ADDIS ABABA UNIVERSITY

ADDIS ABABA INSTITUTE OF TECHNOLOGY

SCHOOL OF MECHANICAL AND INDUSTRIAL ENGINEERING

PRODUCTIVITY IMPROVEMENT OF SME GARMENT

MANUFACTURING INDUSTRY: A CASE STUDY IN YEKA SUB CITY

BY: HENOKTAMIRAT

ADVISOR: DR.YITAGESUY.

CO-ADVISOR: ATO DANIEL A.

A Thesis Submitted to Addis Ababa University, Institute of Technology, School of Mechanical and
Industrial Engineering in Partial Fulfilment for the Award of the Degree of Master of Science in
Industrial Engineering

JUNE, 2019

Addis Ababa, Ethiopia

Productivity Improvement of SME Garment Manufacturing Industry: A Case Study in Yeka
Sub City

ADDIS ABABA UNIVERSITY

SCHOOL OF GRADUATE STUDIES
POSTGRADUATE PROGRAM IN INDUSTRIAL ENGINEERING

PRODUCTIVITY IMPROVEMENT OF SME GARMENT MANUFACTURING INDUSTRY

(A CASE STUDY IN YEKA SUB CITY)

By: Henok Tamirat

Approved by Board of Examiners:

Dr.Yitagesy Y. ..................................... ......................................

Thesis Advisor Signature Date

Mr. Daniel A. ....................................... .........................................

Thesis Co-Advisor Signature Date

Dr.Glelat Gatew ..................................... ..........................................

Internal Examiner Signature Date

Dr.Hailelul M. ........................................ ..........................................

External Examiner Signature Date

________________________
School or Center Chair Person

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DECLARATION
I hereby declare that the work which is being presented in this thesis entitle “productivity
improvement of SME garment manufacturing industry: A case study in yeka sub city” is original
work of my own, has not been presented for a degree of any other university and all the resources of
materials used for the thesis have been duly acknowledged.

_________________________ ____________________
Henok Tamirat Date
(Candidate)

This is to certify that the above declaration made by the candidate is correct to the best of my
knowledge.

__________________________ ____________________
Dr.Yitagesy Y. Date
(Advisor)

__________________________ ____________________
Mr. Daniel A. Date
(Co- Advisor)

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ACKNOWLEDGMENT
I would like to thank our Heavenly Father for granting me His grace giving me all the strength I
needed to survive in this world and to carry out and finish up this research project successfully.

I would like to express my gratitude to my advisor Dr.Yitagesu Y. for his encouragement and
unreserved guidance during this research work. I would also like to express my appreciation to my
co advisor Ato Daniel A. (PhD. Candidate) for his support and guidance during this research work.
My gratitude also extends to all who have responded to my questionnaires and interviews.

Lastly, but most importantly, I am extremely grateful to all my family members and my parents for
their loving considerations and encouragement. Thank you all.

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ABSTRACT

Small and Medium Enterprises have a central role for national economic. Unfortunately, it still has
a domain of low productivity, as well as for SMEs on garment products. This study is aimed to
identify the factors that influence productivity in correspond to increase the productivity of SME on
garment products. Enhancement of productivity in the field of garment manufacturing production is
of very great importance to an entrepreneur’s ability to compete and make profits over time. An
entrepreneur which fails to efficiently utilize its resources in creating value for its customers will
not survive in the competitive business environment of today. Key performance indicators are found
to affect the productivity of garment manufacturing SMEs, productivity plays main part.

While recognizing the centrality of garment manufacturing SMEs in charting the development
trajectory of an economy the full potential of garment SMEs have not been adequately utilized in.
Since enhancing the productivity of the garment manufacturing SMEs is mandatory in order to
make the garment manufacturing SMEs competitive.

The general objective of the research is to develop a productivity improvement method that
supports garment manufacturing small and medium enterprises (SMEs) to enhance their
productivity by identifying the possible productivity factors and selecting the intervention areas. To
achieve this objective, a literature survey has been conducted to get empirical knowledge. The
existing productivity measurement and improvement practices, and productivity factors of the
garment SMEs have been assessed.

To undertake this research primary and secondary data are collected in nine garment SMEs by using
a well-structured questionnaire, interviews and personal observation as well as by referring previous
research works. Descriptive statistics as well as cause and effect diagram were utilized to analyze
data obtained from the SMEs interviews, questionnaires and direct observation.

From the thesis working capital, business network, sourcing, supply chain responsiveness , supply
of raw material, wage/minimum wage, working condition ,product quality, technology, health and
safety, production efficiency, motivation ,business regulation and restriction are productivity factors
identified that affect garment SMEs productivity.

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Study results revealed that the productivity of the garment SMEs is low and decreasing, since, most
of the productivity factors of the garment SMEs show poor status and comparison of garment SMEs
production with international benchmarks show huge deviation.

Since, all the productivity factors identified do not have equal impact on productivity of the garment
manufacturing SMEs. In addition, the resource are limited to solve all the problems associated with
productivity factor. Therefore, deciding the intervention areas which are potential for productivity
improvement is very important.

The intervention areas identified are related human, capital, material and process. This requires
organized and sustainable productivity improvement method to solve the problems associated with
productivity. Therefore, a PIM based on this requirement has been developed.

The research concludes by proposing a conceptual frame work for productivity improvement of the
garment SMEs along with the implementation steps for the frame work.

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Contents
ACKNOWLEDGMENT ii
ABSTRACT v
LIST OF TABLES ix
LIST OF FIGURES ix
ACRONYMS AND ABBREVIATIONS xi
CHAPTER ONE 1
INTRODUCTION 1
1.1 BACKGROUND OF THE STUDY 1
1.2 STATEMENTS OF THE PROBLEM 3
1.3 OBJECTIVES OF THE STUDY 4
1.4 SIGNIFICANCE OF THE STUDY 4
1.5 SCOPE AND LIMITATION OF THE STUDY 5
1.6 ORGANIZATION OF THE STUDY 6
CHAPTER TWO 7
RELATED LITRATURE REVIEW 7
2.1 CONCEPT OF PRODUCTIVITY 7
2.2 PRODUCTIVITY FACTORS 10
2.3 PRODUCTIVITY MEASUREMENT 13
2.4 PRODUCTIVITY PLANNING AND ANALYSIS 15
2.5 PRODUCTIVITY IMPROVEMENT 17
2.6 PRODUCTIVITY IMPROVEMENT METHODS AND TOOLS 20
2.7 OVERVIEW OF THE ETHIOPIAN SMES SECTOR 25
2.8 LITERATURE GAP 30
CHAPTER THREE 32
RESEARCH METHODOLOGY 32
3.1 THE RESEARCH DESIGN AND APPROACH 32
3.2 SOURCE OF DATA 33
3.3 SAMPLING TECHNIQUES 34
3.4 SAMPLE POPULATION 34
3.5 DATA COLLECTION METHODS AND TOOLS 35
3.5.1 Semi-structured Interviews ............................................................................................................. 36
3.5.2 Observation..................................................................................................................................... 38
3.5.3 Structured Questionnaires............................................................................................................... 39
3.6 TOOLS FOR DATA ANALYSIS 40

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3.7 VALIDITY AND RELIABILITY OF THE STUDY 41

3.8 ETHICAL CONSIDERATIONS 41
3.9 METHODOLOGICAL FRAME WORK FOR THE STUDY 42
CHAPTER FOUR 43
DATA ANALYSIS AND INTERPRETATION 43
4.1 PRODUCTIVITY FACTORS ANALYSIS OF ENTERPRISES 43
4.1.1 Educational status of respondents of SMEs.................................................................................... 43
4.1.2 Production factor ............................................................................................................................ 44
4.1.3 Human resource factor.................................................................................................................... 48
4.1.4 Business environment factors ......................................................................................................... 52
4.1.5 Quality infrastructure factor ........................................................................................................... 57
4.1.6 Supply chain factor ......................................................................................................................... 59
4.2 COMPARISON OF FACTORS 61
4.3 EXISTING PRODUCTIVITY MEASUREMENT PRACTIC OF ENTERPRISES 63
4.4 EXISTING PRODUCTIVITY IMPROVEMENT TECHNIQUES OF ENTERPRISES 67
4.5 IDENTIFICATION OF INTERVATION AREA 71
CHAPTER FIVE 73
THE PRODUCTIVITY IMPROVEMENT METHOD 73
5.1 PRODUCTIVITY IMPROVEMENT METHOD 74
5.2 IMPLEMENTATION OF PRODUCTIVITY IMPROVEMENT METHOD 82
CAPTER SIX 83
CONCLUSION AND RECOMENDATION 83
6.1 CONCLUSION 83
6.2 RECOMENDATIONS 85
REFERENCES 87

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LIST OF TABLES
Table 1 Traditional versus the New Productivity Paradigm (NPP) on key dimensions. ............................... 7

Table 2 Technology plays a vital role in improving productivity ........................................................... 21

Table 3 Key Quality Control Points in Sewing .................................................................................... 23

Table 4 Definition of MSMEs by World Bank. ................................................................................... 27

Table 5 Major difference between large and small enterprises. .............................................................. 28

Table 6 The participants from Addis Ababa industry development office for interviews ........................... 37

Table 7 The participants from the sample firms for interviews .............................................................. 38

Table 8 Initial (start-up) and Current Capital of SMEs ......................................................................... 52

Table 9 Garment Benchmarks With Reference and Competitor Countries .............................................. 64

Table 10 Comparison of actual productivity of Trousers of SMEs with International Benchmarks ............ 65

Table 11 Comparison of actual productivity of T-shirt of SMEs with International Benchmarks............... 66

Table 12 Deviation from International benchmarks for Trousers and T-shirt production .......................... 73

Table 13 Coordinated development plan of garment SMEs ................................................................... 78

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LIST OF FIGURES
Figure 1 The relationship between Performance, profitability and productivity, the Triple-P Model (Tangen,

2005) ............................................................................................................................................... 9

Figure 2 Employment generated by SMEs (National bank of Ethiopia) .................................................. 30

Figure 3 Research framework (Own work Modified from Yitagesu , Daniel and Amare ,2015 ) ................ 42

Figure 4 Pie Chart illustrating work experience status of respondents of SMEs ....................................... 44

Figure 5 Pie Chart illustrating standard time ....................................................................................... 47

Figure 6 Pie Chart illustrating production factors that affect productivity ............................................... 48

Figure 7 Pie Chart illustrating human resource factors that affect productivity ........................................ 51

Figure 8 Line Chart illustrating financial growth of SMEs .................................................................... 53

Figure 9 Line chart illustratingSales % in birr ..................................................................................... 55

Figure 10 Line chart illustratingProfit % in birr ................................................................................... 55

Figure 11 Pie Chart illustrating business resource factors that affect productivity .................................... 57

Figure 12 Pie Chart illustrating quality infrastructure factors that affect productivity ............................... 59

Figure 13 Pie Chart illustrating supply chain factors that affect productivity ........................................... 60

Figure 14 Pie Chart illustrating factors affecting productivity of SME.................................................... 62

Figure 15 Pie Chart illustrating types of existing productivity measurement practice of SMEs .................. 63

Figure 16 Column Chart illustrating actual productivity of Trousers of SMEs with International Benchmarks

..................................................................................................................................................... 66

Figure 17 Line chart illustrating actual productivity of T-shirt of SMEs with International Benchmarks ..... 67

Figure 18 Pie Chart illustrating productivity improvement techniques .................................................... 69

Figure 19 Intervention areas using four fields...................................................................................... 72

Figure 20 Productivity improvement model for garment enterprises....................................................... 81

Figure 21 Productivity improvement implementation model for garment enterprises. ............................... 82

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ACRONYMS AND ABBREVIATIONS

MSEs-Micro and small enterprises
MSMEs- Micro, small and medium enterprises
EU-European Union
OECD-Organization for Economic Cooperation and Development
SMEs-Small and Medium Enterprises
GDP-Gross National Product
TPM-Total Productive Maintenance
KPIs-Key Performance Indicators
EPRDF-Ethiopian Peoples’ Revolutionary Democratic Front
ISO-International Organization for Standardization
FDI-Foreign Direct Investment
UNECA-United Nations Economic Commission for Africa
UNIDOU-united Nations Industry Development Organization
F.D.R.E-Federal Democratic Republic of Ethiopia
MOI-Ministry of Industry
PIM-Productivity improvement method
PDCA-Plan, Do, Check and Action
R&D-Research and Development
I.L.O-International labour Organization
BDS-Business Development Service
TFP-Total Factor Productivity
IFC-International Finance Corporation
IDS-Industrial Development Strategy
MOTI-Ministry of trade and industry
CTA-Cotton, Textile & Apparel Sectors
TVET-Technical and Vocational Education and Training
USAID-United States Agency for International Development
CMT-Cut, Make, Trim
ETGMA-Ethiopian Textile and Garment Manufacturers Association
AEC-Asians Economic Community
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EPA-European Productivity Agency

NPBS-National Productivity Board of Singapore
BLS-Bureau of Labor Statistics
GTP-Growth and Transformation Plan
PNA-Productivity needs analysis
FeMSEDA-Federal Micro and Small Enterprises Development Agency
ReMSEDA-Regional State Micro & Small Enterprises Development Agency
AIDO-Addis Ababa industry development office
IDSI- Iindustrial Development Strategy

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CHAPTER ONE

INTRODUCTION

The introduction part of the study has been organized into nine main parts, namely background of
the study,justification of the study, statements of the problem, research question, objectives of the
study both general and specific objectives, significance of the study, scope of the study, limitation
of the study and finally organization of the studyare discussed .

1.1 BACKGROUND OF THE STUDY

The Ethiopian Government has defined the textile and garment sector as a top priority sector in the
industrial development package of the country. This is because textile and clothing market is always
demanded next to food commodities. The sector also utilizes more labor which is available
abundantly at low cost in the country. The garment sector has a large potential for creating
employment opportunities. The sector has strong vertical linkages with the textile industry that has
the potential to increase the development of agriculture. It has a vast potential to manufacture goods
for export, thus earning highly demanded foreign exchange (Cochrane, 2008).

According to Ethiopia MOI, SMEs in Ethiopia are considered to be important members within the
supply chain and are established in almost all major sectors in Ethiopian industry including Agro
processing and pharmaceuticals, Construction, chemicals & jewellers, Textiles& garments, Leather
& leather goods and Metals& wood works. Among the sectors described above textiles and
garments are prioritized sector because of high contribution to GDP, since it is labour-intensive
industries, it is one of priority sector for export and it is one among the four specific economic sub-
sectors that are identified in the industrial development strategy of Ethiopia. Among the sectors
garment producing SMEs are selected for this study because textile is a huge sophisticated industry
which needs huge capital.

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

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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.

The extent of the productivity problem of garment manufacturing SMEs is that they can't compete
in the market and most of the SMEs become out of market. The main reason is that the free market
strategy allow many global/international firms entering the market with superior products with less
cost especially from china. Because of this in the local market the garment manufacturing SMEs are
not competitive.

Since enhancing the productivity of the garment manufacturing SMEs is mandatory in order to
make the garment manufacturing SMEs competitive. While recognizing the centrality of garment
manufacturing SMEs in charting the development trajectory of an economy the full potential of
SMEs have not been adequately utilized in Ethiopia. The small business sector in Ethiopia appears
to be fraught with a number of policies, regulations, laws, rules and related challenges that stifle its
rapid growth and development as a means of overcoming poverty and unemployment
(Mulugeta,2011).Among the several challenges and obstacles that deter SMEs from further
expanding their businesses and affect their competitiveness the study focus on productivity related
problems on selected garment manufacturing SMEs in Addis Ababa city administration yeka sub
city.

The general objective of the research is to develop a productivity improvement method that
supports garment manufacturing small and medium enterprises (SMEs) to enhance their
productivity by identifying the possible productivity factors and selecting the intervention areas.

The research provide overall picture on how productivity is enhanced by analysing the existing
productivity improvement practice of the garment manufacturing SMEs and identifying the
intervention areas, areas that need improvement in order to enhance productivity of the firms, and
developing productivity improvement method (PIM) and finally conclusions and recommendations
are drawn.

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1.2 STATEMENTS OF THE PROBLEM

Even though SMEs are a potential source for economic development of Ethiopia the sector has not
received a commensurate policy attention thereby hamstringing its capacity to access to finance as
well as a poorly regulated dispensation (Animaw, 2016). A glaring weakness is revealed in the
contents of the five year development plan of the government of Ethiopia, which ostensibly places
premium on the expansion and growth of large scale firms whilst giving little to no focus for SMEs.
As a result SMEs are beset by poor product quality, low productivity, absence of innovation, and
lack incremental growth over several years (Hagos.2012).

According to industry development office (2018), Garment SMEs are still facing heaps of
challenges and obstacles that deter them from further expanding their businesses and become
competitive.Due to this their development and transformation to large industry is unsuccessful and
none of the garment SMEs are transformed to large industry having capital of 20,000,000 birr.

Among the several challenges and obstacles that deter garment manufacturing SMEs from further
expanding their businesses this study focus on productivity related constraints only.The
productivity factors of garment SMEs are multidimensional related to human, capital, material,
method, control, process and product that require organized and sustainable productivity
improvement program.

Currently the garment SMEs 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
capital productivity), and lack of identifying the intervention areas for productivity improvement.

Thus the thesis mainly focuses on assessing the productivity measurement and improvement
practices, identifying factors affecting productivity, determining major productivity improvement or
intervention areas and developing productivity improvement method for garment manufacturing
SMEs. Finally making relevant recommendations and proposing a productivity improvement
method for the garment manufacturing SMEs.

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1.3 OBJECTIVES OF THE STUDY

The general objective of the research is to develop a productivity improvement method that
supports garment manufacturing small and medium enterprises (SMEs) to enhance their
productivity by identifying the possible productivity factors and selecting the intervention areas.

In order to achieve this general objective the specific objectives are:

 To assess the existing productivity measurement and improvement practice of garment

manufacturing small and medium enterprises (SMEs).
 To identify factors that affect productivity of garment manufacturing small and medium
enterprises (SMEs).
 To identify the major productivity improvement areas in garment manufacturing small and
medium enterprises (SMEs).
 To propose productivity improvement method to enhance productivity level of garment
manufacturing small and medium enterprises (SMEs).

1.4 SIGNIFICANCE OF THE STUDY

The entrepreneurs who encounter difficulties when establishing the SMEs were benefited by this
study. The findings from this study were to fix productivity related problem. The outcome of this
current study is expected to be published in academic papers.

It is important to organization to know the weaknesses and strength of their company. The
information provided can help them to identify the courses of the low productivity and
improvement to their successful the business.

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 for garment manufacturing
SMEs.

The research aims to identify productivity related problems that hinder the SMEs competitiveness
and develop a productivity improvement method, which could be taken as guide to the garment
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manufacturing SMEs to enhance their productivity. Hopefully believed that the garment
manufacturing SMEs will implement the productivity improvement method and have a remarkable
improvement.

1.5 SCOPEA ND LIMITATION OF THE STUDY

1.5.1 Scope of the study

The study focus on productivity improvement and how to enhance competitiveness. The study aims
to identify reasons of low productivity and to propose the method for solving the problem in
garment manufacturing small and medium enterprises (SME).In this research, focus is on Small
Medium Enterprise (SME). Small and Medium Enterprise (SMEs) are one of the principal driving
forces in economic development.

The study has been done for garment manufacturing SMEs with special reference to 9 SMEs. The
study is dedicated to development of PIM at firm level. The study mainly uses data collected from
various literatures, organizations like Quality and Standards Authority of Ethiopia, Ministry of
Trade and Industry, Ethiopian Garment Association, Ethiopian Textile Industry Development
Institute (ETIDI), Central Statistics Agency, AIDB, FSMMEDA, 9 SMEs are contacted. Data are
collected using survey questionnaire, observation, interview and secondary data source, finally the
collected date is analyzed and interpreted. The study is limited to internal (firm level) productivity
factors develop the PIM.

1.5.2 Limitation of the study

The research is limited to the chosen SMEs themselves. A selection bias of SMEs is additionally
limit the results of the research. The other limitation is the verification of data. There is a constraint
on the reliability of information collected from interviews, due to limitations on data verification.
Therefore the results from the analysis might lack accuracy, in some cases participants refused to
speak against their organizations. There is limitation of knowledge and language in order to answer
the research questioners.

Data used for the study were the opinion of representatives/owners of SMEs. This might have its
own limitation on the quality of data used for the analysis purpose. Another critical limitation was
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the time used to conduct the research. The period was so short it did not give me the opportunity to
observe the post implementation phase to see if proposed solutions is working the adjustments that
needed to be made as well as measuring the level of productivity. Finally the limitations of the
research result mainly from the lack of practical implementation of the method. It is worth
emphasizing that every enterprise is different and operates in individual environmental conditions
and therefore requires a unique approach.

1.6 ORGANIZATION OF THE STUDY

The study has been organized into six chapters. Chapter one introduces the background, statement
of the problem, objectives, scope and problem statement of the study. The second Chapter presents
literature review that states the study matter, the literature review of the study has been organized
into six main parts, namely concepts of productivity, productivity factors, productivity
measurement, productivity planning and analysis, overview of productivity improvement methods
and tools, over view of the SMEs sector. Chapter three is the research methodology, this chapter
presents the research methodology and the research methods used in this study to answer the
research questions presented in the previous chapter. This chapter outlines the research design and
approach, source of data, data collection, and data collection tools, sample population, sampling
techniques, data analysis tools, validity and reliability of the studyand ethical considerations during
the thesis work. In chapter four data analysis, interpretation and findings are discussed and in
Chapter five PIM developed for the SMEs are discussed. The final chapter, chapter six consists of
the conclusion and recommendation of the study.

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CHAPTER TWO

RELATED LITRATURE REVIEW

The literature review of the study has been organized into nine main parts, namely concepts of
productivity, productivity factors, productivity measurement, productivity planning and analysis,
productivity improvement, over view of the Ethiopia SMEs sector, and finally the literature gaps
are discussed.

2.1 CONCEPT OF PRODUCTIVITY

Productivity is commonly defined as a ratio of a volume measure of output to a volume measure of

input use or in other words, how much of output which is obtained from a given set of inputs
(Schreyer and Pilat, 2001). Productivity is a technical concept which measures the efficiency from
the used factors of production. Higher productivity is likely to improve profitability and enhance a
firm’s competitiveness relative to its rivals (Syverson, 2010).

Table 1Traditional versus the New Productivity Paradigm (NPP) on key dimensions.

Dimension Traditional New Productivity Paradigm

Responsibility for productivity Engineers/managers Workers

Productivity goals Short term Long term

Manager's role Boss Coach

Employee's role Work harder Work smarter

Staff role Control Support

View of employee Cost Asset

Way to improve productivity Automation and cost cutting Process improvement

Methods Time-and-motion study/trial Structured/scientific method

and error

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Time-path of improvement Intermittent/Big Bang Continuous/kaizen

Cost–quality relation Trade -off Complementary

Supply chain Arm’s length Partnership

Metrics Financial Customer and quality-focused

Source: Yana, 2012.

Productivity is an overall measure of the ability to produce a good or service. More specifically,
productivity is the measure of how specified resources are managed to accomplish timely objectives
as stated in terms of quantity and quality. Productivity may also be defined as an index that
measures output (goods and services) relative to the input (labor, materials, energy, etc., used to
produce the output) (Franklin, 2001).

Productivity is created in the real process, productivity gains are distributed in the income
distribution process and these two processes constitute the production process. The production
process and its sub-processes, the real process and income distribution process occur
simultaneously, and only the production process is identifiable and measurable by the traditional
accounting practices. The real process and income distribution process can be identified and
measured by extra calculation, and this is why they need to be analyzed separately in order to
understand the logic of production performance (Tabije, 2007).

Productivity contributes to wards increase in production through efficient utilization of resources

and inputs rather than making workers to work hard. Productivity strives to minimize human
hazards and human efforts with a view to utilize them to those areas where they can contribute
maximum to the output. Organizations in recent times have experienced a period of massive change
in their ways of operation due to the trend of increasing competition both at the domestic and
international level (Christina, 2005).

The International labour organization in its report summarizes the concept of productivity, thus
some think of productivity as a measure of the economy as a whole. Others think of productivity in
terms of individual industries or plants". Some businessmen in their public relations speak as
though the whole matter of productivity had to do with the degree of application of the workers to
their Jobs. At other times, the concept of productivity is used as though it were a measure of the

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degree of efficiency achieved in production. The I.L.O. publication "Higher Productivity in

Manufacturing Industries" has defined productivity as the ratio between output of wealth and the
input of resources used in the process of production". This definition applies to an enterprise,
industry or an economy as a whole.

The definition of productivity is simple and complex at the same time, and this is because it is both
a technical and managerial concept (Thomas, 2004). Productivity is defined and analyzed in various
ways, and there is lack of consensus on a specific definition. (Tangen, 2005) forwarded the
definition of the frequently used terms ‘Efficiency’, ‘effectiveness’, ‘productivity’, ‘profitability’
and performance in relative ways.

Figure 1 The relationship between Performance, profitability and productivity, the Triple-P Model
(Tangen, 2005)

For this thesis productivity is defined as, 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. In this thesis the inputs of the firm
considered are human, capital, material, energy and miscellaneous inputs. The outputs considered
are finished and partial finished garment 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.

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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:

Belgin (2008) classify productivity factors in to internal and external factors. 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.

Study showed (Saha, 2015) ineffective management is the most significant factors that have strong
impact a on the less productivity followed by Outdated system, Inadequate Monetary and non-
Monetary rewards, Unsafe working conditions and the insufficient and ineffective coworkers.

Creating a high performance workforce can be achieved through adoption of quality improvement
initiatives. In this context, leading organizations increasingly emphasize on continuous process
improvement through “data driven decision-making”. These improvements specifically focus on
applying management skills to eliminate inefficiency and maximize value through optimization of
processes within the organization. The result is improved performance, fewer errors and increased
efficiency and productivity (Ziaul, 2006).

Shafiqul, (2014) reveals the way to achieve productivity through technological adaptations, high
tech equipment investment, and human resource development and pay strategy – including both
formal and informal labor incentives.

Patra (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, and metrics based approach, assess and evaluate, improved communication, and
focus on benefits.

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Islam (2012) found that shortage of raw materials, absenteeism, machine malfunction, unexpected
WIP, defective products, frequent changeover in production schedule, production shutdown caused
by political action and power supply problem are contributor to low productivity.

Attia (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 (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.

Ethiopian garment industries have low productivity, and one of major factors is poor skill of
workers. Workers skills are characterized as medium complex and further training should be given
to increase the skill of the workers to more complex and flexible designs. Moreover production
managers and supervisors are not trained enough in order to properly manage the process and
unable to balance efficiently the production lines with constant supplying of fabrics and accessories.
Furthermore, utilization of available resources, fabrics, machines, workforces is not satisfactory
(RahelSorri, 2010).

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According to Phusavat (2013), productivity improvements can also be understood at different

levels. The productivity of individuals may be reflected in employment rates, wage rates, the
stability of employment, job satisfaction or employability across jobs or industries. The productivity
of enterprises, in addition to output per worker, may be measured in terms of market share and
export performance. The benefits to the community from higher individual and enterprise
productivity may be evident in increased competitiveness and employment or in a shift of
employment from low to higher productivity sectors.

An empirical study (Hossan, 2012) suggested; reward system filled in as an impetus to make
workers motivated and expand efficiency, they should be rewarded for their hard work and
punctuality. For example, award for attendance. Work coordination is likewise vital to expand
profitability and meet particular generation target. Sound worker conduct and proficiency reward
additionally meet the objective and build efficiency.

The role of the government in facilitating and supporting SMEs remain critical worldwide. It is the
government that creates the right or undesirable environment for businesses growth. When the
government pays little attention to SMEs sector, then, the sectors is prone to suffer leading to many
businesses being unable to survive. A government that does not support SMEs does not only hurt
the sector but experiences negative growth in its economic development. The environment created
by the government in terms of wages framework, taxation, licensing, opportunities, technological
support and infrastructure pave the road to success or failure for the SMEs. Depending on the
regulatory frameworks put in place by the government, can easily crush or promote small business
economy (Kamunge et al., 2014).

Working conditions deals with the arrangement of work areas and equipment’s to produce the
products economically and give good working environment for the workers. Good working
conditions should provide ease of working, less health hazards, greater safety, reduced material
handling, less congestion of materials, machines and men Working conditions provide the
facilitates such as welfare facilities, efficient workstations, minimizes material handling, effective
utilization of manpower, safety, comfort at work, maximum exposure to natural light and
ventilation. It is also essential because it affects the labour efficiency. Working conditions provides
the environment for the better production and affected the productivity of the employees and
maintain an environment that maximizes productivity. Efforts must be taken to industries and
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workers, work together to improve productivity and working conditions. Poor working conditions
can lead to a number of productivity problems, such as worker injuries, production errors, poor
quality products, absenteeism, lack of machine maintenance, haphazard inventory systems
(Wiyaratn and Watanapa, 2010).

According to Tshifhiwa (2009), productivity is a measure of how well the organization converts
inputs by means of the transforming process into outputs. Japanese companies usually measure
productivity in terms of labor, such as the number of product units produced per employee labor-
hour or the number of employees needed to operate a particular machine. In line with this Kevin
(2002) firm productivity measures how much input is needed to produce the firm’s output. Most
productivity growth comes from existing firms who can add to the ratio of capital per worker and
adopt new technology.

In the face of shrinking land base for agriculture and limited absorptive capacity of large industry,
SMEs in Ethiopia have an important role to play in generating employment opportunities for nearly
a million new entrants to the labor force every year. Available evidence suggests that SMEs are
important and growing segment of the economy. Facilitated by inroads into the export market,
policy reforms providing easier access to imported raw materials and growth of domestic demand,
SMEs in a number of manufacturing and service activities have experienced rapid growth over the
past decade. However, a wide array of structural and policy induced constraints, lack of business
support services and week governance have held back the sector from realizing its full potential.

2.3 PRODUCTIVITY MEASUREMENT

Productivity measurement enables an enterprise to assess the efficiency of conversion of its

resources to goods. Based on this assessment, the enterprise would know whether it is doing well or
badly and therefore could take the necessary action to produce more goods for a given amount of
resources used. Measurement enables the enterprise to do resource planning and to set quantifiable
objectives of productivity levels at which it ought to be operating. Productivity measurement also
enables an enterprise to know whether it is improving its profitability through productivity or
through price recovery. Moreover, productivity measurement enables an enterprise to know the

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results of management decisions, to monitor progress, and to provide feedback. Thus, measurement
is integral to the productivity management process.

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. 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 (Shigeyasu, 2010).

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. 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.
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. Total factor
productivity is the ratio of net output to the sum of associated labor and capital inputs (OECD,
2001).

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.In
order to improve productivity, it is necessary to have some means of measuring company
productivity in terms of both the current position and the position after improvement actions have
taken place. Without some sorts of measures, it would be difficult, if not impossible, to assess
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whether any productivity improvement had actually taken place and whether the effort involved
was worthwhile (Porter, 2006).

According Tangen (2004) productivity is directly and indirectly influenced. 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.

Emerging literature on productivity measurement of late indicate that early productivity measures
revolve around the value of aggregate output per man- hour of labour input despite the problems
associated with measuring labour input. At the moment, productivity research has focused more on
total factor productivity (TFP) measures, where comprehensive aggregates of outputs and inputs are
of interest.

Bheda (2003) proposed a productivity measurement system for apparel industry and it has 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
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.

2.4 PRODUCTIVITY PLANNING AND ANALYSIS

Companies with low levels of productivity could theoretically get significantly more work done, but
they have factors that hold them back from their full potential. This leads to wasting money and
losing ground to competitors. Knowing the reasons company's productivity is lacking directs to
appropriate solutions to improve productivity and profits (Gunasekaran, 2000).

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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.

Productivity analysis is important for productivity improvement. Even as a separate element, it is a

very effective tool for decision-making at all economic levels. The success of productivity
measurement and analysis depends largely upon a clear understanding by all parties concerned
(enterprise managers, workers, employers, trade union organizations and government institutions)
of why productivity measurement is important for the effectiveness of the organization. The answer
is that it indicates where to look for opportunities to improve and also shows how well
improvement efforts are faring. 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 (Gomaa, 2006).

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. Sumanth (1984) 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.
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 Illustrate the methodology with a numerical example.

2.5 PRODUCTIVITY IMPROVEMENT

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.

Mekonnen (2013) had pinpointed that inadequate infrastructure facilities, inadequate finance, poor
managerial and technical skills, and inadequate working premises were the major challenges to
MSEs’ successful operations followed by marketing problems, low support from respective
institutions, inadequate supply of raw materials, and regulatory issues. According to Commission
on Legal Empowerment of the Poor (2006) study, most MSEs in Ethiopia face critical constraints
both at the operation and start-up level. Some of these constraints include lack of access to finance,
access to premise, infrastructure, training in entrepreneurial and management skills, information on
business opportunities, and social and cultural factors particularly related to deficient
entrepreneurial culture and excessive corruption.

Mulugeta (2011) has also identified and categorized the critical problems of MSEs into market
related problems, which are caused by poor market linkage and poor promotional efforts institution-
related problems including bureaucratic bottlenecks, weak institutional capacity, lack of
awareness, failure to abide policies, regulations, rules, directives, absence of training to
executives, and poor monitoring and follow-up; operator-related short coming slick developing
dependency tradition, extravagant and wasting behavior, and lack of vision and commitment from
the side of the operators; MSE-related challenges including lack of selling place, weak accounting
and record keeping, lack of experience sharing, and lack of cooperation within and among the
MSEs and finally, society-related problems such as its distorted attitude about the operators
themselves and their products.

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Since 2001, micro and small enterprises (MSEs) in Ethiopia have been confronted with several
factors that affect their performance. Major factors include financial problems, lack of qualified
employees, lack of proper financial records, marketing problems and lack of work premises, etc.
Besides, environmental factor affects the business which includes social, economic, cultural,
political, legal and technological factors. In addition, there are also personal attitudes or internal
factors that affect the performance of MSEs, which are related to the person’s individual attitude,
training and technical know-how (Werotaw, 2010).

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.

In spite of the enormous importance of the micro and small enterprise (MSE) sector to the national
economy with regards to job creation and the alleviation of abject poverty in Ethiopia, the sector is
facing financial challenges, which impeded its role in the economy. These challenges are lack of
access to credit, insufficient loan size, time delay and collateral. Moreover, although MSEs, as
compared to their larger counterpart businesses, can create more employment per unit of scarce
capital, there are many MSEs which dissolve after a short period of time of their establishment
rather than growing. Their dissolution will result in a vicious circle in that they won’t be able to
take owners out of unemployment, poverty, and economic growth remains weak as the dissolution
of an established MSEs is a cost to both regional as well as national level governments (Wolday and
Gebrehiwot, 2006).

Workneh (2007) research undertaken in Kolfe Keraneo sub-city of Addis Ababa indicated that lack
of capital, lack of market, unfavorable policy, and inadequate infrastructure, absence of adequate
and relevant training, bureaucratic structure and procedures are among constraints faced by
MSEs. Similarly, Adil’s (2007) research carried out in Addis Ababa shows that inappropriate
government intervention, shortage of capital, location disadvantage, and lack of market and lack of
display room are the major challenges that obstruct MSEs.

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Gebrechristos Nuriye (2014) despite Ethiopian government efforts, it shows that there are a number
of bottlenecks to address. These enterprises are still suffering from lack of initial and working
capital, lack of premises, lack of market and unskilled labor force. The study results show that
supports provided, and performance of enterprises has strong and direct linear relationships
indicating supports are important for the better performance of enterprises.

Gizachew Animaw (2016) identify external and internal factors affecting the growth of MSEs. The
first most important external factor identified are marketing factors and the second most important
external factors identified are technological factors including: lack of appropriate machinery and
equipment, lack of skills to handle new technology, lack of money to acquire new technology and
unable to select proper technology.

But as finding of Beyene, internal attributers (personal and business related) and external attributers
(governmental, access to market, infrastructure) factors were affected the success of the small and
medium enterprises. In addition, SMEs in Ethiopia are constrained and failed to succeed by a
number of factors such as unfavorable legal and regulation condition, lack of access to market, poor
access to quality business infrastructure, problems of raw materials and lack of working capital are
among many factors (Washiun, 2011).

To tackle the problems and improve the productivity of garment manufacturing firms, a coordinated
and well organized system among the actors (at macro and micro level) in the value chain should be
in place. Some of the major problems such as lack of skilled manpower and infrastructure has to be
tackled by the government and private sectors. And the other problems could be approached by
using some modern management philosophies (such as just-in-time manufacturing, business process
re-engineering, lean production) and scientific methods like production planning and control etc.
Productivity improvement centers at national, regional, and organizational levels shall take an
initiation to coordinate all the actors in the chain to make it effective. Overcoming the existing
major problems, Ethiopia has to have a radical and dramatic change in every standard or
measurement of national competitiveness for the sector. This could be achieved by throwing away
our old long trend paradigm at all levels through hard work and commitment for change. The
authors believe that change or paradigm shift will not come overnight. It will take some time. The
span of time to bring the required change may be long or short depending on our commitment to
work hard intensively. Therefore, the Ethiopian government should work hard to bring a paradigm
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shift at all levels of textile and garment manufacturing firms, considering it as one of the
development strategy tool (Daniel and Amare, 2017).

Small and medium enterprises (SMEs) are one of the principal driving forces in economic
development. The SMEs also can generate employment opportunity through diversification of
economic activities in the economy. However, there are several factors which must be addressed to
ensure productivity of SMEs. The above studies conducted shows that SMEs productivity is
affected by many internal and external factors this justify that the SMEs are not productivity enough
since there production process is affected by the internal and external factors. Based on this fact the
objective of this study focus on in-depth study to identify the productivity associated problems of
the garment manufacturing SMEs on a broader scale to provide appropriate solutions.

2.6 PRODUCTIVITY IMPROVEMENT METHODS AND TOOLS

Over the past decade, governments and international donors have increasingly turned their attention
from merely offering financial assistance to providing business development services (BDS) for
SMEs, recognizing that financial support alone is not enough for achieving sustained
competitiveness. BDS are all types of SME support services, including training, consulting,
technical and managerial assistance, marketing, physical infrastructure and policy advocacy. BDS
interventions are specifically aimed at helping small enterprises to overcome market imperfections
and inadequate access to technology, as well as to operate more competitively and with greater
efficiency in domestic and global markets (OECD, 2017).

Creating a high performance workforce can be achieved through adoption of quality improvement
initiatives. In this context, leading organizations increasingly emphasize on continuous process
improvement through “data driven decision-making”. These improvements specifically focus on
applying management skills to eliminate inefficiency and maximize value through optimization of
processes within the organization. The result is improved performance, fewer errors and increased
efficiency and productivity (Ziaul, 2006).

Standards may also positively contribute to the innovation performance of firms and consequently
productivity. This may be the case when, in preparation to obtain a certificate, firms upgrade their
existing capital stock and invest in new vintage machinery and equipment (e.g. less polluting, more

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constant, etc.) which is in line with the definition of process innovation. Furthermore, even when a
certificate has been already obtained, the continuous improvement requirements common to most
used international certifications like ISO 9001 may positively affect the innovation performance.
Finally, the same adoption of superior quality managerial systems and operational practices may
help firms build technological capabilities and strengthen their ability to develop and absorb
knowledge and, thus, to implement technological innovations (Bernardo, 2014).

Shafiqul (2014) reveals the way to achieve productivity through technological adaptations, high-
tech. equipment investment, and human resource development and pay strategy – including both
formal and informal labor incentives. In most cases, SMEs utilize foreign technology with a scarce
percentage of shared ownership or leasing.

Table 2 Technology plays a vital role in improving productivity

Area of application & equipment particulars Approx. increase in operation

productivity (%)

Design room

Computer aided pattern making & grading 150

Cutting room

Fully automated carriages 40-100

Air floatation tables 25-35

Die cutting 270

Laser cutting 190

Fusing

Continuous fusing press 60

Sewing room

Programmable sewing machines 5-100

Auto back tacking, edge controlled 20

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Sewing jigs 60

Folders 20-100

Engineered workstations 10-60

Panel pick up units 14

Needle positioner 10-20

Stacker 10-40

Finishing

Programmable presses 60-130

Source: ETDI Training manual

Working conditions deals with the arrangement of work areas and equipment’s to produce the
products economically and give good working environment for the workers. Good working
conditions should provide ease of working, less health hazards, greater safety, reduced material
handling, less congestion of materials, machines and men (Wiyaratn and Watanapa, 2010).

Attia (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.

The other area of SMEs promotion and support is provision of industry extension service. This
strategy is adapted from Ethiopia’s experience in agricultural extension. The primary objectives of
the national industry extension service are to make SMEs competent enough in the market, to
enable them to generate sufficient and sustainable job opportunities thereby improving their
income. The industry extension service elements consist of entrepreneurship, business development

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services, production technique, marketing management, supplies management, book keeping and
continuous productivity improvement or kaizen. The mechanism of dissemination of the service is
mainly through in-company training and consultation and through group discussions of enterprises
that are engaged in the same sector (EDRI, 2014).

In clothing manufacturing a good quality management system would be concerned about the inputs
used in the making of clothes, the skill of the workers and also having adequate sewing machines
which sew in quality threads. Quality clothing is normally rewarded by consumers and the same is
for consumers when they receive quality clothes. A challenge for co-operatives in maintaining
consistent quality in clothing manufacturing is that they lack certain resources which are important
to implementing and for continuous monitoring of quality practices, these resources as already
indicated include capable sewing machines, available technology, skilled labour, quality assessment
standards, pre and post quality checks and the sewing process outline (Lazim, 2013).

Emerging industries in clothing manufacturing such as those in South Africa and Africa, are
dependent on the activities of small sewing enterprises mainly co-operatives to deliver local
clothing and also to revitalize the clothing manufacturing sector. The lack of process quality
management in small clothing-wear manufacturing enterprises can create inconsistencies on the
quality of the output delivered. Quality management requires to be managed using resources which
include capable human resources, machine resources, a capable workflow and adequate
manufacturing facilities (Heizer& Render, 2014).

Table 3 Key Quality Control Points in Sewing

Available Key Quality Control Points Description

Resource(s)

Industrial Selection of correct settings Machine and Resource Maintenance is key

to quality management in a sewing process.
Sewing Machine Maintenance
A sewing enterprise with limited resources
Machine(s)
shall focus on the maintenance of the
available machine resource and setting it
correct for each job.

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Cutters Accuracy based on measurement Cutters as resources in a sewing process

Balance in saving of fabric and have a potential of saving material if

adequately used. Cut-men should cut-to
quality cuts
size and also not compromise on quality
cuts with an aim to save fabric. Quality and
accurate cuts should be simultaneous.

Fabric Correct reading and assessment of The inspection and reading of quality shall
/Cloth fabric prints and, designs be done by the buyer while making
purchase inspection at the suppliers’ site.
The fabric design influences the quality
look of a garment.

Facility Adequate protective storage Safekeeping of fabric in non-damp

conditions protects it and other resources
from damage that can compromise quality.

Labour skill Inspection and application of job Labour should use formal and tacit
knowledge knowledge in managing a process of sewing
as well as the associated resources.

Source: (Heizer& Render, 2014).

Sumanth (1984) cataloged more than fifty different techniques of productivity improvement in a
comprehensive survey of the literature. These techniques classified into seven basic groups:
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; Material based techniques includes:
inventory control, material requirements planning (MRP), quality control, material handling
improvement, material reuse / recycling and new materials; Product based techniques: includes
research & development (R&D), product design, product standardization, product reliability
improvement and value engineering; Employee based techniques: includes individual financial
incentives, group financial incentives, training & education, quality circles, brain storming, working

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conditions improvement, communication improvement and job rotation; Task based techniques:
includes work study, job evaluation, job safety, human factors engineering (ergonomics), computer
aided data processing and scheduling; Management based techniques: includes marketing
management, production management, quality management, cost management, maintenance
management, material management and resource management; and Investment based techniques:
includes reducing the administration cost, increasing value added, increasing contribution and
increasing profit.

Grunberg (2007) represented the productivity improvement methods into the following categories:
logistics, quality, production engineering and others. Many firms have tried the tools of quality and
productivity improvements (e.g. Quality Circles, Kaizen, control charts, etc.) but with limited
success in their organizations. They have observed how these tools work but do not understand why
they work and thus are unable to construct a coherent system for improvements (Inkpen, 2005).

Study showed by Saha (2015) Ineffective management is the most significant factors that have
strong impact on the less productivity followed by Outdated system, Inadequate Monetary and non-
Monetary rewards, Unsafe working conditions and the insufficient and ineffective coworkers.

2.7 OVERVIEW OF THE ETHIOPIAN SMEs SECTOR

Ethiopian government issued the National Micro and Small Enterprises (MSE) strategy in 1997 and
established the Federal Micro and Small Enterprises Development Agency (FMSEA) to harness the
benefit of such strategy. To implement the MSE policies and strategies at regional level, Regional
Micro and Small Enterprise Development Agencies (ReMSEDAs) have been established even sub
branch offices at zone/district level. Consequently, the government has emphasized the role of
MSEs and provided support to this sector. Accordingly, the share of formal employment increased
in urban areas, while informal employment declined from 4.3 percent in 2005 to 3.2 percent in
2013, declined by 1.1 percentage points. In 2005, of the 4.0 million employed people living in
urban areas, 1.32 million were employed in the informal sector, and the same figure increased to
1.33 million in 2013. This implies that while there are still a large number of workforces employed
in the urban informal sector, it has not grown significantly since 2005 (Ferede, 2014).

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Having understood the significant roles of SMEs, the Ethiopian government has given due attention
to strengthen MSEs and took a decisive measure for the development of the sector. As a result of
which, the Council of Ministers approved Regulation No.201/2011 and re-structured the Federal
Micro and Small Enterprises Development Agency again to enable the agency achieves its
objectives (FeMSEDA, 2015).

Currently the government amend SMEs strategy with the objective of that in addition that the sector
play alleviating poverty & reducing unemployment to help out the sector poverty & reducing
unemployment, to help out the sector to play its pivotal role as a base to large scale industry. The
strategy is implemented all over the country. In amending the strategy a lot of experiences had took
from different countries especially from India, Japan and Malaysia (Konjit, 2011).

SMEs are labor-intensive and usually performed using moderate technology and medium-level skill
to generate employment. As a result, micro and small enterprises are one of the seven strategy
pillars of the Ethiopian Growth and Transformation Plan (GTP) Since SMEs development and their
competence both in local and global market by enhancing their productivity is highly essential for
Ethiopia economy growth. This is why this study is conducted.

2.7.1 Definition of SMEs

From the literature review there is no universal definition for SMEs since the definition depends on
who is defining it and where it is being defined. SMEs can be defined in two ways: based on the
number of employees in an enterprise and/or the enterprises fixed assets.SMEs are independent,
non-subsidiary firms that are defined by size. Various criterions can be taken into account to define
the size of a firm. Most commonly the number of employees is used, being fewer than 250
employees for SMEs. Additionally the Organization for Economic Cooperation and Development
(OECD) uses turnover and number of shares owned by another company to define the size of a
firm. However there is no general consensus among OECD member states on how SMEs are
defined (OECD, 2005).

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Table 4 Definition of MSMEs by World Bank.

Source: Independent Evaluation Group, 2008

SMEs in Ethiopia are defined and classified based on the size of cost of investment of the firm and
its number of employees. According to F.D.R.E council of ministers regulation no. 373/2016"small
manufacturing industry" means an industry having a total capital, excluding building, from Birr
100,001 to Birr 1,500,000 (one Hundred Thousand One Birr to One Million Five Hundred
Thousand Birr) in the manufacturing sector and engages from 6 to 30 workers including the owner,
his family members and other employees and medium manufacturing industry" means an industry
having a total capital, excluding building. from Birr 1,500,001 to Birr 20,000,000 (One Million Five
Hundred Thousand One Birr to Twenty Million Birr) in the manufacturing sector and engages from
31 to 100 workers including the owner, his family members and other employees. For this study
this definition is used to identify SMEs sector from other sector.

2.7.2 Characteristics of SMEs

Easy of entry, reliance on local resource, family ownership, small scale operation, labor intensive,
adopted technology and competitive market are among the major characteristics of MSE. Perhaps
the most commonly cited characteristic of SMEs regards resource limitations. It is often said that it
is harder for SMEs to dedicate resources (including for improvement efforts) than it is for large
companies The size of an SME can also lead to issues that are lost in round-offs for large
companies. In large companies, results are measured over an aggregated period of time, whereas
liquidity is often crucial in smaller companies. There is a considerable difference between “money
now” and “money in two months". Investment pay-offs are also less continuous when a company is
small: even if the current number of specialized employees or machines are insufficient, one fuller
unit might not be worth the extra cost (Bridge, 2003).
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It is generally agreed that there are fundamental operational differences between SMEs and larger
company’s .Hudson (2001) summarized the key characteristics of SMEs as follows: personalized
management, with little devolution of authority, severe resource limitations in terms of
management, manpower and finance, reliance on a small number of customers and operating in
limited markets ,flat, flexible structures ,high innovation potential ,reactive, fire-fighting mentality,
informal, dynamic strategies, small scale productions and sales ,low labor productivity and high
labour intensity, lack of skilled labour and strong dependency on unpaid family workers and
inadequate financial resources

Similarly Tsiegereda (2002) outlined the common characteristics of SME like small scale operation,
labor intensive mode of production, low fixed cost, reliance on family labor, use personal and
informal source of credit, and lack of wage employment. Furthermore, some of the major
distinguishing differences between large and small enterprises are listed as follow.

Table 5 Major difference between large and small enterprises.

Characteristics Large scale business Small scale business

Technology Capital intensive Labor intensive

Management Bureaucratic Family based

Capital Abundant Scarce

Work hour Regular Irregular

Financial service Bank Personal, informal

Market Often export Rarely export

Inventories Large Small

Source: Tsigereda, 2002

2.7.3 SMEs contribution to Economic Development

The significance of SMEs is that they are source of new business creation and employment
generation in the developed countries. The emergence of SMEs in the developed world makes
economic case for fostering development of these industries. Considering significant contribution of

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SMEs on overall growth and sustainable economic development, it is imperative to take necessary
steps towards facilitating growth of SMEs, which includes: Enhancing Access to SME Finance;
Development of SME Infrastructure; Training Facilities for SME workers and Entrepreneurship and
Ensure SME Promotional Drive (Qamruzzaman, 2015).

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 (Bheda, 2003).

In Ethiopia, SMEs Sector is the second largest employment-generating sector next to agriculture
(CSA, 2011). According to CSA (2011) this sectors contributes 14.5% of GDP, 44% of the
industrial sector’s contribution and 57% of the manufacturing sector contribution to the GDP of the
year 2010.To that end in recent years the Ethiopian government has given special emphasis to the
growth and development of Small and Micro Enterprises and they are now become the lifeblood of
the Ethiopian economy. This is especially true as most graduates, learning institutions as well as
policy makers are beginning to accept the fact that the larger organizations and government offices
cannot provide all the needed jobs, but would have to be complemented by the SMEs (Wolday and
Gebre Hiwot, 2006).

The development of the sector in Ethiopia is believed to be the major source of employment and
income generation for a wider group of the society in general and urban youth in particular. The
five-year Growth and Transformation Plan (GTP) of Ethiopia envisages to create a total of three
million micro and small scale enterprises at the end of the plan period (NBE, 2011). Citing the
source from the Federal Micro and Small Enterprise Development Agency (FMESDA), the EEA
Research Brief noted that a total of seventy thousand five hundred (70500) new MSEs were
established in 2011/12 employing eight hundred six thousand three hundred (806300) people across
the country. Their performance is below the target set in GTP (EEA, 2015).
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Figure 2 Employment generated by SMEs (National bank of Ethiopia)

According to the GTP II projection, the share of the manufacturing sector in GDP is expected to
show a fourfold increase from 4.8 % in 2014/15 to 18 % by 2025. From this projection the share of
Micro and Small Enterprises in GDP under base scenario in percent is stated as 1.1 in 2014/15 to
1.8 by 2019/20 with an average contribution of 1.4 in 2015/16 to 2019/20 and the projection is also
made for Medium and Large scale enterprises as 3.7 in 2014/15 to 5.9 in 2019/20 with average
share of 4.9 in periods 2015/16 to 2019/20.

As the contribution of SME sector in every major macroeconomic indicator became clearer,
particularly with respect to the role of these enterprises in creation of new jobs, real GDP growth
and development of entrepreneurship, SME sector became the center of socio-economic policies in
Ethiopia economies, also causing an acceleration of research in this area. This is why this thesis is
conducted to enhance the productivity of the garment manufacturing SMEs by considering the
major contribution of the sector to the Ethiopian economy.

2.8 LITERATURE GAP

From the literature review the major gap identified was that most of the reviewed papers doesn't
focus only on productivity related problems of the entrepreneurs but this thesis among the many
challenges that affect garment SMEs focus only on productivity related problems. The second gap
identified was that all studies focus only on identifying factors affecting growth and performance

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they doesn't try to develop improvement methods ,frame work or models to solve the identified
problems. The review literatures also have limitation on identifying the impact of the factors and
effort required to eradicate or improve them. The previous studies only identify factors but the
major intervention areas for improvement are not identified.

In addition the other gap identified was misunderstanding of SMEs in Ethiopian context. Any good
policies and strategies need to rely on timely information if they are to promote the enterprises with
the view to increasing their contribution to poverty reduction and economic growth. Therefore, the
purpose of this study is to enhance productivity of garment manufacturing SMEs.

The major contribution of this paper is that it focus only on productivity related problems of the
entrepreneurs and after analysis have been done the major intervention areas for productivity
improvement of the entrepreneurs are identified and based on the identified major intervention are a
productivity improvement method has been developed.

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CHAPTER THREE

RESEARCH METHODOLOGY

This chapter presents the research methodology and the research methods used in this study to
answer the research questions presented in the previous chapter. This chapter outlines the research
design and approach ,source of data, data collection , data collection tools, sample population,
sampling techniques, data analysis tools ,validity and reliability of the study and finally ethical
considerations are discussed .

3.1 THE RESEARCH DESIGN AND APPROACH

According to Vogt (2011), research design is the science and art of planning procedures for
conducting studies so as to get the most valid findings. In this regard, research design offers the
strategy to direct this study. For the research strategy survey research approach on selected garment
manufacturing SMEs has been chosen.

The thesis, with the purpose of in-depth analysis of the garment manufacturing SMEs sector for
enhanced productivity by developing a productivity improvement method is conducted on a
purposive sample basis on selected 9 garment manufacturing SMEs found at two cluster site.

The data sources in the thesis work is based on both the primary and secondary data. Scientific
articles and books are used for understanding of problem, finding the solution and developing a
productivity improvement method for the study. Primary data was collected though questionnaires,
interviews and observations, while secondary data is collected from company’s documents and their
online resources.

The data collection and analysis use mixed methods both quantitative and qualitative techniques are
employed to collect data from SMEs.Questionnaires were designed based on problems identified in
root cause analysis and brainstorming, from literature and are reviewed and standardized .Data
collection and analysis methods show quantitative characteristics as well as purely qualitative ones.
By doing so, the qualitative data is supported by quantitative data originating from the factual
SMEs data.A structured questionnaires is used to collect data in the first phase followed up with

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interviews and observation in the second phase to conduct an in-depth investigation into the
research problem. Secondary data's are also used in the study from different secondary data source
for the selected garment manufacturing small and medium enterprises (SMEs).

The next decision in the framework of this research is to investigate the existing productivity
improvement practice of the firms. Having analyzed the existing productivity improvement system,
its shortfalls are identified. Based on identified shortfalls intervention areas for productivity
improvement are identified and a solution has been proposed .Finally productivity improvement
method is proposed to improve SMEs productivity. Finally conclusions and recommendations are
drawn.

3.2 SOURCE OF DATA

According to Kothari (2004), data sources are the carriers and provide the opportunity to investigate
the problem. The data sources could mainly be categorized as primary and secondary. Primary data
is the original data that is investigated or collected to meet the research objectives or problem by the
researcher at hand. Primary data is directly targeted to research objectives and can better solve the
problem faced, however it can requires the specialized tool to collect and analyze it.

The data sources for this research work is based on both primary and secondary data. Scientific
articles and books are used for understanding of the research problem, finding the solution and
developing a productivity improvement method for the study. Primary data will be collected
thoughquestionnaires, interviews and observations, while secondary data is collected by reviewing
company’s documents like company’s annual performance reports including production and
technique annual performance, finance and accounting annual performance, human resource
development and general service annual performance, and marketing and sales annual performance
of the SMEs for different years (for last five years). Company profile documents and bulletins and
others, such as the company’s brushers, were among the company’s documents reviewed. With
these documents and records, it had been possible to see the existing productivity improvement
system of the garment SMEs.

In order to obtain additional information about the productivity and productivity related information
and data of garment enterprises, Quality and Standards Authority of Ethiopia, Ministry of Trade and

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Industry, Ethiopian Garment Association, Ethiopian Textile Industry Development Institute

(ETIDI), Central Statistics Agency, AIDB and FSMMEDA are contacted.Primary data for the
study are collected from the mentioned government and non-government office and selected
garment manufacturing SMEs of the sub-city through structured questionnaires, observation and in-
depth interviewing. Secondary data from the company’s internal documentation, from different
books, articles and journals are also used.

3.3 SAMPLING TECHNIQUES

A purposive sampling technique is employed for the thesis and 9 garment manufacturing SMEs are
selected for the study.This means participants are selected because they are likely to generate useful
data for the project (Nouria and Green, 2007).Purposive sampling /non-probability sampling is a
sampling procedure which does not afford any basis for estimating the probability that each item in
the population has equal chance of being included in the sample. In this type of sampling, items for
the sample are selected deliberately by the researcher; choice concerning the items remains
supreme. In other words, under non-probability sampling the organizers of the inquiry purposively
choose the particular units of the universe for constituting a sample on the basis that the small mass
that they are to select will be typical or representative of the whole (Kothari, 2004)

3.4 SAMPLE POPULATION

Depending upon the type of research problem, a clear set of guidelines about which kinds of cases
to include is required. The choice of the firms for the sample must fit into the official Ethiopian
SMEs definition. Meanwhile, the samples selected should depend on the identification of key
determinants of productivity.

First, the sample SMEs are chosen on the basis of a purposive sample and 9 garment
manufacturing SMEs are selected out of 20 garment manufacturing SMEs in the sub-city. The
selected firms fit within the definition of Ethiopian SMEs in terms of number of employees and
capital they have. Second, sampling decisions were based on criteria that had relevance for the
research questions. In addition the samples are selected in accordance with the following criteria:

 Corresponding to the Ethiopian definition of SMEs;

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 Representativeness for garment manufacturing small and medium enterprises;

 The companies has relatively plentiful data required for this research purpose;
 Ease of accessibility for frequent data collection;
 The companies are also trying to implement different modern management tools and
systems including kaizen;
 They all are in cluster ;
 High-growth SMEs undergoing substantial changes.

Nine firms that areTaimeMlse Garment, LeyuDesign Garment, Abbay Garment, MelkamuTadel
Garment, Kibru and Tateqe Garment, Zenach Garment, SenaytGeses Garment, Cottex Garment and
YMOS Garment are selected for the study, so as to obtain a broad understanding of the
phenomenon under the study from a variety of perspectives.From the garment manufacturing SMEs
in the sub-city 9 garment manufacturing SMEs are selected on a purposive sample basis for the
study. The sample firms are production-oriented SMEs, produce different products and have the
same technologies focused on different markets. The companies had been in business for an average
of 7 years.

3.5 DATA COLLECTION METHODS AND TOOLS

According to Kothari (2004) selection of data collection method depends on the research problem
faced by a researcher. Research objectives will be a deciding factor for choosing the quantitative or
qualitative method and both the methods are not mutually exclusive.

A structured questionnaires is developed for selected garment manufacturing SMEs. The purpose of
this questionnaire is to find out productivity related date. The questionnaire is developed in English
language and during data collection for those who didn't clearly understand English language the
questionnaire is translated to Amharic, the native of respondent’s language. Questionnaires with
questions on a 5 point rating scale is designed based on problems identified in root cause analysis
and brainstorming and are standardize.

For the qualitative data collection in-depth individual interviewing with the general managers,
operation managers and with selected employs with in selected SMEs and Addis Ababa industry
development office is conducted in Amharic and English with the purpose of knowing the root

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cause of the productivity related problems and factor affecting firms productivity, to know what
masseurs are taken before, productivity improvement tools and techniques used, to know major
productivity improvement areas for garment manufacturing SMEs, cause and the impact crated by
low productivity.

Observation is used to observe and record the swing machines arrangements, way of inventory,
scrap, defects, raw material and finished product handling mechanisms. Direct observations were
made at each firm, involving looking around the different offices, workshops, plants, warehouses,
the laboratories, different departments and visiting the manufacturing area etc. I carefully observe
everything relevant to productivity at all the sample SMEs manufacturing plant.

A wide range of data is collected for the study to suggest a solution for the defined problem. The
following subsections describe the different primary data collection methods used in the thesis:

3.5.1 Semi-structured Interviews

According to Gray (2009), qualitative data could be gathered through a number of sources, mainly
the interviews and observations. Interviews could be qualitative or quantitative based on the
structure of interview. Semi-structured interview has the benefits of both structured interview and
unstructured interview.Semi-structure interviews is conducted during the SMEs visit; the semi-
structured interviews are selected due their good freedom and structure to deal with the problem.

In-depth interviews is carried out at nine different garment manufacturing SMEs. For the purpose of
generating a deeper interpretation, it is intended to collect as much relevant evidence from the
SMEs as possible. The raw data in each SMEs originated from multiple informants and sources.In
addition to the SMEs respondents form Addis Ababa industry development office four participant
participate in the interview. One respondents from yeka -sub city industry development office and
three respondent from Addis Ababa industry development office. The interviews with Addis Ababa
industry development office employees were used to cross check the reliability of the response of
the questionnaire and gather additional information.

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Table 6 The participants from Addis Ababa industry development office for interviews

Key informant Industry Yeka sub city

development office

Textile garment and leather support Directorate 

director

Garment and apparel division team leader 

Garment and apparel expert 

Manufacturing industries support Business process 

owner

Source: Research Data

The enterprises and industry development employees were first contacted by telephone to confirm
whether they approved my being part of the research. Before going to the sample SMEs, I had a
basic pre-understanding of the company’s profile and any related information that could be found
on the Internet and at sub-city industry development office. Normally, because the sample SMEs
are quite small, there is very little information available online. I visited the sample firms several
times. Data collection was conducted with founder owners, production managers, marketing
managers, quality control representatives, HR managers, employees etc. These key people were all
assumed to have substantial knowledge about their business and a good overview of their
company from their different perspectives.

Generally, appointments with each individually informant are made to ensure sample time for each
interview. The personal interview time was arranged at each informant’s convenience. The
interviews were generally formal, but there were also occasional informal discussions. The formal
interviews took place in informant’s offices and the company’s meeting rooms. Prior to the
commencement of each interview, asking the participant’s background and workplace position are
done and briefly introduced myself to them so we could get to know each other.

Then present the questionnaire to the interviewee to introduce them to the research topic and the
purpose of the interview, as well as the promise of confidentiality. As it turned out, after only a
brief glance, most interviewees returned the questionnaire to me and allowed me to ask questions
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freely. During the interview process, the questions asked were not restricted to the pre-formulated
questionnaire. In order to gain an overall picture of firms and to increase my understanding, many
additional questions were asked to capture as much data as possible. The interviewees were able to
identify the major productivity problem in the firms.Key thoughts are summarized and written
down on field not on each interview. The preliminary data analysis involved reviewing the written-
up field notes.

Table 7 The participants from the sample firms for interviews

Key informants

MelkamuTadelarment

SenaytGesesGarment
TaimeMlseGarment

Leyu design arment

Zenach Garment

Kibru and Tateqe

Abbay Garment

Cottex Garment

Garment
Founder/CEO/ General        
Manager

Quality representative  

Production technician 

Source: Research Data

3.5.2 Observation

Observation is the most commonly used data collection method. Under the observation method, the
information is sought by way of investigator’s own direct observation without asking from the
respondent. The main advantage of this method is that if observation is done accurately, subjective
bias will be eliminated. Secondly, the information obtained under this method relates to what is
currently happening; it is not complicated by either the past behavior or future intentions or
attitudes. Thirdly, this method is independent of respondents’ willingness to respond and as such is
relatively less demanding of active cooperation on the part of respondents as happens to be the case
in the interview or the questionnaire method (Kothari, 2004).

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The data from observations come from the phenomenon under their real environment. Observation
has many forms, and the observation can be applied even people unwilling to express themselves
verbally. Gray (2009), argued field notes are the essence of qualitative data collection during
observation.

This method is used for collecting the required data and information from the respective SMEs. In
this research direct observation is used as a means to assess the techniques used in documentation
and production processes as well as the existing facilities of the SMEs. Data collected through
direct observation were carried out on the company through frequent travel and whole sites visits,
starting from raw material and spare parts storages to finished products warehouses and sales shops
for nearly two months. Productivity improvement process needs to go through several steps
.Moreover, the infrastructure and facilities of the SMEs has been observed. Observed process defect
data for this study were collected by making notes (field notes) of what has been observed.

3.5.3 Structured Questionnaires

The layout of the questionnaire was kept very simple to encourage meaningful participation by the
respondents. The questions were kept as concise as possible and great care was taken to the actual
wording and phrasing of the questions. In preparing the questionnaire English language was used.
During data collection through questionnaires because some operators might not fully understand
English as equal as Amharic the questionnaires is translated to Amharic. Greater emphasis was also
given for the appearance and layout of the questionnaire because they play of greater role and are
important in data collection process where the questionnaire is to be completed by the respondent.

The comments of pretesting participants were taken into account during the finalization of the
survey questionnaire to improve the question wording, format, sequence and layout of the
questionnaire. Since the data collection was self-administered, the questioners were present face-to-
face with each respondent to explain and clarify their questions. In addition to minimizing
misunderstanding the questions, the self-administration of the survey also provided the advantage of
an increased response rate. The reliability of the SME survey responses has been used for the study
with the assumption that the SME owner or managers have provided information that is nearest to
the actual information.

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For the purpose of this research the five-point Likert scalequestionsare used. The Likert scale
ranges from ‘strongly agree’ to ‘strongly disagree’ so as to not limit the response of respondents to
some limited ranges.

3.6 TOOLS FOR DATA ANALYSIS

The collected data through the means of interviews, questionnaires, direct observation and
secondary data source were analyzed & interpreted. In data analysis phase of the research, both
quantitative and qualitative data analysis methods were used. The data obtained through
questionnaire and observation were analyzed using both quantitative and qualitative method.
Conversely for qualitative data analysis content analysis method used to analyze and describe the
data obtained through structured interview and document review.

Analysis is made by investigate the productivity related problems and apply cause and effect
diagram to identify the potential areas of improvement. Cause and effect diagram is used to identify
the root cause for the productivity problems and to identify root causes for various defects.This
answers research question by giving a better understanding which areas has the most occurring
frequency and needs to be given more attention and prioritized in other to achieve operational
excellence (productivity).Finally, a productivity improvement method is proposed targeted to
enhance productivity of garment SMEs.

For data collected through interviews and observation, the recorded interviews and observations
from the field notes are selected. Data analysis was focused on putting the pieces of information
fragments together from the interviews and observations which are related to the theoretical concept
of productivity and productivity improvement. The emphasis was on the information that best
addressed the research problem. The information from the field notes are carefully screened to
determine whether particular data was suitable for answering the research questions.

Data from the questionnaires, observation and the interview are analyzed by use of descriptive
statistics (frequencies, tables, means, histograms and percentages).Once the analyses of the
questionnaire have been completed, the data obtained from the interview was analyzed and
interpreted along with the main themes of qualitative analysis.

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Descriptive statistics were utilized to analyze data obtained from the SMEs interviews,
questionnaires and direct observation. Moreover, pie charts was also used to describe the general
characteristics of enterprises. The reason for using descriptive statistics is to compare the different
factors.

3.7 VALIDITY AND RELIABILITY OF THE STUDY

Accordingly, the questionnaire developed in this study was administered after pre-testing .The
pretesting is done by my thesis advisor and co-advisor at the University of Addis Ababa institute of
technology, industry development experts and SMEs experts . After this pre-testing, collecting data
through the questionnaires was run on the selected garment SMEs in the sub city. The results of the
pretesting ,done by my advisor, industry development employees and management and by some of
the SMEs managers ,addressing the reliability of the instrument indicated that each respondent had
the same understanding of questions, resolving doubts on question clarity and comprehensiveness.

Validity of the developed PIM is ensured through reviewing intensive literature study to develop
the PIM that answers the problem formulation and the measures selected for PIM development also
based on major factors affecting productivity mentioned by the entrepreneurs. It is also ensured by
interviewing with highly experienced personnel’s to accurately answer the desired question seeing
relationships between measures(Advisor ,co advisor, industry development office experts and some
SMEs general managers).External validity is ensured by developing the PIM from scientific
literatures, which are already generalized theories.

3.8 ETHICAL CONSIDERATIONS

All the research participants included in this study were appropriately informed about the purpose
of the research that the research is merely academic and their data is held confidential and their
willingness and consent was secured before the beginning of distributing questionnaire. Regarding
the right to privacy of the respondents, the study maintained the confidentiality of the identity of
each participant. Their privacy, identity and confidentiality were maintained by assigning them
code numbers instead of names. The completed questionnaires were filed safely and were
accessible only to the researcher and thesis advisor. In all cases, names are kept confidential thus

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collective names like, respondents‟ were used. Based on this premise, the study does not reveal
firms’ information.

3.9 METHODOLOGICAL FRAME WORK FOR THE STUDY

Start

Introduction
 Problem formulation and Gap identification
Development of productivity improvement
 Research brief introduction
 Briefing research objective method (PIM)
 Meeting defined set of criteria

Literature review
 Theoretical and empirical views, concepts and findings on
productivity Conclusion and recommendations
 Productivity improvement
 Productivity measurement and over view of SMEs sector

Research methodology and Selection of sample manufacturing Concluding thesis result

SMEs
 Required data availability
 Representativeness (for garment manufacturing SMEs in
End
the sub city)
 Ease of accessibility for frequent data collection

Data collection
 Observation
 Interview
 Questionnaires
 Document and records review

Investigation of the exiting productivity measurement and

improvement practice of the case SMEs
 Productivity measurement, factors affecting productivity ,
analysis and productivity improvement system

Identification of intervention areas

Figure 3 Research framework (Own work Modified from Yitagesu, Daniel and Amare, 2015)
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CHAPTER FOUR

DATA ANALYSIS AND INTERPRETATION

This chapter presents data analysis and findings of the study improving garment manufacturing
SMEs through enhanced productivity in yaka sub city of Addis Ababa. Many literatures confirms
that in most cases developing countries are facing the challenges affecting SMEs for unsuccessful
development. This study investigate and identifying the possible productivity factors,among the
possible productivity factors identify the major intervention areas for improvement and develop a
productivity improvement method that supports garment manufacturing Small and medium
enterprises (SMEs) to enhance their productivity in yeka sub city of Addis Ababa.

Data collected through questionnaires, interviews, observation and from secondary data source
were analyzed and interpreted. The analysis was presented in different sections. The aim of this
sections was to answer the basic research questions. Questionnaires, interview data from the
entrepreneurs and Addis Ababa and yeka sub city industry development officers, observation data
and secondary data were consumed for analysis in this thesis. Therefore, the presentation, analysis
and interpretation of data were made based on the data obtained from the above sources.

4.1 PRODUCTIVITY FACTORS ANALYSIS OF ENTERPRISES

Based on review of literature, various critical factors affecting productivity of SMEs are identified
and were well communicated with the respondents and their response were incorporated in the
survey. Respondents assess the statements in the questionnaire using a five-point likert scale of
strongly agree to strongly disagree (Where; 1= strongly disagree; 2= Disagree; 3= Neutral; 4=
Agree; 5= strongly disagree) and evaluate the factors in relation to their enterprise. In addition to
data collected through the survey questionnaire data from observation of the SMEs production
facility, interview and literature were used for the analysis.

4.1.1 Educational status of respondents of SMEs

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The position of respondents are founder/CEO, marketing manager, general manager, quality
manager, production manager, marketing manager and human resource manager.Regarding the
respondents work experience except two respondents one with 6 years and the other with 8 years’
experience, all the other respondents have work experience more than 10 years in the garment
sector. All the respondents have TVET /Diploma in their qualification.

From this data one can understand that the education status of respondents in the research is low.
Therefore, they may face a problem in complex business decision making processes; and this will
have a negative impact on the productivity of their business activities.

12.50%
6 Years
12.50%

8 Years
75%

Above 10 years

Figure 4 Pie Chart illustrating work experience status of respondents of SMEs

4.1.2 Production factor

The major production factor identified that affect productivity of SMEs considered in this thesis
work are spare parts supply, technology, quality and production efficiency. In order to know
production factor effect on productivity of garment manufacturing SMEs data collected through
survey questionnaire, interviews ,observation and secondary data analysis and interpretation is
done as follow.

From the interview, it is understood that there is shortage of spare parts supply in the market. The
spare parts for sewing, button fixing and over lock are not easily accessible in the market. The
SEMs get this spare parts from shops in merkato and the spare parts are not available when they are
needed. The spare parts has also quality problem. Finding original spare parts in the market is
difficult task for SMEs in required quality and quantity.

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Research shows that automated technologies exist in all 4 stages of apparel production. For
example, during product development, there are digital printing and body scanning technology.
During apparel design, there are 3D body scanning, computer aided design (CAD) pattern tools.
During production, there are fabric spreader truck, automated cutting machines and sewing robotics.
During apparel finishing, there is pressing automation.

Responses from the interview shows that technology is one determinant of SMEs productivity and
adds value in their productivity. The responses confirm that technology assisted their firms mainly
in saving costs, improving product quality, increasing production volume and raising relatively on
overall productivity if further financial supports are given to them for installation of modernize
technology. This implies that using improved appropriate technology in SMEs enterprises can
produce a more valuable and competitive products. The technologies that they used for pattern
design, fabric/cloth spreading, cutting, fusing, sewing, buttoning and finishing consists old machine
they can't purchase new technology due to financial shortage. Since accusation of new technology
machines requires high investment the SMEs can't have new technology for their garment
production this intern reduce their product quality. Garment with poor quality are not competitive
with the RMG imported from abroad.

From observation most of the production machineries used by the enterprises are old technologies
and are not new technologies. This confirms that they can't produce with their full potential. The
research indicates that 100% of the SMEs doesn't have a quality management system certificate.
Quality management system with established procedures for each point of the process, records,
databases, analysis and action plans to improve the process does not exist. None of them have ISO
9000 QMS certificate. From interview responses it is understood that, all SMEs have awareness
about quality and quality control as well as they perform quality related activities in informal way.
Except Cottex have a separate quality control and assurance department while Abbay garment
assigned one responsible personnel for quality control and assurance but other firms have neither
separate quality department nor responsible personnel for quality issues.

From the interview it is understood that, all of the SMEs doesn't have separate design department
consisting of pattern design and sample maker. In all the enterprises the pattern design is performed
by the SMEs owners’ .In all firms pattern is designed manually and most measurements are done by
approximation from their experience, but from observation it is clear that the manual pattern design
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development is neither sufficient nor efficient. The time taken to develop a new product ranges
from 2 to 3 weeks and depends on the activity of shop floor and market. For new pattern design by
external designer the SMEs pay an average of 20,000 birr to 30,000 birr.

Due to this lead times for deliveries are with large margin therefore the SMEs are not competitive in
delivery. The major production efficiency problem identified are old machines , shortage of spare
parts delivery, shortage of inputs used in the making of clothes (fabrics and accessories), poor
quality of raw material, poor working condition, shortage of working capital, the skill and attitude
of the workers and production method. Employee’s performance at swing section is also the major
problem of the firms.

From observation it is seen that the preproduction areas consist of pattern design, fabric/cloth
spreading, cutting, fusing, sewing, buttoning (if needed) and finishing consists old machine and
most of the production process are performed manually. Almost all the SMEs get their production
machine from Addis capital by loan. From interview Addis capital provides all the machines
required by SMEs but they doesn't provide new technology machines with high machine efficiency.

From literature work standards identify the best way of doing a job and it consists of set of
documented policies, rules, directives and procedures fixed by the management for all major
operations to enable employees to perform their jobs without mistakes and to enable management to
minimize variations in output, quality, work-in-progress and cost.

From observation the working condition of the SMEs are not standardized in accordance to the
principles of kaizen and 5s.Exepet Cottex and kibru all the SMEs doesn't implement kaizen. They
doesn't have documented quality policies, they doesn't develop documented policies, rules,
directives and procedures fixed by the management for all major operations to enable employees to
perform their jobs without mistakes and to enable management to minimize variations in output,
quality, work-in-progress and cost. In all SMEs the swings are properly arranged in production lines
but when we observe the motion of operators in the shop there is high motion of operators, that
doesn't add value.

From literature seating time standards for each production process can also be improved since lesser
time can be implemented to finish such tasks. Standard time can also be major factor in increasing
the productivity of the garment manufacturing SMEs at lesser time and for the workers to maintain

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their efficiency in doing each process. Therefore, productivity can be maximized through utilization
of workers given that standards are set and resulting to the attainment of desired outputs.From the
collected questioner87.5% garment SMEs have standard time for each garment style and12 %
doesn't have.

12%

HAVE STANDARD TIME

DOESN'T HAVE STANDARD TIME

87.50%

Figure 5 Pie Chart illustrating standard time

Regarding manufacturing machine/equipment utilization except Cottex garment in all garment

SMEs, all machines are not run all the time because the garment SMEs doesn't have continuous job
order. Since there is no continues production most of the time machine/equipment are idle.Except
Cottex Garment all the SMEs doesn't fill the questioner asked. I asked the reason why they doesn't
answer the questioner asked during the interview and they respond ,they have faced with shortage
of working capital , the current political unrest of the country ,shortage of raw materials (resulted
from shortage of hard currency), bureaucracy of developmental bank of Ethiopia for loan, market
and electric power shortage due to this they are not producing in accordance with their schedule and
most of the production machines are idle for days or weeks without any work.

The respondents have also indicated the major reasons for machine failure, which includes:
improper handling of machines, maintenance problem, depreciation, old machines, due to improper
handling of machines, machine quality problems, using machine for long period of time, electric
power fluctuation, and shortage of operator’s skill, spare parts problem and motion of machines
from one place to another.

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37.50% TECHNOLOGY

87.50%
QUALITY

75%
PRODUCTION EFFICENCY

87.50% SPARE PARTES

Figure 6 Pie Chart illustrating production factors that affect productivity

From the research 87.5 % of respondents mentioned that technology and quality were their top
production factor that affect their productivity. In line with this, 75% respondents mentioned that
production efficiency problem was second main problem for the SMEs. On the other hand, 37.5 %
of respondents showed that spare parts was also main problem they have been facing.

4.1.3 Human resource factor

The major human resource factor that affect productivity of SMEs considered in this thesis work are
motivation of employs, human resource performance, health and safety of employs, wage and
working conditions. In order to know human resource factor effect on productivity of garment
manufacturing SMEs the data collected through survey questionnaire, interviews ,observation and
secondary data analysis and interpretation is done as follow.

It has been reported that job motivation is a main criteria and principle in human resource
management. (Ortiz & Tran, 2007) It reveals that there is a positive and direct correlation between
motivation and productivity among organization’s employees. Being careful about fulfilling the
motivation factors causes a considerable improvement.

From direct interview, it is understood that the garment manufacturing SMEs in the sub city has
motivation mechanism for their employees based on their production performance. The employs are
evaluated based on number of garments they produce and new innovative ideas they provide. The
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motivation mechanism for employees are providing allowance/ Bones (incentive) for employees,
giving reward for production line that produce beyond the production target on weekly base and
increasing their monthly wage. From direct interview it clear that motivational system is neither
efficient nor sufficient in most of the SMEs due to the fact that it is not applied systematically but
randomly.

From literature human resource performance is attained by educating and training of the work force
of the firms. In dealing with firm productivity, the most common factor included by many
researchers is the human capital variables measured by education level, training, educational
expenditure, literacy rate and so forth. Human capital attainment especially in terms of education
and training plays an important role in determining firm’s performance such as output, productivity
and profit .Firms with more educated workers are better able to sustain and control their present
technology or adopt modern and new technology. They are more able to invest in human capital
like training because knowledgeable workers learn and adapt faster and are more innovative Labor
productivity is very much related to skills among workers that can be acquired through Proper
training. Workers who have attended training will be more efficient, productive and contribute to
productivity growth.

Worker performance is the ability of the worker to execute a series of tasks given by the company
in order to produce a product. With proper utilization of the available resources and doing each
process right the first time with less cost, workers tend to perform the job efficiently and produces
quality products through right movements and techniques needed to finish the job at a shorter
period of time. In this way, the capacity of the worker to perform each assigned task appropriately
helps increase productivity and their improvements to perform each task efficiently. Efficiency is
achieved when each worker performs a specific task with correct movements that allows each
worker to finish the task with less interruptions and delays in production. In addition, the efficiency
improvement and proper management can also be a factor to an efficient performance by
implementing a single-tasking activities and an open communication.

From observation accident preventive methods applied in the garment SMEs include implementing
occupational safety and health procedures by giving trainings, using Personal protective apparatuses
such as Protective Equipment devices/clothing for employees engaged in potentially dangerous or
harmful work like uniform, fabric cap, rubber gloves, dust mask or carbon masks, soap, rubber
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boots, goggles and by covering machines that need protection is not satisfactory and needs
improvement in order to protect the well beings of the employees. All SMEs regarding safety of
employees they doesn't use any protective mechanism to protect the employee’s safety. The
manufacturing SMEs sites doesn't have proper hygienic working conditions.

From the responses regarding health and safety of employees it is understood that, all SMEs have
awareness about health and safety of employees. Unhealthy employee can't produce what is
expected from him and he is unproductive.

A higher wage rate received by the workers will encourage them to work harder and contribute to
higher productivity. Workers with higher level of education and attended formal training tend to
receive higher wages and they are also more likely to contribute to career development, research
and development and further human capital accumulation and consequently they contributes to
higher productivity growth. Therefore, it is very important for firms to have more educated workers
to gain this added stimulus effect.

The minimum wage is the lowest legal payment for an employee who performs the simplest work
under normal working conditions during normal hours of work i.e. 8 hours. The minimum wages
shall be determined on monthly, daily and hourly basis. From direct interview there is no minimum
wage set by government for the sector due to this different wage are paid for employee performing
similar job. Average wage of a worker/employee working in SMEs are between 900-150 birr per
month.

Labour turn-over and socio-economic background of the employees was the main chronic problem
that affected productivity in majority of the SMEs. According to interview conducted with human
resource department of the SMEs employees from Addis Ababa are not stable they leave their job
even without announcing to them this intern affect their productivity since the garment production
process is a continuous process if one step is not performed all the operations are also stop. Another
problem faced is that since there is no quality of skilled manpower available in the market the new
employees has to train, this costs the SMEs. Absenteeism and Working conditions also affect labour
productivity.

They also highlighted high staff turnover as one of the reasons for lack of skills as employees tend
to migrate to other organizations leaving them short in manpower hence rendering them to produce

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below their set standards. From the collected questioner the turnover rate among workers according
to 66.6%respondent is 1-2% and 5-6% according to 33.33% of the respondents. While when we see
absenteeism rate according to 16.6% of respondents the absenteeism rate is 1- 2 %, 66.6 % of
respondents the absenteeism rate is 3-4% and 9-10% according to 16.6 % of respondents. This
indicate that absenteeism rate is the garment SMEs is not the major productivity problem. The
absenteeism rate is low. From the direct interview it can be conclude that, the relationship between
employees and superior, income, work environment and job security had an effect on employee
absenteeism.

From literature working conditions were analyzed to evaluate the workstation designs, material
handling and storage, working environment, cleanliness and welfare facilities. After the comparison
of low, medium and high productivity units, it was concluded that in high productivity units,
working conditions were better as compared to medium and low productivity units. From interview
conducted the management is unaware of many issues related to working conditions and the
working conditions like lighting, passageways, ventilation ,toilets, materials storage and Machine
safety are no in a good conditions that gives comfort for the workers and for the quality and
efficiency of the production process and needs improvement.

The apparel SMEs should evaluate the working conditions and welfare facilities and should take
corrective measures accordingly. Good working conditions are essential for enhancing productivity
.Most workers in SMEs are producing garments repeat the same or similar operations for the whole
production lot which, if performed efficiently and quickly, can result in better productivity. Each
workstation should be designed to suit the needs of a worker, the machine and the task to be
performed.

62.50% W0RKING CONDITION

87.50%
WAGE/MINIMUM WAGE

HEALTH AND SAFETY

75%
87.50%
MOTIVATION

Figure 7 Pie Chart illustrating human resource factors that affect productivity
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From the research 87.5 % of respondents mentioned that working condition and wage/minimum
wage were their top human resource factor that affect their productivity. In addition to 75% of the
respondents mentioned that health and safety and human resource performance was their second
human resource factor that affect their productivity .On the other hand, 62.5 % of respondents
showed that motivation of employees was also main problem they have been facing.

4.1.4 Business environment factors

The major business environment factor that affect productivity of SMEs considered in this thesis
work are working capital, business regulation and restriction and business networks are the major
ones. In order to know business environment factor effect on productivity of garment
manufacturing SMEs the data collected through survey questionnaire, interviews ,observation and
secondary data analysis and interpretation is done as follow.

Table 8 Initial (start-up) and Current Capital of SMEs

S.No. Enterprise name Initial (startup) Capital Current Capital

(Birr) (Birr)

1 TaimeMlse Garment 56,000.00 700,000.00

2 Leyu Design Garment 100,000.00 900,000.00

3 Abbay Garment 25,000.00 715,000.00

4 MelkamuTadel Garment 5,800.00 550,000.00

5 Kibru and Tateqe Garment 20,000.00 700,000.00

6 Zenach Garment 70,000.00 120,000.00

7 SenaytGeses Garment 70,000.00 120,000.00

8 Cottex Garment 50,000.00 1,300,000.00

9 YMOS Garment 5500.00 650,000.00

Source: Research Data

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1,600,000

1,400,000

1,200,000

1,000,000
Current capital
800,000

600,000

400,000

200,000

0
Start up capital

Figure 8 Line Chart illustrating financial growth of SMEs

One of the major requirements for establishing business is the startup capital/initial capital. As
indicated in table above the greater part of the owner of the enterprises start up with small amount
of capital. For that reason 44.44 % of the enterprises were launched with less than 50,000 birr,
55.55 % of the respondent started up their business with a capital of 50,000 birr and above. Thus
most of the enterprises were established with a low amount of capital. This affect their productivity
at the early stage and long term. Even though this is the main feature of enterprises in the
developing countries, the government should support this sector in terms of finance and other
incentive in order to enhance SMEs productivity.

On the other hand from the collected data, the current capital of all enterprises, except Cottex
garment with capital 1.3 million birr, doesn’t exceed 1 million birr. Again this is very low capital
amount. That is one major hindrance factor for further expansion of enterprises and affect their
productivity.

According to F.D.R.E council of ministers regulation no. 373/2016"small manufacturing industry"

means an industry having a total capital, excluding building, from Birr 100,001 to Birr 1,500,000
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(one Hundred Thousand One Birr to One Million Five Hundred Thousand Birr) and medium
manufacturing industry" means an industry having a total capital, excluding building. From Birr
1,500,001 to Birr 20,000,000 (One Million Five Hundred Thousand One Birr to Twenty Million
Birr) in the manufacturing sector.

Based on this definition when we assess the SMEs none of them is transferred to medium
manufacturing industries having a capital of 1,500,001 birr. In an interview with the entrepreneurs
the major constraint for this is lack of appropriate government support, political instability of the
country and collateral requirement of bank. If they get enough financial support from the
government the SMEs are committed to transform to medium and large manufacturing industries.

As one can see from the table above, all of the respondents 100 % has increased their initial
investment or there is improvement in their capital but none of them fulfill the minimum
requirement set by the government for medium manufacturing industries that is 1,500,001 birr.

From literature the absence of government commitment to ensure an enabling business environment
and enhance the capacity of SMEs is another obstacle for productivity. In assessing how the
business environment is affecting the productivity of SMEs business regulation and restriction set
by the government for tax, labor and rental are assessed.From the interview the SMEs productivity
is affected by government regulation and restriction especially for rental of the working premises.
The working premises rental for one square meter is 37 birr before it was 20 birr for one square
meter this cost affects their productivity. The major problem identified is that the government
increase the rental cost of the working premises without discussing with the entrepreneurs and the
rental cost is high which shows 200% increment.

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400%

350%
Kibru and Tateq Garment
300%

250% Melkamu Tadel Garment

200%
Taime Mlse Garment
150%

100% YMOS garment

50%
Abbay Garment
0%
2006 E.C 2007 E.C 2008 E.C 2009 E.C 2010 E.C

Figure 9 Line chart illustrating Sales % in birr

120%

Abbay Garment
100%

80% YMOS garment

60% Taime Mlse Garment

40%
Melkamu Tadel Garment

20%
Kibru and Tateq Garment

0%
2006 E.C 2007 E.C 2008 E.C 2009 E.C 2010 E.C

Figure 10 Line chart illustrating Profit % in birr

Regarding sales and profit of the enterpriser’s data was collected analysed.The analyzed data
indicates that most of these SMEs profit haven’t increased after the last two years. Most of these
(44.45%) have no knowledge of market situation and their respective market share situation in the
market. From the above graph it is identified that, the sales volume and profit of most of the
enterprises declines from the last two years due to political instability of the nation.
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Enterprises need finance to purchase equipment’s and machinery, expand their market, to cover
working capital shortage and for expansion of their process. However the major difficulty for
entrepreneurs still seems to be the lack of access to finance. The research indicates that all garment
industries have a working capital problem and In an interview conducted with regard to financial
factors affecting the growth of SMEs confirmed that SMEs couldn‘t able to get loan from banks due
to uninviting preconditions of development bank of Ethiopia in relation to collateral requirements.
Due to this obstacle of banks, they are forced to go to micro financial institutions and exposed for
high interest rate. But majority of interviewees widely outlined that, they frequently use informal
sources as main sources of finance.

From the research the main reason for working capital shortage in the SMEs are collateral
requirements required from the SMEs, which is difficult to fulfilled by the SMEs and bureaucracy
of loan acquisition preconditions set by the development bank of Ethiopia. The government of
Ethiopia develop a lease financing program for SMEs to get access to finance for machinery
purchasing without collateral but this program has set more than 25 precondition requirements
which must be fulfilled by the SMEs. From the interview none of the SMEs fulfill the requirements
and get access to loan from the development bank of Ethiopia. All the respondents presented strong
arguments on the importance of collateral to successfully gain access to bank loans which is the
major problem of the SMEs.

During the interview with the entrepreneurs the major issue raised was the development bank of
Ethiopia doesn't rely on local entrepreneurs but rather they give loan to foreign entrepreneurs
simply. According to research conducted by UNDP the reason why the development bank doesn't
give loan to the SMEs simply is insufficient assets, low capitalization, and vulnerability to market
fluctuations, high mortality rates and lack of accounting records. The interview also revealed that
the banks’ lack confidence in the ability of SMEs to repay the loan.

The interview with entrepreneurs revealed that the business network is created by themselves. The
government doesn't give them any incentives when they participate in government biding. Because
of this may SMEs are out of biding during bid assessment this in turn affect their productivity since
they doesn't get access to work. Lack of policy alignment (e.g., differential advantages according to
firm ownership) crowd out domestic suppliers instead of create linkages between SMEs and
suppliers. The entrepreneurs complain that they are disadvantaged in accessing resources such as
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land, capital and government contracts (even while their contribution to the economy and jobs
growth are significant). In essence, lack of effective domestic competition policies to effectively
participate in government contractual bids.

WORKING CAPITAL
62.50%
100%
BUSINESS NETWORK

BUSINESS REGULATION AND

100% RESTRICTION

Figure 11 Pie Chart illustrating business resource factors that affect productivity

From the research 100 % of respondents mentioned that working capital and business networks
were their top business environment factor that affect their productivity. On the other hand, 62.5 %
of respondents showed that business regulation and restriction was also main problem they have
been facing.From the above graph it is identified that, the most sever obstacles for productivity
improvement are working capital and business networks, secondly factors rated as major obstacle is
business regulation and restriction.

4.1.5 Quality infrastructure factor

From literature standards represent a form of codified knowledge that can bring management
systems to a more sophisticated level than the practices generally diffused in a developing context.
For this reason, management standards certifications have started to be used in firm-level
productivity analyses. However, the cost of ISO implementation and certification by third-party
systems is a major factor for garment enterprises. Most of these enterprises are not strong
financially.

Evidence from literature has also been found that firms adhering to standards are more likely to
provide better work conditions for their labour force, experiencing positive effects on the

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employees. Thus, introducing better practices for human resources as part of overall management
quality improvements, providing training to increase human capital, and improving workplace
safety and satisfaction may contribute to better work conditions and better employee performance,
ultimately reflecting into increased productivity.

From the direct interview with entrepreneurs revealed that there is no national standards for
garment production and the national quality infrastructure doesn't support them to be ISO 900
management system certified and to manufacture standard garment for both national and
international market. The national quality infrastructure do nothing in supporting garment SMEs
.There is also no anthropometric measurement data for garment manufacturing at national level and
garment standards for M, L, XL, XXL, XXXL garment to manufacture accordingly. The SMEs use
random measurement for manufacturing of the garment products. Due to lower productivity and the
inability to meet international product standards, SMEs struggle to deliver the required product
quantities at consistent quality this inhibit them from exporting there product. Low levels of
compliance with national and international standards is the major reason why national and
international buyers are wary about buying SMEs products.

From the interview SMEs garment product is not reliable in the market, because the products
doesn't manufactured in accordance with customers requirement, quality problem and absence of
manufacturing standard for different garment style. All most all of the garment enterprises do not
identify customer requirements. There is a large gap between customer requirement and the
products of the enterprises. The degree of communication with the customers to understand their
requirements and translating into products is not satisfactory. The major problem identified was
most of these enterprises are not strong financially. Therefore, the cost of upgrading their
infrastructure to meet international standards and the cost of certification is unbearable

From an interview conducted product standardization and product reliability improvement are
important for productivity of the SMEs. Since standard products are more accepted by the
customers than nonstandard ones, but producing standard garment is difficult since there is no
product standard as a nation for garment.

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25% STANDERDIZATION
37.50%

CERTIFICATION
37.50%

METROLOGY

Figure 12 Pie Chart illustrating quality infrastructure factors that affect productivity

From the research 37.5 % of respondents mentioned that standardization and certification were
factor that affect productivity of garment SMEs. On the other hand, 25 % of respondents showed
metrology factor affect productivity.

4.1.6 Supply chain factor

From literature A supply chain is the network of raw material producers, component manufacturers,
final product manufacturers, wholesalers and distributors, retailers, and customers, interconnected
by several types of flows, including material, information, finance, and people.

The interview with entrepreneurs revealed there is an organization called EGEL organized by the
government to supply raw material for SMEs. But the company is not effective in supply of raw
material for the enterprises because it supply the raw materials by purchasing from local
distributors this makes the cost of supply high and the SMEs are not interested to purchase raw
material form the company.

On the other hand, access to key inputs being their critical problem was not solved. All enterprises
did not benefit from getting linkage with suppliers of key inputs like fabric. Access to key inputs
remained the key problem of the SMEs. In line with this, the general manager of most SMEs stated
that they encounter problems of supply of raw material in desired quantity and quality. They
believed that it is absolutely impossible to imagine improvement in the quality of products without
the availability of affordable raw materials with good quality and quantity.

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From the interview with the entrepreneurs the major supply chain problem is that the supply of
fabric is dominated by merkato brokers it is difficult to break the broker’s chain and enter in to the
supply chain. The fabric manufacturer at dukem supply the manufactured fabric for the brokers and
they purchase the fabric from shops at merkato .Due to supply of raw material problem the SMEs
are not producing in accordance with their production target. This is because the entrepreneurs want
to minimize supply risks and meet production targets in order to enhance their productivity. Lack of
competitive local suppliers in the country that supply raw material for SMEs in terms of quality,
quantity, price and timely inputs needed for production. Almost all the textile manufacturers
manufacture fabric for export market they doesn't supply for local market .Interviews with firms
reveal that while there are market-based legal frameworks, the laws written on paper are not put
into actual practice ,there is a lack of enforcement. Also, application of rules is subjective and
government bureaucratic processes remain the major obstacle.

Regarding access to raw materials all responded that they use locally purchased raw materials. The
problems encountered by garment industries during purchase of raw materials locally are raw
material quality, shortage of raw material, cost of raw material and supply of raw material is not
responsive. Lack of competitive local suppliers, shortage of capital, Institutional and government
failures to crate partner linkages, lack of enforcement, insufficient policy coordination failures and
suppliers are not willing to be immediate suppliers for SMEs are the major problems identified
from the research.

100% 100% SOURCING

SUPPLY CHAIN RESPONSIVENES

100%

SUPPLY OF RAW MATERIAL

Figure 13 Pie Chart illustrating supply chain factors that affect productivity

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According to all of the respondents, the garment enterprises do not have any mechanism to evaluate
the performance of fabric and accessory suppliers. The enterprises focus on price instead of quality
in the selection of suppliers. From the research 100 % of respondents mentioned that sourcing,
supply chain responsiveness and supply of raw material were their top supply chain factor that
affect their productivity.

4.2 COMPARISON OF FACTORS

Even though, all the production factor, human resource factor, business environment factors, quality
infrastructure factor, and supply chain factor affect the productivity of the garment manufacturing
SMEs, this does not necessarily mean that all factors have equal impact. What follows is a brief
discussion of the ranking of the relative importance of primary causes for low productivity

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TECHNOLOGY

QUALITY

PRODUCTION EFFICENCY

SPARE PARTES

WORKING CONDITION

100% 87.55% WAGE/MINIMUM WAGE

100% 87.55%
HEALTHAND SAFETY
75%
MOTIVATION
100% 37.50%

25% WORKING CAPITAL

87.50%
BUSINESS NET WORK
37.50%
38% 87.50%
BUSINESS REGULATION AND
62.50% RESTRICTION

100% 75% STANDERDIZATION

100%
62.50% CERTIFICATION

METROLOGY

SOURCING

SUPPLY CHAIN RESPONSIVENES

SUPPLY OF RAW MATERIAL

Figure 14 Pie Chart illustrating factors affecting productivity of SME

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From the above Pie Chart illustrated it is identified that working capital, business network,
sourcing, supply chain responsiveness and supply of raw material, wage/minimum wage, working
condition , quality and technology are major factors affecting productivity of garment SMEs.The
other factors health and safety, production efficiency, motivation ,business regulation and
restriction are productivity factors that affect garment SMEs.

4.3 EXISTING PRODUCTIVITY MEASUREMENT PRACTIC OF ENTERPRISES

The existing productivity measurement practice of SMEs, it has been observed that there is
incompleteness in considering all factors of production of the entrepreneurs. These include the raw
materials, machineries, energy and other utilities used in producing the final product of the firm.
These input factors have key impact on the productivity of the SMEs. Ignoring these factors while
measuring productivity of the entrepreneur, in fact, result in erroneous effect and misdirect the
entrepreneur’s productivity improvement effort.

The most commonly used productivity measurement system by SMEs identified are labor
productivity and capital productivity. But this doesn't show the overall firm productivity (multi
factor productivity), it gives productivity information only about the labor and capital (partial
productivity), this by itself affects the SMEs productivity since they doesn't have full information
about all the measures.

CAPITAL PRODUCTIVITY
20%

LABOR PRODUCTIVITY

20% 60%

BOTH LABOR AND CAPITAL

PRODUCTIVITY

Figure 15 Pie Chart illustrating types of existing productivity measurement practice of SMEs

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From the garment SMEs having productivity measurement culture 60 % use capital productivity, 20
% used labor productivity and 20% used both labor and capital productivity for their productivity
measurement. From the research the major problem identify were the productivity measurement
practice of the SMEs lacks consistency and doesn't consider all the productivity factor.

When the standard time of the garment SMEs compared with performance of benchmarks they are a
lot behind the benchmark standard time for garment manufacturing. From interview the major
reason for this is old technology, operator’s skill problem, skill and attitude of employees, working
method and working capital shortage.

Table 9 Garment Benchmarks With Reference and Competitor Countries

Ethiopia Egypt Turkey Romania Bangladesh

Average rework rate 2007-sewing 5–10 30 5 5 10
(%)
Average 2nd quality fallout rate 2 10 4 3 7
2007garmenting (%)
Average overall efficiency – 30 40 77 80 50
garmenting (%)
Productivity-causal trousers 10 15 40–50 50 30
(pcs/worker/day)
Productivity–T-shirt 30 40 70 80 50
(pcs/worker/day)
Average export selling price-T-shirt 0.45 2.5 10 10–12 1.8
(USD/pcs)
Average export selling price 0.85 7.5–10 20 25 5
trouser(USD/pcs)
Average standard allowed minutes T– 5–6 5–6 10–12 15 5–10
shirt(min/pcs)
Average standard allowed minutes- 20–30 15–20 15–30 25–35 15–25
trouser (min/pcs)
Average cost price per 0.015– 0.05 0.2 0.16 0.03
minute(USD/min) 0.02
Source: Sorri, 2010

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When the productivity of the garment SMEs are compared with international benchmarks the
productivity of our garment SMEs in the sub city is very low. From interview the major reason for
this is old technology, operator’s skill problem, skill and attitude of employees, working method
and working capital shortage.

Table 10 Comparison of actual productivity of Trousers of SMEs with International Benchmarks

S.No. Enterprise name Actual International Deviation

Productivity Benchmarks from
benchmarks
Trousers
(pcs/workers/day)
of SMEs
1 TaimeMlse Garment 130 500 370
2 Leyu Design Garment 153 1250 1097
3 Abbay Garment 150 650 500
4 MelkamuTadesse Garment 120 500 380
5 Kibru and Tateq Garment 200 1600 1400
6 Cottex Garment 380 10000 9620
7 YMOS Garment 40 600 560
Source: Source: Own developed

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10000
9000
8000
7000
6000
5000 Actual productivity
4000 (pcs/workers/day)
3000 Benchmarking
2000 (pcs/workers/day)
1000 Deviation (pcs/workers/day)
0

Figure 16 Column Chart illustrating actual productivity of Trousers of SMEs with International
Benchmarks
Table 11Comparison of actual productivity of T-shirt of SMEs with International Benchmarks

S.No. Enterprise name Actual International Deviation

Productivity Benchmarks from
benchmarks
T-shirt
(pcs/workers/day) of
SMEs
1 TaimeMlse Garment 90 800 710
2 Leyu Design Garment 200 2000 1800
3 Abbay Garment 300 1040 740
4 MelkamuTadesse Garment 80 800 720
5 Kibru and Tateq Garment 100 2560 2460
6 Cottex Garment 400 16000 1200
7 YMOS Garment 100 960 860
Source: Own developed

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20000
18000
16000
14000
12000
10000
Deviation (pcs/workers/day)
8000
6000 Benchmarking
4000 (pcs/workers/day)

2000 Actual productivity

(pcs/workers/day)
0

Figure 17 Line chart illustrating actual productivity of T-shirt of SMEs with International
Benchmarks

4.4 EXISTING PRODUCTIVITY IMPROVEMENT TECHNIQUES OF ENTERPRISES

From literature firms that achieve dramatic improvements in productivity are those that take a
systems approach and make the necessary culture change in their organization. Technology based
techniques, material based techniques ,product based techniques, employee based techniques, task
based techniques and management based techniques are the major productivity improvement
techniques used to enhance entrepreneurs productivity and this productivity improvement
techniques are used to assess the garment SMEs in the sub city.

From the interview with the entrepreneurs majority of the respondents have knowledge of
productivity improvement tools through awareness training. The finding is not surprising since
government has been providing productivity awareness training to the sector through industry
development office, ETIDI and FeMSEDA .Judging from the productivity problems still affecting

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the sector, this may indicate that the productivity campaign is not producing the desired results and
needs improvement.

Results from both interview and observation indicated that there is poor top management
commitment when it comes to application of productivity improvement techniques. Studies in the
area of productivity improvement adoption indicate that top management is vital to the success of
productivity improvement techniques. Indeed, the lack of top management commitment in
productivity improvement techniques application has been attributed to the low level of awareness
among managers of the existence of these productivity improvement techniques, as well as their
limited faith in the usefulness of these tools which result in poor tool implementation is also the
major constraint of the SMEs in the sub city observed. The SMEs do not have well established
system to support effective and efficient implementation systems for productivity improvement.

From the responses lack of training is the main reason for the productivity improvement
implementation failure. The entrepreneurs also pointed out that the government agent’s industry
development office and TVET doesn't have enough competence to give a practical skill training.
They further stated that some of their positions remain vacant for long periods of time because they
cannot find skilled manpower to fill the positions. They also highlighted staff turnover as one of the
reasons for lack of skills as employees tend to migrate to other organizations leaving them short in
manpower hence rendering them to produce below their set standards.

Lack of appropriate machinery and equipment is the main productivity improvement problem of the
garment SMEs. According to the interview with the entrepreneurs, absence of modern machines,
tools and equipment’s have hindered them to produce products in a better quality and much
quantity. The regular payment for machines bought by credit made them lead a subsistence life
having no significant improvement in their growth. Moreover, respondents replied that, if new and
appropriate technologies obtained, the presence of them will result in fundamental growth of their
business and enhance their productivity.

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TECHNOLOGY BASED TECHNIQUES

87.50% MATERIAL BASED TECHNIQUES

100%
75%
100%
PRODUCT BASED TECHNIQUES
87.50% 100%

EMPLOYEE BASED TECHNIQUESTASK

TASK BASED TECHNIQUES

MANAGEMENT BASED TECHNIQUES

Figure 18 Pie Chart illustrating productivity improvement techniques

On the subject of technology based techniques, 87.5 % of respondents mentioned that introduction
of new production line, computer aided pattern design and new machine were the top technology
based techniques used for productivity improvement. But since all the above productivity
improvement techniques requires capital in order to introduce the SMEs can't implement them as a
productivity improvement techniques since they have capital problem due to collateral requirement
for loan.

On the topic of material based techniques, 87.5 % of respondents mentioned that introduction of
quality control and assurance and material handling improvement were the top material based
techniques used for productivity improvement. On the other hand, 75 % of respondents showed that
inventory control and 50 % of respondents showed material reuse were also material based
techniques used for productivity improvement.

From the collected questionnaire it is understood that, 100 % of respondents mentioned that product
standardization and product reliability were the top product based techniques used for productivity
improvement. But since there is no standard at national level for garment manufacturing the SMEs
are not manufacturing according to standard this in turn reduce their garment product reliability in
the market. From the research 100 % of respondents mentioned that management performance was
the top management based techniques used for productivity improvement.

Moreover from the research 100 % of respondents mentioned that working conditions improvement
was the top employee based techniques used for productivity improvement. On the other hand,

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87.5% of respondents showed that financial incentive and 70 % of respondents showed training and
education were employee based techniques used for productivity improvement respectively. On the
other hand 100 % of respondents mentioned that job evaluation was the top task based techniques
used for productivity improvement .The respondents mentioned that the garment enterprises have
job evaluation techniques and employs are benefited based on the result of evaluation. All most all
SMEs usefinancial incentive productivity improvement techniques by giving financial incentives
for best performing employs. This creates competition between employs. The other employee based
productivity improvement techniques used by employs to enhance their productivity is training of
their employs on their own firm and outside to build the employees capacity and enhance their skill.

Most of the garment SMEs are not using their production capacities due to raw material shortage,
working capital shortage, tax systems, and lack of market as well as machinery breakages and lack
of spare parts. Poor layout including missing factory layouts, material flow plans and work plans is
another observed weakness, where these are vital for the coordination, flexibility of the factory
production system and to see where production and machinery arrangements might be inefficient.
Sewing layouts is in almost all cases one single line cumulating preparation of parts and
assembling, difficult to manage efficiency and quality wise where this setting is not recommended
for trousers or complex products.

The general trend of the production processes are such that there is no separate sections for
cutting/sewing/finishing rooms exist which is difficult to manage and improper as utilization of
resources. In addition position of departments, especially in case of warehouses, is not according to
a general flow leading to extra material handlings and transport. In cutting sections, accumulations
of fabrics are observed, due to missing correct flow and limited skills of operators for the spreading
and numbering operations. Furthermore intermediary between cuttings and sewing is missing,
where mostly it is done directly in lines leading to poor utilization of available machines and
personnel. Besides supplying accessories with fabrics according to the cut quantities are not done
and all accessories are delivered directly to line generating waste and errors.

Finally the garment manufacturing SMEs are potentially wasting valuable and scarce resources
since they doesn't implement productivity improvement tools and techniques and some the
implemented one like kaizen and 5s are also failing to deliver the results expected. A number of
related factors would appear to be contributing to this position are the relatively low level of
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understanding of productivity improvement tools and management methodologies, the relatively

low level of training received in the use and application of productivity improvement tools and
management methodologies, lack of a strategic approach to the application of tools and techniques
as a result of tools and techniques being selected before a clear business need has been identified.

4.5 IDENTIFICATION OF INTERVATION AREA

As mentioned earlier, there are several productivity factors which affect productivity of the SMEs.
All the productivity factors do not have equal impact on productivity of the garment manufacturing
SMEs. In addition, the resource are limited to solve all the problems associated with productivity
factor. Therefore, deciding the intervention areas which are potential for productivity improvement
is very important. To decide the intervention areas the productivity factors are located in the four
fields based on resource requirement, respondent’s information provided and the impact on
productivity .The current status of productivity factor has been used to estimate the effort required
and impact on productivity.

As shown in Figure 27 below, 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 impact 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, improving production efficiency, motivation of
employees, human resource performance, health and safety of employees, business regulation and
restriction, marketing linkage, management skill and knowledge, training and technical support, and
productivity measurement are potential for productivity improvement at low effort. Whereas
improving aaccess to technology, qquality, wage /minimum wage, working capital, wworking
condition, business network, sourcing, supply of raw material, supply chain responsiveness, attitude
and infrastructure are potential for productivity improvement at large effort.

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 Production efficiency
 Absenteeism  Motivation of employees
 Human resource performance
 Health and safety of employees
 Business regulation and restriction
 Marketing linkage
 Management skill and knowledge

Low effort

Training and technical support

 Productivity measurement

 work experience  Access to technology

 Certification  Quality
 Standardization  Wage /minimum wage
 Metrology  Working capital
 Spare parts  Working condition
 Business network
 Sourcing
High effort

 Supply of raw material

 Supply chain responsiveness
 Attitude
 Infrastructure

Low impact High impact

Figure 19 Intervention areas using four fields

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CHAPTER FIVE

THE PRODUCTIVITY IMPROVEMENT METHOD

In general, results obtained from assessment of garment SMEs show that the productivity of the
garment SMEs is low and decreasing, since, most of the productivity indicators of the garment
SMEs show poor status and the production capacity deviation from International benchmarks for
garment products are high.

Table 12 Deviation from International benchmarks for Trousers and T-shirt production

S.No. Enterprise name Deviation from Deviation from

benchmarks benchmarks Trousers

T-shirt (pcs/workers/day)
(pcs/workers/day) of SMEs
of SMEs

1 TaimeMlse Garment 710 370

2 Leyu Design Garment 1800 1097

3 Abbay Garment 740 500

4 MelkamuTadesse Garment 720 380

5 Kibru and Tateq Garment 2460 1400

6 Cottex Garment 1200 9620

7 YMOS Garment 860 560

Source: Own developed

The identified productivity factors are multidimensional ranging from human to capital to material
to method to control to process to product factors. This requires organized and sustainable
productivity improvement method to solve the problems associated with productivity. Therefore, a
PIM based on this requirement has been developed.
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5.1 PRODUCTIVITY IMPROVEMENT METHOD

The main components of productivity improvement method for garment SMEs are identified based
on the research analysis, intensive literature surveys and previous similar research works. These are;
paradigm shift, management commitment, supply chain improvement, intensive education and
training, continuous improvement and improved government support. Based on main components
of productivity improvement method a model which is part of productivity improvement method is
proposed for the garment SMEs.Following the proposed model work has been stated considering
the specific nature of the garment SMEs, present technology, culture, financial ability,
organizational structure and personnel involved.

5.1.1 Paradigms shift (for radical change)

An old long traditional industrial working trend has existed in garment manufacturing firms.
Through time, individuals and the firms as a whole have adapted a traditional working culture. Most
of the workers in these firms are not aware of the productivity, productivity measurement and
improvement tools and techniques of their firms. They are not ready to make a change. Similarly,
the firms accept this trend and they do not have vision to change their firms. Most of the firms are
not ready to practice the modern management philosophies to improve their productivity.To change
attitude of both management and employees of the garment SMEs and increase productivity
Paradigm shift of management and employs attitude is required.

Paradigm shift is a continuous task that needs consistent updating to catch up the unprecedented
global competition. Therefore, the Ethiopian government should work hard to bring a paradigm
shift in all levels of garment manufacturing SMEs, considering it as one of the development
strategy tool. Therefore paradigm shift (for radical change) is required from the government support
system, entrepreneurs management commitment and employees attitude.

5.1.2 Management commitment

Moreover to be productive, it requires industries to perform a continuous improvement of their

process, hence continuous improvement should always be an elusive goal for garment industries in
order to improve the productivity and competitiveness in the current market. Management

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commitments are also required for allocating budgets and resources and monitoring progress.
Particularly management commitment needs to improve regarding training system, motivational
system and social compliances to meet international working conditions.

The management should give attention for customers and must recognize that the purpose of all
work and efforts to make improvements are to serve the customer better. Hence to satisfy
customers’ requirements, industries must fully understand the customers’ current and future needs
and expectation and must focus on value added manufacturing activities only. Therefore, garment
manufacturing SMEs shall focus their manufacturing efforts on the value added activities.

In order to solve the identified problems of garment SMEs, several solutions have been proposed as
follows, proper utilization of employee, hiring necessary employee based on human resource
planning, conducting training to upgrade skills of employee and the management staff , preparing
job description for individual employees, giving clinical, transportation, recreational and office
services, creating conducive working areas, follow up the proper implementation of human resource
management policies, procedures and manuals, identification and implementation of appropriate
productivity improvement techniques and tools, performance appraisal of each department and
individual employees and Establish good reward mechanism and welfare system for employees on
weekly, monthly and yearly base.

And the other problems could be approached by using some modern management philosophies
(such as business process re-engineering, lean production) and scientific methods like production
planning and control etc. In order to implement the modern management philosophies and scientific
methods the SMEs management must be committed. Finally the government must undertake
different package of measures to support SMEs to improve their management skills and enable
local networks for benchmarking best practice where SMEs can learn from one another.

5.1.3 Continuous quality improvement

Quality has become one of the most important drivers of the global competition today. Intensifying
global competition and increasing demand for better quality by customers have caused more and
more companies to realize that they will have to provide high quality product and/or services in
order to successfully compete in the marketplace.

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In garment manufacturing SMEs, the quality awareness is very low. Most of the firms do not even
clearly identify their customers. They produce their products without considering customer
needs/requirements. The production system is traditional and it is not quality and market-oriented.

The quality control activities in these enterprises are inspection-based instead of prevention-based.
But, inspection actually does not build quality; quality is built into the process. When a defect
shows up, the information should be sent back to the work stage so that the process can be
corrected. Hence, the enterprises should make use of quality control tools for measuring,
prioritizing, and improving their processes.

Garment industries must have quality improvement plan to improve the productivity where it
should include a quality policy that contains goals and methods to achieve it. They should
implement and maintain a documented quality system as a means of ensuring quality. Quality
control system should be implemented to measure the percentage that deviate from the acceptable
in order to prevent the reoccurrence of a defect garment. Quality control techniques should include
monitoring incoming raw material quality levels as well as utilizing statistical quality control
methods to reduce garment variability. Implementation of the quality systems, together with an
intensive training over the handlings, methods, records and data analysis is necessary for all
management positions.

There are many methodologies of continuous improvement. The two that can be adapted to the
garment SMEs condition are kaizen (Continuous improvement) and lean manufacturing. The
frequent decline of garment SMEs in customer satisfaction due to poor quality could be solved
using this tool.

5.1.4 Improved government support

To date, there are government efforts to address the major productivity problems of the garment
SMEs. But It is noted that there are policy and institutional constraints such as (i) coordination
failures; (ii) lack of enforcement; (iii) insufficient policy alignment; and (iv) poor implementation
of government support packages ( SMEs access to technology, capital goods and machinery
delivery, infrastructure, access to credit, market linkage, promotion, incentives packages ,BDS and
industry extension supports) . Results suggest that all of these issues are binding. This suggests that

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horizontal interventions, such as improvement of government support, are a key part in addressing
SMEs productivity. Government’s role in enhancing SME productivity has to be improved.

In order to solve such problems of the government support system, several solutions have been
proposed as follows: (1) Technology promotion system, Therefore, the government must support
SMEs access to technology which has high contribution to productivity improvement.(2) The
government must improve its current enforcement, support policy and system. The government
must review and dramatically change the current support system provided for SMEs , The current
support system which is not efficient ,effective and well organized (3) Improving the support
provided by government agencies for the garment SMEs like national development bank of
Ethiopia ,quality infrastructures( Ethiopia national standard agency, certification agency)
,ETIDI,TVET , FEMSEDA and industry development office for SMESs (4) Improving the finance
support system, access to credit and working capital problem, by revising its collateral requirements
for bank loan (5) The government must establish a detailed strategy for SMEs’ (6) Introducing
effective and efficient incentive mechanism, that privileged that garment SMEs (7) Programs must
be expanded to equip SMEs with new and improved management and business practices methods
in production, quality improvement, marketing and productivity improvement; and further
development of technical skills amongst SMEs.

To achieve a higher rate of success the government support approach has to be systematic and
coordinated. This synchronized approach is to be carried out hand in hand with financial support
programs which include: Assisting entrepreneurs to upgrade technical and professional skills,
Assisting in the purchase of new machinery and equipment and providing industrial sites (clusters)
at competitive prices.

Generally, if the government is committed to work hard by focusing on the above dimensions of
productivity improvement for the garment entrepreneurs, ultimately there will be a change and
possible to come to the positions of the best competitors in the nation and worldwide. Since it is
difficult to give solution for all productivity problems of garment SMEs at the same time
developing a strategy is a must. The proposed three-step development strategy of the garment SMEs
shown on table 20 describes the coordinated development plan in short (up to 1 years), medium (up
to 2 years) and long (up to 3 years).

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Table 13 Coordinated development plan of garment SMEs.

Sub-sectors Garment SMEs

Time span

Short term  Improve quality and productivity

 Develop technical skills among SMEs
 Improve coordination failures among government
support agencies
 Improve current enforcement system
 Technology promotion
 Delivery of capital goods and machinery

Mid Term  Review and dramatically change the current support

system and support packages
 Improve support provided by government agencies
like ,ETIDI,TVET , FEMSEDA and industry
development office
 Improve bank collateral requirement
 Ensure continuous improvement
 Seating minimum wage
 Introducing effective and efficient incentive
mechanism
 Provide efficient infrastructure

Long term  Develop detailed strategy for SMEs

 Introduce effective and efficient incentive mechanism
 Improve current enforcement support policy
 Review and dramatically change the current support
system and support packages
 Perfect SMEs policy

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 Industry park development for the sub sector

Source: Own work

5.1.5 Intensive education and training

Ethiopian government is expanding educational institutions such as TVET (Technical and

Vocational Education Training) colleges to fulfill the demand of technical skills by garment
manufacturing firms. This program is encouraging. But the implementation process is not yet
effective. Moreover, intensive training of the existing staff (top management, middle management,
and shop floor workers) in the sector is also very essential. Therefore, TVET colleges should focus
on practical training program.

Poor management and leadership is a problem for garment SMEs and is damaging their
productivity and ability to grow. Often, this is because SMEs lack financial resources to invest in
relevant training, are unaware of the benefits such training can deliver or suspect that it will not be
directly relevant to their business. The Government must provide support for leadership and
management training.

It was noted that the general awareness of quality in the enterprises is low, especially in the shop
floor. Therefore, quality awareness education should be provided to ensure that employees have a
common understanding of the importance of quality. The quality awareness program should aim to
ensure that employees know their roles within the firm, and build a desired organizational quality
culture. Training is the critical element for the success of garment enterprises. It enables the
workforce to acquire the skills needed to improve and maintain the quality and productivity of the
production process. Education and training should be given in the garment enterprises on continual
basis to improve the performance of workers which enhance SMEs productivity. Government
agencies ETDI,TVET, Industry development office, Ethiopian standard agency and certification
institute has to do more on this by providing training on BDS, industry extension, concept of
productivity, garment value chain, supply chain, embroidery, pattern design, quality control and
quality assurance, system and product certification, productivity improvement and standardization ,

For human resource development (HRD) of garment SMEs, it was recommended that; (1)
Governmental effective campaign to deploy the value of training for productivity improvement, (2)

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Creating comprehensive training support system, (3) Frequent provision of training courses for
employees of the entrepreneurs , (4) Progression of training courses from basic to intermediate to
advanced, (5) Communicating to the managers the benefits of the initiative, and (6) Encouraging
employees involvement, participation and empowerment.

5.1.6 Supply chain improvement

From the analysis the primary cause of poor quality products in garment enterprises is poor quality
fabric. The selection of suppliers should not solely depend on price but should mainly focus on
quality. In addition, the enterprises must assess the reputation of the supplier and investigate
supplier manufacturing facilities before sourcing the supplier and purchase any fabric. The
enterprises should frequently evaluate the quality of products received and provide feedback for
improvement.

The management is responsible in supplier evaluation and selection, where the selection of
suppliers must be based on existing relation with garment industries, previous records and
testimonies from previous clients and financial capacity and other relevant information about the
supplier.

Select the best marketing strategy, to carry out efficient marketing channels according to
consumers’ demands and Utilize the varied promotion and market activities for enhancing
marketing linkage.

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Paradigm shift

Establishing Effective Establishing Efficient Improved

efficient human improved quality Supply
production resource business Infrastructure chain
system management environment

Productivity improvement tools

Improve SMEs management
Improve government support
Skill and system
For SMEs

Productivity
Improved?

Enhanced productivity

Figure 20 Productivity improvement model for garment enterprises.

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5.2 IMPLEMENTATION OF PRODUCTIVITY IMPROVEMENT METHOD

Once the productivity improvement method 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 method. 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 method. Note that the
productivity improvement method is nothing if it cannot be implemented by the enterprises.

Top management commitment

Top management
commitement
Establish a productivity improvement
team
Establish a quality
Provide companywide training
improvement
Provide c
implementation team
implementation tea
Formulate productivity improvement
plan
Plan Do

Implement productivity improvement

plan
Implement quality Act Check
improvementpla

Observe and check results

Observe and

Investigate and analyze results

Investigate and

Implement the result on a wider scale

analyzeresul
Implement the r

Figure 21 Productivity improvement implementation model for garment enterprises.

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CAPTER SIX

CONCLUSION AND RECOMENDATION

6.1 CONCLUSION

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. The
results obtained from the assessment of garment SMEs show that they possess low productivity
since, most of the productivity indicators of the garment SMEs show poor status. This low
productivity makes them to face challenges in market competition. Therefore, using different
methods of quality management, personnel, production, capital, energy and other resources in the
enterprise can significantly save money and increase productivity.

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.

It can be concluded from the research that there are different productivity factors that are hindering
the productivity improvement of the garment SMEs, where the factors can be categorized as
potential for productivity improvement at low effort and large effort. Therefore, improving
production efficiency, motivation of employees, human resource performance, health and safety of
employees, business regulation and restriction, marketing linkage, management skill and
knowledge, training and technical support, and productivity measurement are potential for
productivity improvement at low effort. Whereas improving access to technology, quality, wage
/minimum wage, working capital, working condition, business network, sourcing, supply of raw
material, supply chain responsiveness, attitude and infrastructure are potential for productivity
improvement at large effort.

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Currently garment SMEs 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 capital productivity), and lack of identifying the intervention areas
for productivity improvement are the main reasons for not applying organized and sustainable
productivity improvement.

Therefore, the research identify intervention areas for productivity improvement based on identified
intervention area a PIM is developed. The developed PIM consists six major potential areas for
productivity improvement that address all the intervention areas identified. These are: paradigm
shift, management commitment, supply chain improvement, intensive education and training,
continuous improvement and improved government support.

Increasing productivity is one of the most critical goals in business. If the productivity improvement
is carefully planned and executed, the painstaking investment is the initial cost and effort, and the
reward is overwhelming result. To achieve continuous productivity improvement through the
utilization of improvement tools, all barriers that lead to their implementation failure have to be
overcome. Also, unlike large companies, small companies have limited resources and this act as an
implementation barrier.

Though, various governmental bodies designed various programs aimed at developing SMEs. Most
of the programs were not given the appropriate backing and as such the impact of the programs
could not be felt in the productivity of SMEs.This is mainly because of the fact that these programs
or policies are not effectively implemented in line with their intended objectives owing to various
reasons. According to the findings, the reason ranges from lack of visible commitment of
governmental bodies to lack of regular integration between the garment SMEs and the concerned
bodies of the government in the sub city.

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.

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6.2 RECOMENDATIONS

Based on the findings of this study, it is recommended that:

 Productivity is one of the major determinants of competitiveness. Therefore, the garment

SMEs should manage their productivity in organized and sustainable way so that to compete
in the market place.
 With regard to business factor for SMEs, Ethiopian government should revise the tight
regulation of financial institutions on collateral requirements so that SMEs will have equal
and fair funding sources like their large counterparts. In fact, the risky nature of SMEs in the
country may pose a problem but if the physical and institutional infrastructures along with
indiscriminate support for all SMEs is guaranteed the enterprises will have attractive
performance and loan repayment capacity. A structural reforms on the SME business
environment, as well as on the role and impact of policies targeted to SMEs is
recommended.
 To increase the labour productivity in apparel SMEs, an appropriate recruitment procedure
should be created after job analysis. Workers should be counseled for reduction in
production output, poor quality of garments and so on. To achieve positive results
motivation tools such as training, appropriate wage structure and incentive along with
annual productivity linked bonus can be provided.
 Currently the garment SMEs in the sub city apply single partial productivity indicator (i.e.
human productivity and capital 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, garment SMEs, in addition to human and capital
productivity, should focus on, material productivity, energy productivity, miscellaneous
productivity, total productivity, surrogate productivity and process indicators.
 In order to enhance productivity, workers skills need to be improved in designing, pattern
making and grading as well as marker making and cutting. Hence upgrading technology and
moreover adopting CAD will increase the speed and the accuracy for the sampling process;
transfer of data from customers will also be easier and faster hence increases flexibility.

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Facility layouts are to be reorganized in order not to allow accumulation of fabrics in cutting
areas as well as sewing. Optimum material handling system usage should improve for better
flexibility.
 With regard to technology for manufacturing, Adapting more efficient new technologies to
boosting productivity of the garment SMEs is recommended like, modern swing machines .
 Currently garment SMEs 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.
 With regard to production factor for SMEs, in garment SMEs operation, production costs
constitute mainly, raw material cost, labor cost, and equipment’s and machineries costs.
Thus to reduce production costs, resource utilization should improve i.e. wastage of fabrics
and accessories, reworks, quality degree. Inspection of raw materials, good relation with
suppliers in order to get optimum cost of raw materials, proper utilization of existing
machineries is also important. The study also recommends that SMEs should establish
quality management systems and improve on their quality management programs for overall
success of the enterprises productivity.
 With regard to human resource factor for SMEs, Time based minimum wages shall been set
by the government for the garment sector for SMEs. Since it is the major productivity factor
that affect the productivity of garment SME. The garment SMEs should follow modern
management practices, adopt flexible manufacturing, kaizen, lean manufacturing and
productivity improvement techniques.
 With regard to education statues of the enterprises, the design and implementation of policy
interventions aimed at enhancing the support given by government agencies ETDI, TVET,
Industry development office, Ethiopian standard agency and certification institute to
enhance the capacity of the garment SMEs should be implemented.

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