Azemeraw Tadesse (2011) Page II

Table of Contents .......................................................................................................................... II

List of Figures ............................................................................................................................. IX

List of Tables ............................................................................................................................... XI

List of Acronyms........................................................................................................................ XII

Chapter One ................................................................................................................................... 1

1.1-Background of the Study ....................................................................................................... 1

1.2-Statement of the Problem ...................................................................................................... 2

1.3-Objective of the Study ........................................................................................................... 3

1.4-Significance of the Study....................................................................................................... 3

1.5-Scope of the Study ................................................................................................................. 4

1.5-Research Methodology .......................................................................................................... 4

1.5.1-Literature Survey ............................................................................................................ 4

1.5.2-Data Collection ............................................................................................................... 4

1.5.3-Data Analysis and Presentation ...................................................................................... 5

1.6-Organization of the Study ...................................................................................................... 5

Chapter Two .................................................................................................................................. 7

2.1-Concepts of Productivity ....................................................................................................... 7

2.3.1-Productivity Measurement at International Level ........................................................ 13

2.3.2-Productivity Measurement at National Level ............................................................... 15

By: Azemeraw Tadesse (2011) Page III

2.3.4-Productivity Measurement at Company Level ............................................................. 19

2.4-Productivity Analysis .......................................................................................................... 26

2.5-Productivity Planning .......................................................................................................... 27

2.6-Productivity Improvement ................................................................................................... 28

2.7-Overview of Productivity Improvement Methods ............................................................... 31

2.7.1-Total Quality Management ........................................................................................... 31

2.7.2-Six Sigma ...................................................................................................................... 31

2.7.3-Total Productive Maintenance ...................................................................................... 31

2.7.4-Just In Time .................................................................................................................. 31

2.7.5-Lean Manufacturing ...................................................................................................... 32

2.7.6-Business Process Reengineering ................................................................................... 32

2.7.8-Work Study ................................................................................................................... 32

2.7.9-Supply Chain Management ........................................................................................... 32

2.7.10-Theory of Constraints ................................................................................................. 32

2.7.13-Total Productivity Management ................................................................................. 33

2.8-State of the Art of Productivity ........................................................................................... 34

Chapter Three .............................................................................................................................. 36

3-Overview and Assessment of Ethiopian Garment Industries .............................................. 36

3.1-Overview of World Textile and Garment Sector ................................................................ 36

3.1.1-Major Trends in World Textile and Garment Sector .................................................... 36

_____________

_Dr.-Ing. Daniel Kitaw __

__ Mr. Amare Matebu_ __

_____________

_____________