i

THE EFFECTS OF RESOURCE

MANAGEMENT ON PRODUCTIVITY: THE CASE OF

METAL PRODUCTS FACTORIES IN ADDIS ABABA

SINTAYEHU ZELEKE EJERIE

MASTER OF BUSINESS ADMINISTRATION

ADDIS ABABA SCIENCE AND TECHNOLOGY UNIVERSITY

DECEMBER 2018

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THE EFFECTS OF RESOURCE MANAGEMENT ON

PRODUCTIVITY: THE CASE OF METAL PRODUCTS FACTORIES IN

ADDIS ABABA

By

SINTAYEHU ZELEKE EJERIE

A Thesis Submitted to

The College of Natural and Social Science for the Partial Fulfillment of the Requirement for

the Degree of Master of Business Administration in

Industrial Management

ADDIS ABABA SCIENCE AND TECHNOLOGY UNIVERSITY

DECEMBER 2018

ADDIS ABABA, ETHIOPIA

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Declaration

I hereby declare that this thesis entitled “The Effects of Resource Management on

Productivity: The case of Metal Products Factories in Addis Ababa” is my original work

and has not been presented or submitted partially or in full by any other person for a degree in

any other university, and that all sources of materials used for the purpose of this proposal

have been duly acknowledged.

Name: Sintayehu Zeleke Signature: ____________Date:___________

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Certificate

This is to certify that the thesis prepared by Mr. Sintaehu Zeleke Ejerie entitled “The

Effects of Resource Management on Productivity: The case of Metal Products Factories

in Addis Ababa” and submitted in fulfillment of the requirements for the Degree of Master

of Business Administration in Industrial Management complies with the regulations of the

University and meets the accepted standards with respect to originality and quality.

Signed by Examining Board

Examiner: __________________________Signature:_____________Date: ______________

Examiner: __________________________Signature:_____________Date: ______________

Thesis Advisor:______________________Signature:_____________Date:______________

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Abstract

There are dramatic evolutions in the market environment and every organization strives to

keep itself in business. Major competition has shifted from the market to the production floor

where manufacturing costs can be cut down, productivity and profitability boosted for firms

to compete favorably. Trends in the sector showed that there were gaps between demand and

supply in metal products sector in the country and also, the metal and steel industries in the

country are operating at around 38 percent of their installed capacity. Based on this created

gap and low efficiency on the sector, researcher investigated the organizational resources

(human resource, working capital, raw material and technology) management taken as a

variable to measure its effect on productivity. Hence, the broad objective of the study is to

analyze the Effects of Resource Management on Productivity the case of Metal Products

Factories in Addis Ababa. This study used quantitative and qualitative research

methodology, data types which were collected through questionnaires, observation and

interview. The study used both primary and secondary data with a mixed research approach.

The researcher designated descriptive (mean, standard devotion) and inferential

(correlation, regression) statistics in this study. The Studied companies were selected based

on geographical location and products homogeneity. Probability (stratified) and non-

probability (purposive) sampling designs were used in this study. The necessary annual

report data used for the purpose of this study covered three successive years from 2014/15 up

to 2016/17. The correlation and regression analysis result clarified that all independent

variables (human resource management, working capital management, raw material

management and technology management) were strong positive significant effect on

productivity. As the result the Ethiopian metal products firms need to give a special attention

on the way an organization manages its human resources, raw material, working capital and

technologies have a significant effects on the organization’s performance. On regards to

Resources- Human resource, working capital, raw material and technology managements are

vital to the studied firms become win the compaction that bearing higher productivity turns to

butter value to customer that leading to higher share in the market

Key word: Resource Management, Productivity, Human resource management, Raw material

management, Working Capital management, Technology management.

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Acknowledgments

Above all, I thank the almighty God because He gave me the strength to complete my courses

and the thesis work. I am really grateful to my thesis advisor Dr. Delessa Daba for his

guidance and enthusiastic support throughout the research undertaking.

My heartfelt appreciation to my wife, W/ro Serkalem Gessess, My children Yonathan and

Yeroson for their help and patient during my study and preparation of this thesis. Their

endless support, encouragement and understanding throughout my good times and hard times

are too meaningful to me.

I would like to appreciate top management, middle management, supervisor/senior

employees of Kaliti metal products factory, Sunny Steel Pipe manufacturing PLC, Osaka

engineering plc, Mame Steel Plc those individuals who devoted their precious time to

respond to my questionnaire and interview.

Finally, I would like to thank Metal Industry Development Institute directors and employees

for their useful date provided.

Thanks to GOD who made all things possible.

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Table of Contents

Certificate ________________________________________________________________ iii

Declaration _______________________________________________________________ iv

Abstract___________________________________________________________________v

Acknowledgments__________________________________________________________ vi

Table of Content __________________________________________________________ vii

Lists of tables ______________________________________________________________x

Lists of Figures ____________________________________________________________ xi

List of Abbreviations ______________________________________________________ xii

CHAPTER ONE ____________________________________________________________1

INTRODUCTION __________________________________________________________1

1.1. Background of the study_________________________________________________1

1.2. Statements of the Problem _______________________________________________3

1.3. Research Objectives ____________________________________________________6

1.3.1. General Objective _________________________________________________6

1.3.2. Specific Objective_________________________________________________6

1.4. Development of Hypothesis ______________________________________________6

1.5. Significant of the Research_______________________________________________7

1.6. The Scope of the Study__________________________________________________7

1.7. Limitation of the Research _______________________________________________7

1.8. Organization of the Study________________________________________________8

1.9. Definition of Key Terms_________________________________________________8

CHAPTER TWO_________________________________________________________10

RELATED LITRATURE REVIEW __________________________________________10

2.1. Theoretical Review____________________________________________________10

2.1.1. Working Capital Management and productivity_________________________13

2.1.2. Human Resource Management and Productivity ________________________15

2.1.3. Raw Material Management and Productivity ___________________________20

2.1.4. Technology Management and Productivity ____________________________26

2.1.5. Factors Influencing Productivity_____________________________________31

2.1.6. Productivity Measurement _________________________________________31

2.1.7. Productivity Improvement _________________________________________33

2.1.8. Productivity Indicators ____________________________________________33

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2.2. Empirical Review _____________________________________________________34

2.2.1. Related Empirical Review _________________________________________35

2.2.2. Summaries of Empirical Studies_____________________________________44

2.2.3. Literature Gap ___________________________________________________47

2.3. Conceptual Frame Work________________________________________________47

CHAPTER THREE _________________________________________________________49

RESEARCH METHODOLOGY _______________________________________________49

3.1. Research Design ______________________________________________________49

3.2. Sources of Data_______________________________________________________49

3.3. Research Approach____________________________________________________50

3.4. Population of the Study ________________________________________________50

3.5. Sample Design _______________________________________________________51

3.6. Sampling Frames _____________________________________________________51

3.7. Sampling Unit________________________________________________________51

3.8. Sample Size _________________________________________________________51

3.9. Sampling Technique ___________________________________________________52

3.10. Methods of Data Collection____________________________________________53

3.11. Data Analysis Method ________________________________________________53

3.11.1.Model Specification ______________________________________________53

3.12. Validity and Reliability _______________________________________________54

3.12.1.Reliability ______________________________________________________54

3.12.2.Validity ________________________________________________________55

3.13. Ethical Considerations________________________________________________55

CHAPTER FOUR __________________________________________________________57

DATA PRESENTATION, ANALYSIS AND INTERPRITATION____________________57

4.1. Demographic Characteristics of Respondents _______________________________57

4.2. Relation of Resources Management among Productivity ______________________60

4.3. Effects of Resource Management on Productivity____________________________62

4.3.1. The Effects of Raw Materials Management on Productivity _______________64

4.3.2. The effect of Human Resource Management on Productivity ______________64

4.3.3. The effects of Working Capital Management on Productivity______________64

4.3.4. The effects of Technology Management on Productivity__________________64

4.4. Summary of Hypothesis ________________________________________________65

4.5. Summary of Major Findings_____________________________________________65

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CHAPTER FIVE ___________________________________________________________67

CONCLUSIONS AND RECOMMENDATIONS__________________________________67

5.1. Conclusions _________________________________________________________67

5.1.1. On Effects of Raw Material Management _____________________________67

5.1.2. On Effects of Human Resource Management __________________________67

5.1.3. On effects of Working Capital Management ___________________________68

5.1.4. On Effects of Technology Management _______________________________68

5.2. Recommendations ____________________________________________________69

Reference _________________________________________________________________71

Bibliography_______________________________________________________________79

Appendix _________________________________________________________________80

Appendix - A ______________________________________________________________81

Appendix - B ______________________________________________________________85

Appendix – C ______________________________________________________________88

Correlation and Regression Analysis Result ______________________________________88

Full correlation _____________________________________________________________88

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Lists of Tables

Table 2.1: Summary for the Deference between Production and Productivity 14

Table 2.2: Summary of Related Literatures 46

Table 3.1: Population of the Study 53

Table 3.2: Sampling size 54

Table 3.3: Reliability of data collection instrument 57

Table 3.4: Reliability statistic 57

Table 4.1: Demographic characteristics 59

Table 4.2: Respondent’s opinion about the effects of RMM on productivity 61

Table 4.3: Respondent’s opinion about the effects of HRM on productivity 61

Table 4.4: Respondent’s opinion about the effects of WCM on productivity 62

Table 4.5: Respondent’s opinion about the effects of TM on productivity 62

Table 4.6: Full correlation 63

Table 4.7: Partial correlation 63

Table 4.8: Model Summary 66

Table 4.9: ANOVA test 66

Table 4.10: Coefficients 66

Table 4.11: Summary of overall outcome of the research hypothesis 68

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Lists of Figures

Figure 2.1: Production system 11

Figure 2.2: Dynamic Concept of Productivity 13

Figure 2.3: Supply chain flow chart 25

Figure 2.4: How information technology influences all aspects of the

manufacturing enterprise 29

Figure 2.5: The key steps of an effective productivity measurement system 32

Figure 2.6: Models of Conceptual Frame Work 48

Figure 4.1: Models of conceptual frame work Results 66

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List of Abbreviations

AACCSA Addis Ababa Chamber of Commerce & Sectoral Associations

AGOA African Growth and Opportunity Act

ANOVA Analysis of variance

BMI Basic Metal Industry

CAD Computer Aided Design

CIM Computer Integrated Manufacturing

CSA Central Statistics Agency

EMOI Ethiopian Ministry of Industry

EOQ Economic Order Quantity

ERCA Ethiopian Revenue and Customs Authority

ERP Enterprise resource planning

GDP Growth Domestic product

GTP Growth and Transformation Plan

HRM Human Resource Management

ICT Information Communication Technology

IJSER International Journal of Scientific & Engineering Research

IS Information system

KPI Key Performance Indicators

MOFED Ministry of Finance and Economic Development

MOI Ministry of Industry

R and D Research and Development

SCH Supply Chain Management

TQM Total Quality Management

WIP Work-In-Process

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CHAPTER ONE

INTRODUCTION

1.1.Background of the study

Manufacturing sector is the heart and soul of many developed and developing country’s

economy which can spur economic growth and development because of its immense potential

for wealth creation, employment generation and poverty alleviation. Similarly, the

manufacturing sector makes an important contribution to the Ethiopian economy and

employs abundant work force. Melaku (2013) in his study on the total factor productivity and

technical efficiency of the manufacturing sector of Ethiopia found out that, fabricated metals

product manufacturing were labor intensive. One of the sub sectors in manufacturing

industries in Ethiopia is a basic metal and engineering industry. Being a top manufacturing

subsector; a basic metal industry plays an important role in the development of the country.

The Ethiopian metal industry sector is classified into two categories: basic metal and

engineering industries. Basic metal industries deal with production of metal from ore, scrap

and conversion of billet, slabs etc. into primary metal products such as hot rolled ribbed and

plain reinforcement bars, wire rod, angles, cold rolled tubes of various profiles, cold rolled

sheets, galvanized sheets and tubes whereas engineering industries convert primary metal

products into secondary products such as metallic structures, tanks, pressure vessels, machine

parts, components, machineries, transport equipment, electrical and electronic equipment,

measuring and control instruments and others.( AACCSA, 2015)

Following the economic growth and the development of mega infrastructure projects, there is

a very high demand for metal products. This creates a favorable condition for the basic metal

industry. However, the growth and contribution of the sector to the Ethiopian economy is at

its infant stage and it’s characterized by low productivity and under capacity utilization (Ali,

2017). Melaku T. Abegaz. 2013), the low productivity and the under capacity utilization of

the industry has been largely attributed to a variety reasons, the major ones being the sector’s

use of obsolete machinery, lack of skilled man power and application of backward production

technology. The performance of the sector has been also affected the poor state of physical

infrastructure, limited access to finance, limited research and development & poor

institutional framework.

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Therefore, firms have been using as one of strategic tools that came to the production floor

where manufacturing costs can be cut down, productivity and profitability boosted for firms

to compete favorably. So that resource management is fundamental to the survival of metal

factories and economy. To be this industrial sector contribution to the country’s GDP and

also to create good investment climate the Ethiopian government is taking a number of

remedial measures. The government provides variety of incentives for investors engaging in

the basic metal production. On the other hand, to meet the skilled manpower demand of the

industry various trainings which are aligned with industry strategies are conducted by

colleges and universities. The government also promotes apprenticeship programmers for

students by creating university–industry linkage. In addition, the construction of industrial

parks and simplification of business regulations via the introduction of a single window

service is paying off by luring investors into the manufacturing industry.

Productivity growth is a crucial source of growth in living standards. Productivity growth

means more value is added in production and this means more income is available to be

distributed. It is crucial to the welfare of industrial firm as well as for the economic progress

of the country. Productivity can be managed in different levels – on national, sector or

enterprise level. At firm level higher productivity can be achieved through efficient and

effective managing resources.

High productivity refers to doing the work in a shortest possible time with least expenditure

on inputs without sacrificing quality and with minimum wastage of resources (S. A. Kumar

and N. Suresh; 2008, p. 171). Resource can be a person, an asset, material or capital that can

be used to create value. Every organization needs three main resources to survive (Nicholas,

B., John, V. R. 2010,) they include: -Financial resources, Physical resource which include

material and Human resource. (Nkechi, A. O. 2014) in every area of organization, human and

material resources play an indispensable role. In organizational studies, resource management

is the efficient and effective development of an organization's resources when they are

needed. Such resources may include financial resources, inventory, human skills, production

resources, or information technology (Wikipedia).

Therefore, it is an important part for any profit making business entities managing such

resources systematically. Organizational Resource Management is an approach to guiding the

entire entity to success. Some slight, but significant, modifications derive a basic definition

of ORM as: A management system that makes optimum use of all available resources –

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equipment, procedures and people – to achieve organizational goals and enhance

the efficiency and value of operations.

At organizational level it is crucial managing- skilled manpower, working capital, source of

finance, new technology, flow of inventory, work improvement, optimal use of material,

waste reduction and improving work environment. Similarly, firms in the basic metal

industry strive for a higher productivity in order to survive and to be competitive in the

industry. The important factor that enables organization to stay competitive is by managing

the available resources efficiently and effectively. Besides to be more competitive in the

turbulent economy firms should devise a mechanism to enter a wider market by operating

strategically. Firm’s strategy should place a road map to penetrate global markets by adopting

the advanced technology, fulfilling social responsibility and reducing manufacturing costs by

innovation. In a similar, to attain higher productivity business processes and operations need

to be monitored continuously. Therefore, this study was conducted on the effects of resource

management on productivity in a basic metal manufacturing industry.

1.2. Statements of the Problem

Industrialization plays an important role in economic development. In this regard, the

manufacturing sector plays a key role in growth process. Despite the importance of

industrialization in Sustainable Economic Growth, the sector has encountered with a serious

growth problem that leads to insignificant contribution to GDP (Metal, Lather and Textile

performance to GDP 0.4, 6.0 and 1.4 % respectively) Dametew (2017). The Government of

Ethiopia has prioritized a few industries to lead its ambitious industrialization agenda,

namely, sugar, textile and garments, and leather products industries. These sectors are

prioritized because of their expected linkages with the agricultural sector and the desire to

exploit the country’s potential comparative advantage in labour-intensive products. These

priority industries are expected to be exported-oriented in order to generate the financial

resources needed for capacity expansion in other manufacturing industries. This strategy

sounds consistent with the country’s natural resource endowments and may allow the country

to take advantage of preferential trade arrangements such as The African Growth and

Opportunity Act (AGOA) (Admasu, S., 2017).

Ethiopian government through a time lists a priority sectors have been updated; the flower

industry and some import-substituting industries (such as metal and engineering, chemicals

4

and pharmaceuticals) were sequentially added. Ethiopia’s goal is to transform the country to

an industrialized economy and increase the per capita income of its citizens to middle-income

levels by 2025. Phase two is a phase where diversification in the existing priority industry

takes place along with emerging of new key industries. Among such industries the percentage

share of heavy metal and chemical industries will gradually increase. According to the

Central Statistical Agency, recently there are 241 medium and large scale sized firms of

metals and engineering manufacturing producers.(CSA, 2014).

At the end of the 2nd phase, the share of the manufacturing sector to the GDP is targeted to

reach 12%. The share of the manufacturing sector to GDP will finally reach 17%. The last

planning phase extends from year 2021 to 2025 which focus on building up and further

enhancing the capacity of high tech industries and the deepening and expansion of heavy

metal and chemical industries with strong linkages with other sectors including the existing

light industries. But medium and large factories as well as the light and small manufacturing

shared respectively 4% and 1.2% throughout the past decade. Among the industry sector, the

contribution of manufacturing and construction to GDP was 4.2% and 5.6%. This is due to

the low and inefficiency of the production and productivity of the manufacturing sector

(MOFED, 2014).

The strategic pillars of the GTP II (Growth and Transformation Plan) related to

manufacturing include; developing light and small manufacturing enterprises that are globally

competent and leading in Africa and establishing a foundation for further growth of the

strategic heavy industries which ultimately enable Ethiopia to become an industrialized

country by 2025 (source: GTP II, PP 38). This is, however, an over ambitious plan. First of

all, our experiences over the past ten years tells that, despite the sector level growth, the

much needed structural transformation has never even showed a sign of change. The metal

and steel industries in the country are operating at around 38 percent of their installed

capacity. It shows us they operate under efficiency (survey interview). Based on articles of

Pawlos Belete the current operating performance is very low as compared to the world

average which currently stands around 85 percent. So what are the reasons for the Ethiopian

firms perform below the world average.

Despite the efforts by the government, the metal sector faces serious growth problem that

affects contribution to GTP. Actually the main issues should be unavailability of locally using

raw material resources. Due to depend on 95% imported materials (survey interview) rather

5

than local resources, consequently of these the manufacturing sector is still infancy and have

full of problems. In the industrial development policy of Ethiopia, the metal and metal

products industry has the objective to play important role in import substitution. But some

indicators show that industry has been affected by chronic financial scarcity, boosting volume

of production and becoming competitive both in the domestic and international markets are

serious issues.

According to Metal Industry and Development Institute annual report, country’s annually

imported and local manufacturing achieved 1,274,943 ton and 1,502,651 ton respectively

(Appendix B ) this shows that local manufacturer cannot be fulfills the demand for local

market. It indicates that a demand and supply gap in the market existed (CSA).

Hence, the gap that created by local manufacturer was taken by the researcher to further

investigated. According to the Ethiopian GTP the annual per capital metal consumption of

the country is set to reach 34.2 kg in 2014/2015 but the actual value is 11.2 kg we can

compare with the global average of annual per capital steel were 216.6 kg (Dametew AW,

Ebinger F, 2017).

In order to attain the government gaol, as well as for their survival metal industry sectors are

raising many problems to be productivity as well as profitability. They have also a resource

and resource management constraint. Researchers’ have a general knowledge on the current

problems on metal factories; so that , lack of skilled manpower, lack of spare parts, locally

unavailability of raw material, lack of quality raw materials , lack of working capital, weak

customers handling system, Problem on relationship with supplier, problems on adopting

new technology, employees resistance to change, lack of transport and logistics, lack of

specialized training center, lack of the capacity on innovation and design and development

center are some of the issues needs highly attention by stakeholders.

Therefore, the researcher was answered such question at what extent the effects of resources

management on productivity in metal products factories were farther investigated in this

study based on problem statement and literatures review some variables were taken within

conceptual frame work. This study was conducted to investigate the reason why the basic

metal performance was under efficiency. Therefore; by investigating the above stated effects

of resources on productivity in metal products sub sector, by answering related issues and

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what actually the sector achieved now is the main concern on this research paper. So from the

above indicated problems, researcher was answered by taken from the most organizational

resources as variables - human resource management, working capital management, raw

material management and technology management. Although studies about the effects of

resource management on productivity in basic metal industry have conducted in some

countries, as far as the researcher knowledge there are very few empirical evidence about the

productivity of basic metal industry in Ethiopia were reviewed. Thus, this study was

conducted to add empirical evidence and to narrow the research gap in the area of the Effects

of Resource Management on Productivity the case of Metal Products Factories in Addis

Ababa.

1.3. Research Objectives

1.3.1. General Objective

The general objective of this study is to assess the effects of resource Management on

Productivity the case of Metal Products Factories in Addis Ababa.

1.3.2. Specific Objective

To examine the effects of human resource management on productivity.

To examine the effects of raw material resource management on productivity.

To examine the effects of working capital management on productivity.

To examine the effects of technology management on productivity.

1.4. Development of Hypothesis

Based on the literature review and the hypothesized connections presented in the conceptual

framework the following alternative and null hypotheses were tested at (0.05) significance

level.

1. Hypothesis 1

(H1): Human resource management has impact on firm’s productivity.

2. Hypothesis 2

(H1): Raw material resource management has positively effect to firm’s productivity.

3. Hypothesis 3

(H1): Working capital management has strong effect on firm’s productivity.

4. Hypothesis 4

(H1): Technology resource management has positively effect on firm’s productivity.

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1.5. Significant of the Research

Based on the finding researcher was identified from metal industries; the causes of lower

productivity, constraints and performance gaps. And finding will be used as an input to

increase productivity, improve efficiency and for better competitiveness in the sub sector.

Through that finding also helpful how resource utilization, what are risks they have,

opportunities and threats that are facing to productivity and ensure sustainability for growth

and development, what are the basic and priority areas that needs to support and suggesting

possible solution with the alternative management resource system. Furthermore, this study is

relevant for the academia because it fills a literature gap on the topic area. The study is

therefore a source of reference for researchers, students and academicians who have interest

in the subject matter.

1.6. The Scope of the Study

The scope of the study is limited by Geographical, firm’s sizes and year of establishments.

The research is limited to basic metal manufacturing industries (specifically products like

steel hollow section, corrugated sheet, cut to size (plain and rolled products), and normal roof

caver. There are many resources in an organization to be taken all as variables are

unmanageable to conduct the study because in terms of time, finance, and research

manageability. Therefore, because of highly significant effects on organizational productivity

and profitability out of many organizational resources researcher was taken four variables for

this study. It is supported by (S. Anil Kumar and N. Suresh; 2008), (Nicholas, B., John, V.

R.; 2010) and (Nkechi, A. O. 2014) and et al. Accordingly to the purpose of this topic the

variables- human resource management, Working capital management, raw material

management, and technology management are independent, whereas productivity is the

dependent variable. The necessary annual report data used for the purpose of this study

covered three successive years from 2014/15 up to 2016/17. The target populations were

including key persons which are top management, middle management and supervisor/senior

employees found in four metal product factories in Addis Ababa.

1.7. Limitation of the Research

There are many variables which effects productivity; to accomplished this study researchers’

tried only to select four variables (human resource management, Working capital

management, raw material management, and technology management are independent,

whereas productivity is the dependent variable). The study was conducted in four sampled

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basic metal firms and covered metal factories which are geographically found in Addis

Ababa Ethiopia. Addis Ababa regions are the place where the majority metal industries

located, thus the selected sample industries can be considered to be sufficient indicatives of

the metal industries in Ethiopia as a whole.

1.8. Organization of the Study

The study focuses on the effects of resource management on productivity in metal products

factories in Addis Ababa city. Chapter one is caver introductory view to the reader about the

thesis work, background, the statement of problem, research objectives, significant, scope,

hypothesis, limitation, and definition of terms. Chapter two covers literature review that in

detail the literature available of resource management on productivity. Theoretical review,

empirical review, literature gap, and conceptual frame work are included. Methodology of the

study is presented in the third chapter. The fourth chapter explains data analysis and

presentation and interpretation of the result. Finally, the fifth chapter of this study contains

the summary of findings, conclusion and recommendations.

1.9. Definition of Key Terms

Following are operational definitions of some of the most commonly used terms in this study.

Resource Management:- The process of using a company's resources in the most efficient

way possible. These resources can include tangible resources such as goods and equipment,

financial resources, and labor resources such as employees.

Productivity - a ratio of production output to the input required to produce it–is one measure

of production efficiency. Productivity is defined as a total output per one unit of a total input.

Control management must implement control processes to maintain or improve productivity.

Human resource management - defined as a process in which human resources are

recruited and mobilized in such a way that it helps in achieving the objective of the

organization. Concerned with the people dimension in management under which the

consideration is given towards recruitment and selection, development, motivation and

maintenance of human resources in an organization.

Raw Material Management - Raw material management is critical to the overall

performance of any manufacturing concern. Beside demand and other forces like

competitor’s actions and general price index; raw material situation in terms of efficient

9

management and effective planning determines the activity level, the turn-over and the

ultimate profit in a given company (Akindipe, O. S. 2014).

Working Capital Management:- The process of managing activities and processes related

to working capital. This level of management serves as a check and balances system to ensure

that the amount of cash flowing into the business is enough to sustain the company's

operations. This is an ongoing process that must be evaluated using the current level of assets

and liabilities.

Technology management – can contribute to sustainable competitive advantage. This is

because, creating and sustaining competitive advantage requires more than operational

efficiency and cost minimization. For technology intensive companies, creating competitive

advantage is related to capability of managing technological assets (Cruickshank, et al 2015).

10

CHAPTER TWO

RELATED LITRATURE REVIEW

2.1. Theoretical Review

This chapter presents the theoretical foundation of the effects of resource management on

productivity and relationship, history, principles and concepts on the topics. Before

describing productivity definitions production and production system, concepts, relationship

with each other’s should be clarified. The wealth of a country is measured by its gross

national product—the output of goods and services produced by the nation in a given time.

Goods are physical objects, something we can touch, feel, or see. Services are the

performance of some useful function such as banking, medical care, restaurants, clothing

stores, or social services.

Production is concerned with the transformation of a range of inputs into the required

outputs (products) having the requisite quality level. Production is defined as the step-by-step

conversion of one form of material into another form through chemical or mechanical process

to create or enhance the utility of the product to the user (customer). To get the most value

out of our resources, we must design production processes that make products most

efficiently. Once the processes exist, we need to manage the operation so they produce goods

most economically. Managing the operation means planning for and controlling the

resources used in the process: labor, capital, and material. All are important, but the major

way in which management plans and controls is through the flow of materials. The flow of

materials controls the performance of the process. If the right materials in the right quantities

are not available at the right time, the process cannot produce what it should. Labor and

machinery will be poorly utilized. The profitability, and even the existence, of the company

will be threatened (J. R. Tony Arnold, Stephen N. Chapman, Lloyd M. Clive, 2011).

The transformation process typically uses common resources such as labor, capital (for

machinery and equipment, materials, etc.), and space (land, buildings, etc.) to effect a change.

Economists call these resources the “factors of production” and usually refer to them as labor,

capital, and land.

Resource in its organizational context, is defined as ‘anything that could be thought of as a

strength or weakness of a given firm’ including tangible and intangible assets (Wernerfelt,

11

1984; 172). According to Senyucel (2009) there are three main organizational resources:

human resource, financial resource and technological resources.

Resource management is the efficient and effective development of an organization's

resources when they are needed. In any organization there is the need to utilize available

resources for better performance. The term, management of organizational resources, refers

to proper utilization of such resources as assets, information, human, financial, Inventory,

knowledge and Equipment. Many organizations fail to reach their set targets due to lack of

proper management of these resources. This study brief describes how to manage

organizational resources. How to manage organizational resources remains one of the

fundamental organizational management questions. The resource management for individuals

and also enterprises are fundamental for survival. Resources should be well managed to get

value for Successful productivity management is the key to their survival in today’s highly

competitive environment. An organization’s productivity can be effectively raised only if it is

managed in a holistic manner. Productivity management is a journey of continuous

improvements involving employees at all levels.

Productivity is that it is a quantitative relationship between output and input (Iyaniwura and

Osoba, 1983, Antle , 1988). Eatwell and Newman (1991) defined productivity as a ratio of

some measure of output to some index of input use. Put differently, productivity is nothing

more than the arithmetic ratio between the amount produced and the amount of any resources

used in the course of production. This conception of productivity goes to imply that it can

indeed be perceived as the output per unit input or the efficiency with which resources are

utilized (Samuelson and Nordhaus, 1995).

Figure 2.1: Production system

Source: Compiled by researcher

12

Productivity as a source of growth has moved to center stage in analyses of growth of

developing economies in recent years. Earlier, the focus was mainly on the growth of capital,

through greater mobilization of resources. As investment levels have increased substantially

in most developing countries and the scope for further increases becomes more limited,

attention has naturally turned to productivity improvements which offer a complementary

route to growth by getting more out of limited resources. (Ahluwalia 1991:191)

To improve productivity products must be designed to satisfy customer need with optimum

consumption of resources without generation of waste in the manufacturing process. Three

perspectives have dominated the field of productivity namely economics, industrial

engineering, and administration. These perspectives have complicated a search for any

precise definition of the concept ‘productivity’. To put it bluntly, the definition of

productivity is complex and this is because it is both a technical and managerial concept. It is

perceived that the more different are the goals of the different individuals, institutions and

bodies that have a stake in productivity as a problem, the more different their definitions of

productivity will be (Oyeranti, G. A. (2000).

The least controversial definition of productivity is that it is a quantitative relationship

between output and input. Productivity can be managed in different levels – on national,

sector or enterprise level. Productivity in its broad sense is a measure of how efficiently and

effectively resources are used as inputs to produce outputs, products or services of the quality

needed by society. As an efficient measure, high productivity implies that production inputs

are fully utilized and waste is minimized. Effectiveness, on the other hand, means that

outputs (and activities and processes) contribute to the attainment of the organization’s

specific goals, whether these meeting customers’ demands, the achievement of business aims

or a contribution to attaining the social, economic and ecological objectives of the society

(Daneil K. and Tibebe. B., 2007)

High productivity provides several benefits. At the macroeconomic level, productivity

improves a country’s living standards because more goods and services are produced at better

prices, inflation and interest rates tend to be stable, and gross domestic product (GDP) tends

to be high. At the microeconomic level, high productivity can increase people’s real income

and improve their ability to purchase goods and services, enjoy leisure activities, access

better housing and education, and contribute to social and environmental programs (KS, M.

F., Krishnaiah, K.)

13

Surbhi. S., (2017) the level of productivity, in the production, determines the profitability,

efficiency and performance of the enterprise, i.e. the higher the productivity of the firm the

greater will be the earning capacity. It aims at determining the relationship between the input

and output, in a particular production process. In short, it is nothing but attaining the highest

possible outcome, while consuming minimum factors of production. Productivity is often

misconstrued with production, but there exists a difference, in the sense that production

indicates the volume of output, whereas productivity is the output generated from the

resources employed by the company.

Figure 2.2: Dynamic Concept of Productivity

Source: Surbhi. S., 2017

Competition triggers productivity, as intense competition results in higher productivity,

which in turn provides better value to the customers, leading to higher share in the market.

Table 2.1: Summary for the Deference between Production and Productivity

Basis for Comparison Production Productivity

Meaning

Production is a function of anorganization which is associated with theconversion of range of inputs into desiredoutput.

Productivity is a measure ofhow efficiently resources arecombined and utilized in thefirm, for achieving the desiredoutcome.

What is it? Process Measure

Represents Numbers of units actually produced. Ratio of output to input

Expression Absolute terms Relative terms

Determines Value of outputEfficiency of factors ofproduction

Source: Compiled based on the researcher’s secondary data

2.1.1. Working Capital Management and productivity

For any business sector needs sufficient resources to keep it going and ensures that such

resources are maximally utilized to enhance its profitability and overall organizational

14

performance. Among such resources are working capital management, and every business

entity, regardless of its business types, needs working capital management (Javid S., 2014,

p.184).

Ethiopian private industries raise problems related to working capital; the issue of collateral,

Financial sector policies, Bureaucracy at financial sectors, discriminatory practices in favors

of party-owned enterprises than others are some of now a day the industries chronic issues

they pointed.

Working capital management refers to a company's managerial accounting strategy

designed to monitor and utilize the two components of working capital, current assets and

current liabilities, to ensure the most financially efficient operation of the company. Wobshet

(2014) working capital management is vital for all business survival, sustainability and its

direct impact on performance. The primary purpose of working capital management is to

make sure the company always maintains sufficient cash flow to meet its short-term

operating costs and short-term debt obligations. The goal of working capital management is

to have adequate cash flow for continued operations and have the most productive usage of

resources. There is significant association between working capital management and firms’

performance. It has however been discovered that some methods that managers use in

practice to make working capital decisions do not rely on the principles of finance, rather

they use vague rules of thumb or poorly constructed models. This, however, makes the

managers not to effectively manage the various mix of working capital component which is

available to them, and as such, the organization may either be overcapitalized or

undercapitalized or worst still, liquidate. Padachi, k. (2006) stated that a well-designed and

executed WCM is anticipated to contribute positive value to the firm. Just as circulation of

blood is very necessary in the human body to maintain life, the flow of funds is very

necessary to maintain business. Soekhoe S.G. et al (2012) the objective of working capital

management is to maintain the optimum balance of each of the working capital components

namely receivables, inventory and payables. In majority of manufacturing industries,

inventory constitutes some significant part of current assets.

Accounts receivable are revenues due – what is owed to a company by its customers for

sales made. Timely, efficient collection of accounts receivable is essential to a company’s

smooth financial operation. Accounts receivable are listed as assets on a company’s balance

sheet, but they are not actually assets until they are collected. A common metric analysts use

15

to assess a company’s handling of accounts receivable is days sales outstanding, which

reveals the average number of days a company takes to collect sales revenues. Ross et al

(1996) Accounts receivable are customers who have not yet made payment for goods or services,

which the firm has provided. The objective of the debtor management is to minimize the time-

lapsed between completion of sales and receipts of payment. In this respect account receivable is

divided by sales. It represents the firms’ payment from its customers. Wobshet M. (2014)

uncollected accounts receivables can lead to cash inflow problems for the firm.

Accounts payable, the money that a company is obligated to pay out over the short term, is also

a key component of working capital management. Companies seek to strike a balance between

maintaining maximum cash flow by delaying payments as long as is reasonably possible and the

need to maintain positive credit ratings while sustaining good relationships with suppliers and

creditors. Duru (2007) accounts payable are suppliers whose invoices for goods or services have

been processed but who have not yet been paid. Ideally, a company’s average time to collect

receivables is significantly shorter than its average time to settle payables

Inventory is a company’s primary asset that it converts into sales revenues. The rate at which

a company sells and replenishes its inventory is an important measure of its success.

Investors consider the inventory turnover rate to be an indication of the strength of sales and

as a measure of how efficient the company is in its purchasing and manufacturing process.

(Duru, 2007) inventories are list of stocks raw materials, work-in- progress or finished goods

waiting to be consumed in production or to be sold. Inventory is calculated as

inventory/purchase. It reflects the stock held by the firm inventory that is too low puts the

company in danger of losing out on sales, but excessively high inventory levels represent

wasteful, inefficient use of working capital.

2.1.2. Human Resource Management and Productivity

HRM is aspects of management that concerns the coordination of all aspects of employment

including hiring, training, compensating, motivating, disciplining and all day-to-day

interactions. Formerly this function was called personnel administration, employee relations,

or industrial relations. HRM is concerned with the human beings in an organization. “The

management of man” is a very important and challenging job because of the dynamic nature

of the people. No two people are similar in mental abilities, tacticians, sentiments, and

behaviors; they differ widely also as a group and are subject to many varied influences.

People are responsive, they feel, think and act therefore they cannot be operated like a

16

machine or shifted and altered like template in a room layout. They therefore need a tactful

handing by management personnel” (S.Ganesan, 2014).

Human resource is the most important asset for any organization and it is the source of

achieving competitive advantage. Without having adequate human resource, the organization

will be unable to achieve established goals and objectives. For any company to operate

successfully, it must have materials, money, supplies, equipment, ideas regarding the good or

services to offer the individuals who may utilize it outputs and lastly people, which is the

human resource, to run the company. The proper management of individuals at work is

Human Resource Management, and it has developed to be a main activity in many

organizations and is the concentration for a wide - ranging deliberation concerning the nature

of the contemporary business relationships. One of the major components in the coordination

and management of work in an organization is the management of human resource (Engetou

et al 2017.p.4).

Human Resource Management is concerned with the people dimension in management. Since

every organization is made up of people, acquiring their services, developing their skills,

motivating them to high levels of performance and ensuring that they continue to maintain

their commitment to the organization are essential for achieving organizational objectives.

This is true regardless of the type of organization government business, Education, Health,

regression or social action (Decenzo David A. Stephen Robbins, 2005).

HR practices that reward effort and performance are associated with better firm performance.

Huselid (1995) productivity is influenced by employee motivation; financial performance is

influenced by employee skills, motivation and organizational structures. HRM is an activates

organization conducts to use its human resources effectively and the aspects of management

that concerns the coordination of all aspects of employment including hiring , training,

compensation, motivating disciplining and all day-to-day interaction as well as rewarding and

appraising (Gary Dessler 2003)

Training and Development is involves an organized attempt to find out training needs of

individuals to meet the knowledge and skill which is needed not only to perform current job

but also to fulfill the future needs of the organization. An ongoing process in any organization

and it is one of the HRM practices of organization.

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Investment in human resources became an important part for the organizations’ strategies in

order to be able to compete globally. Therefore, it is necessary to pay attention to the talented

human elements in contemporary organizations as it is the most important elements towards

excellence and success. Besides, changes and developments in technology and economy

create new issues in the field of human resources as the organization alone cannot deal with

these challenges without considering and investment on talented human capital Karam et al.

(2017).

According to Kulkarni (2013), the success of any organization depends upon the quality of

the work force, but in order to maintain the quality of the work force, many organizations

come across a number of obstacles. These obstacles include attraction of the qualitative

workforce towards the organization, recruitment of intelligent, dynamic as well as

enthusiastic people in the organization, motivation of current employees with different

techniques and retention of the current workforce for maintaining the organizational status in

the competitive market. For surviving the business and becoming a successful pillar in the

market; training is a tool that can help in gaining competitive advantages.

According to Paynes (2008), both training and development programs seek to change the

skills, knowledge, or attitudes of employees required by the job post. Programmers may be

focused on improving an individual’s level of self-awareness, competency and motivation to

perform his or her job well. This in turn makes employees feel that they are part of the

organization’s family. It creates a sense of belonging in employees, enhances the employee’s

skills, and motivates while improving financial gain. This in the long run makes employees

feel indebted to the organization.

According to Armstrong, training is systematic application of formal processes to impart

knowledge and help people to acquire the skills necessary for them to perform their jobs

satisfactorily. Training should be systematic in that it is specifically designed, planned and

implemented to meet defined needs. It is provided by people who know how to train and the

impact of training is carefully evaluated. The concept was originally developed for the

industrial training boards in the 1960s, consists of a simple four-stage model:

1. Identify training needs.

2. Decide what sort of training is required to satisfy these needs.

3. Use experienced and trained trainers to implement training.

4. Follow up and evaluate training to ensure that it is effective.

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Training and development are very necessary for both the employee’s morale and the

organization’s output. This is in realization of the fact that people are the greatest assets of

any organization and their value could be enhanced by investing time and money in their

improvement for optimal use in the organization.

Compensation and Benefits the design, implementation, and maintenance of compensation

systems are important parts of strategic human resources management (SHRM). Decisions

about salaries, incentives, benefits, and quality - of – life issues are important in attracting,

retaining, and motivating employees. Strategic decisions about pay levels, pay structures, job

evaluation, and incentive pay systems influence the ability of an organization to compete in

the marketplace to attract the most qualified and competent applicants and retain its most

talented and productive employees (Stinchcomb, J. B., et al, 2009).

Motivators are more concerned with the actual job itself. For instance how interesting the

work is and how much opportunity it gives for extra responsibility, recognition and

promotion. Hygiene factors are factors which ‘surround the job’, working environment rather

than the job itself. And also morale is highly important in human relations and workers with

high morale are more enthusiastic, joyful, committed and productive (Mescon, Bovee and

Thill; 1999, p.259). Compensation and reward can be powerful tools for getting efforts from

the employees to fulfill the organizations goals.

Compensation and reward management is closely related to the performance management.

Reward can be financial or non-financial but altogether the objective is to motivate, attract

and retain employees in organization. This means recognition and rewarding strategies and

polices for successful performance in archiving the determined goals in individual, team or

organizational level Armstrong (2010). The rewarding has many different systems to follow.

The financial rewards can be base pay, and performance related pay. Base pay is determined

with internal and external rates that the form of job evaluation and market rates and it is

expressed with relation to a certain time period i.e. year, month, and week. The levels of pay

are agreed with individual agreements or with collective agreements/ with labor unions

Armstrong (2010). According to Bratton and Gold (2007:360), reward refers to all the

financial, non- financial and psychological payments that an organization gives for its

employees in exchange for the work they perform.

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Some literature indicates that the labor/ skills market in Ethiopia is highly underdeveloped.

Hence, the labor market couldn’t allocate this important industrial input properly. And

developing a properly functioning labor market in the country takes time. For instance,

breaking the vicious circle of the low wage leading to low productivity and thereby to low

enterprise profit which again yielding to low wage takes time. Presently, wages and salaries

in the strategic manufacturing sector are very low which is not adequate to finance daily

subsistence. Because of this, many of the hardworking labors are forced to migrate to other

sectors primarily to the service sector that in turn leads the manufacturing enterprises to stay

in the lower productivity and competitiveness trap. Since profit of the manufacturing

enterprises is low they cannot raise the salary of their employees. Breaking this vicious and

developing a freely operating industrial labor market is time, finance and energy consuming

which is hard to attain them.

Three propositions on the link between HRM and organizational performance: 1) HR

practices can make a direct impact on employee characteristics such as engagement,

commitment, motivation and skill; 2) if employees have these characteristics it is probable

that organizational performance in terms of productivity, quality and the delivery of high

levels of customer service will improve; and 3) if such aspects of organizational performance

improve, the financial results achieved by the organization will improve.

The determinant of firm productivity is the incentive system in place. Several works by

Edward Lazear has shown that monetary and non-monetary rewards enhance productivity

(Lazear, 2000). Another determinant of firm productivity is the quality of management

practices in firms. Notable works in this field include Bloom and Van Reenen (2010).

Ulrich, D. (1997) this quality of HR index was related to four financial measures:

market/book value (market value of the firm based on stock price divided by firm’s assets,

which represents “value added” by management), productivity (dollar value of sales divided

by number of employees), market value (stock price X outstanding shares), and sales. All

four financial measures increased dramatically with the quality of HR practices. HRM can be

measured in terms of their organizational performance and employee’s productivity.

According to Ravi K. G. (2017) managers must work through people to achieve the

objectives of the organization. So the nine areas was identified which are Employ the Right

People, Encourage Innovation and Creativity in the Work Place, Have Flexible Work

20

Schedules, Reward employees on the Basis of Performance, Install a Reliable Time Tracking

System, Have the Right Tools of Trade, Have a Clean and Comfortable Working

Environment, Keep the Employees Informed, and Create Incentive Programs. The most

successful strategies are those that develop an intrinsic push towards productivity. The HR

can achieve very little success if it attempts to push the employees to achieve productivity.

Therefore, the theoretical literature clearly suggests that the behavior of employees within

firms has important implication for organizational performance and that human resource

management practice can effect individuals employee performance through their influence

over employees skill and motivation and through organizational structures. If there was a

poor HRM practice, it was highly productivity is affected. So based on the deferent literature

the effects of HRM practices and policies on the organizational productivity are a highly

significant.

2.1.3. Raw Material Management and Productivity

Raw material management is critical to the overall performance of any manufacturing

concern. Beside demand and other forces like competitor’s actions and general price index;

raw material situation in terms of efficient management and effective planning determines the

activity level, the turn-over and the ultimate profit in a given company. The determination of

economic order quantity (EOQ), re-order level and minimum/maximum stock levels is

important in raw material management in any manufacturing outfit (Akindipe, Olusakin S,

2014, p.37)

Raw materials are basic un-fabricated materials which have not undergone in any operation

since they are received from the suppliers. Managing raw material availability for current and

future needs, when do order make, where is the right region to supply on the globe are

majority of manufacturing industries problems. Manufacturing companies attain significant

savings from effective materials management. Effective management of inventory can lead to

a reduction in cost, resulting in a significant saving. A potential saving on total cost through

effective raw material management are achievable in various types of materials to be

managed in any organization include purchased materials, work-in-progress (WIP), materials

and finished goods.

Materials Management is a tool to optimize performance in meeting customer service

requirements at the same time adding to profitability by minimizing costs and making the

21

best use of available resources. The basic objective of Materials Management as explained by

Banjoko (2000) and Jacobs et al., (2009) is to ensure that the right item is bought and made

available to the manufacturing operations at the right time, at the right place and at the lowest

possible cost. Telsang (2010) asserts that a manufacturing firm generally carries the

following types of inventories: Raw materials, Work-in-Process Inventories, Finished Goods

Inventories, Maintenance, Tools Inventory, and Miscellaneous Inventories.

Materials management is a concept which brings together the responsibility for determining

the manufacturing requirement that is scheduling the manufacturing processes and procuring,

storing and dispensing materials (Ondiek, 2009). Materials Management is a tool to optimize

performance in meeting customer service requirements at the same time adding to

profitability by minimizing costs and making the best use of available resources (Jeruto K. et

al (2014).

Barker (1989) articulated that improvement in continuity of supplies with reduced lead times,

reduction in inventories with reduced obsolescence and surplus, improvement in cooperation

and communications with reduced duplication of effort, reduction in material costs,

improvement in quality control, improvement in status control, and quicker identification of

problems are the main benefits of Materials Management in organization. J.R.Tony. Armold,

S.N.Chapman, L.M.Clive (2008) manufacturing creates wealth by adding value to goods. To

improve productivity and wealth, a company must first design efficient and effective systems

for manufacturing. It must then manage these systems to make the best use of labor, capital,

and material. One of the most effective ways of doing this is through the planning and control

of the flow of materials into, through and out of manufacturing.

There are three elements to a material flow system: supply, manufacturing planning and

control, and physical distribution. They are connected, and what happens in one system

affects the others. Traditionally, there are conflicts in the objectives of a company and in the

objectives of marketing, finance, and production. The role of materials management is to

balance these conflicting objectives by coordinating the flow of materials so customer service

is maintained and the resources of the company are properly used. So that without adequate

planning for materials resources, the overall performance of an organization may be crippled.

Manufacturing companies attain significant savings from effective materials management.

Effective management of inventory can lead to a reduction in cost, resulting in a significant

22

saving. A potential saving on total cost through effective raw material management is

achievable. The various types of materials to be managed in any organization include

purchased materials, work-in-progress (WIP), materials and finished goods indeed. Under

raw material the quality of raw material and raw material transportation (logistics) are farther

described here.

Quality of raw material in the early 1950’s, quality management practices developed

rapidly in Japanese plants, and become a major theme in Japanese management philosophy.

New quality systems have evolved from the foundations of Deming, (1981), Juran and the

early Japanese practitioners of quality. Juran uses the idea of fitness for use. Fitness for use

should be judged from the customer’s point of view and not from either the manufacturer’s or

seller’s perspective. Quality evolution can be four stages: inspection, quality control, quality

assurance. TQM is a management philosophy, a paradigm, a continuous improvement

approach to doing business through a new management model. TQM is composed of three

paradigms: Total: Involving the entire organization, Quality: conformance to requirements

(meeting customer requirements) Management: Science and art or manner of planning,

controlling, directing and the like. David Garvin, a Harvard expert on quality, there are eight

dimensions of quality: performance, features, reliability, conformance, durability,

serviceability, aesthetics and perceived quality.

In some literature also quality of a product, measured against some objective standard,

includes appearance, performance characteristics, durability, serviceability, and other

physical characteristics; timeliness of delivery; cost; appropriateness of documentation and

supporting materials; and so on.

Quality has moved beyond manufacturing into service, distribution, healthcare, education and

others sectors. Based on BMI urbanization and steel intensity go hand in hand. In the

preliminary stages of a country’s (Ethiopia) urbanization, steel intensity increases with the

need for new infrastructure for improved connectivity, efficient use of natural resources, and

creation of sophisticated transport hubs. Increased population density means taller buildings,

housing constructions are requiring more high-quality steel. Demand for machinery also

increases as more of the population urbanizes to find employment industries that are steel-

intensive. This is one of the market advantages for metal manufacturing factories but in the

other side the sector had the problems on material quality, availability, problems of material

cost, material warehouse problems, material delay for manufacturing from suppliers are the

23

main constrains. The researchers were found that some factories were implementing the ISO

standard to be won the computation on marketing. To ensure high performance product

supplier materials management systems are critical task for basic metal industries.

According to quality management, it is important to have a strong focus on satisfying

customers, and Naor et al. (2008 p.671) state that companies need to possess a high level of

flexibility to adapt to faster changing customer needs. The quality of finished product

depends more on the skill of the operators, machineries and the quality of the raw material.

Skill full operators can minimize the probability of defects to be occurred. The basic concept

of productivity is always the relationship between the quality and quantity of goods or service

produced and the quantity of resource used to produce them. So, productivity is also

increasingly linked with quality of output, input, and process itself.

To specify the various physical and mechanical properties of the finished metal products,

various tests, both destructive and nondestructive, are performed. Metallurgical, hardness,

tension, ductility, compression, fatigue, impact, wear, corrosion, creep, machinability,

radiography, magnetic particle, ultrasonic, and eddy current are some of the major tests that

are performed by quality control.

Lysons (2006) logistics management is the process of strategically managing the acquisition,

movement and storage of materials, parts and finished inventory (and the related information

flows) through the organization and its marketing channels in such a way that current and

future profitability is maximized through the cost-effective fulfillment of orders. Stevenson

(2006, p.697), however, views logistics as the movement of materials and information in a

supply chain. He further explained that, materials included all of the physical items used in a

production process.

According to the Council of Logistics Management, a nonprofit organization of business

personnel, it is the process of planning, implementing, and controlling the efficient, effective

flow and storage of goods, services, and related information from point of origin to point of

consumption for the purpose of conforming to customer requirements. Indeed, following Hax

and Candea’s (1984) treatment of production-inventory systems, logistical decisions are

typically classified in the following way. The strategic level: deals with decisions that have a

long-lasting effect on the firm. This includes decisions regarding the number, location and

24

capacities of warehouses and manufacturing plants, or the flow of material through the

logistics network.

The tactical level: typically includes decisions that are updated anywhere between once every

quarter and once every year. This includes purchasing and production decisions, inventory

policies and transportation strategies including the frequency with which customers are

visited. The operational level: refers to day-to-day decisions such as scheduling, routing and

loading trucks.

Currently the term supply chain management is more describe and inclusive logistic

management. Supply Chain Management (SCM) is a strategic coordination of business

function within a business organization and through its supply chain for the purpose of

integrating supply and demand management (Stevenson 2007). According to Ubani (2012),

the primary objective of SCM is to reduce risks and uncertainties into supply chain, thereby

positively affecting inventory levels, operations and production cycle times, processes and

ultimately end users service levels. In basic supply chain, the components contributed are

linked to each other.

Asli Koprulu (2007, p.2) a supply chain is characterized by the flow of goods, services,

money, and information both within and among business entities including suppliers,

manufacturers, and customers. It also includes all types of organizations engaged in

transportation, warehousing, information processing, and materials handling. Sourcing,

procurement, production scheduling, manufacturing, order processing, inventory

management, warehousing, and, finally, customer service are the functions performed

throughout the supply chain. The ultimate goal of SCM is to meet customers’ demand more

efficiently by providing the right product, in the right quantity, at the right location, on the

right time, and in the right condition. As Ferguson, B. R. (2000) supply chain management

affects virtually every aspect of a company’s business. Supply chain management

[influences] plan-buy-make-move-and-sell. Enhanced revenues, tighter cost control, more

effective asset utilization, and better customer service are just the beginning. Thompson and

his colleagues have identified five areas in which supply chain management can have a direct

effect on corporate value. They include: Profitable growth, Working capital reductions,

Fixed-capital efficiency, Global tax minimization and Cost minimization.

25

Figure 2.3: Supply chain flow chart

Source: Buang, et al, 2014

The economic order quantity (EOQ) theory was proposed by (Harris, 1913) to determine

the optimal inventory level. EOQ refers to an inventory level that can minimize both

inventory holding cost and inventory ordering cost (Lwiki et al, 2013). The EOQ model is

used to determine an optimal ordering size that will minimize the sum of ordering and

carrying costs (Ziukov, 2015). This model was found on the assumption that demand equals

annual total quantity ordered by the firm at any point in time (Milicevic, Davidovic &

Stefanovic, 2010). The EOQ model considers a trade-off between storage cost and ordering

cost when making a decision on the quantity to use when replenishing inventory items.

Ordering frequency is usually reduced by a larger amount of quantity ordered, hence reduced

ordering cost but increases storage costs and requires a larger space for storage too (Schwarz,

2008). The EOQ method is used in determining an optimal order quantity which will

minimize total inventory cost. The EOQ is very useful tool for inventory control and it can be

applied to finished goods inventories, work- in- progress inventories and raw material

inventories. It regulate the purchase and storage of inventory in a way to ensure that an even

production flow at the same time restricting excess investment on inventories (Kumar, 2016).

Therefore for our case factories practice of integration, collaboration, and the trend of

managing the SC from supplier to the customer is traditional. Currently the researcher did not

found on basic metal factories (sampled factories) that were implemented logistics

information tracking system (ERP). They are still working manually. Basically the logistics

sector must grow at the same rate as the industry sector, taking into account the recent

Information flow Product flow

RAW MATERIAL SUPPLYCUSTMOR

RETAILER WHOLESALER DISTRIBUTOR FACTORY

26

changes in the Ethiopian Shipping and Logistics enterprise, it is essential to address the

implementation problems related to the multimodal transportation system. The quality service

delivery at the ports and inland transport need to be highly improved commensurate with the

envisioned industrial development process in the country (MOI 2013). The sampled factories

have also serious weaknesses on adopting new technology and skilled man power for raw

material management. Because of a poor raw material management practice unbalanced

customer demand and supply was created. So if the flow of raw material management system

is well, the will be better organization productivity.

2.1.4. Technology Management and Productivity

Technology management can also be defined as the integrated planning, design, optimization,

operation and control of technological products, processes and services, a better definition

would be the management of the use of It is very important for an organization to manage its

technology strategically because when it is not well managed, it might result into a big loss in

the organization. Managing technology involves planning, designing, optimizing, operation

and control of technological products technology for human advantage.

Technology is a system of knowledge, skills, experience and organization that is used to

produce and utilize goods and services. Technology has become a crucial and indispensable

part of almost every kind of business. Without the role of technology in business, many

businesses simply could not survive. Just imagine a multinational organization or a small

business enterprise trying to operate without the use of a telephone or computer – the role of

technology in business continues to change the way we live and work. Modern manufacturing

support systems are implemented using computer systems. Computer technology is used to

implement automation of the manufacturing systems in the factory as well. The systems help

us to design the products, plan the production, control the operations, and perform the various

businesses that operate throughout the enterprise.

Information system (IS) is vital to any organization. A successful and quality IS can bring

enhanced efficiency and effectiveness in operation, possible better business performance and

stronger organizational culture. Quality information system is a system which contains

relevance, accurate, complete, comprehensive, detail, flexible, reliable and timeliness

information so as to ensure streamline its operations into a cohesive functioning unit, support

business decision-making by providing management with critical data, and they serve to

27

enhance the organization’s communication, reduce human labor, support short- and long-term

organizational goals, improving employees’ productivity and distribute complex information.

Technology is a body of knowledge devoted to creating tools, processing actions and the

extracting of materials. The term Technology is wide, and everyone has their way of

understanding its meaning. We use technology to accomplish various tasks in our daily lives,

in brief; we can describe technology as products and processes used to simplify our daily

lives. We use technology to extend our abilities, making people the most crucial part of any

technological system. The concept of technology does not only relate to the technology that

embodies in the product but it is also associated with the knowledge or information of it use,

application and the process in developing the product (Bozeman, 2000).

Technology has two primary components: (1) A physical component which comprises items

such as products, tooling, equipment, blueprints, techniques and processes; and (2) an

informational component which consists of know-how in management, marketing,

production, quality control, reliability, skilled labor and functional areas Vinod Kumar, Uma

Kumar, Aditha Persaud (1999). Firms that adopt new technologies (for example, computer-

aided design and control) and at the same time invest in skills (for example, training in

computer literacy and technical skills) are expected to realize greater productivity gains than

those that do not. Boothby, D., Dufour, A. & Tang, J. (2010) we use technology to

accomplish various tasks, so technology comes in different forms. Some types of

technologies are communication, construction, Assistive, Medical Information, Entitlement,

and business are and the like. In manufacturing sector using advanced information

technology software sophisticated task will simplified. In any industry using automation

Production System and Computer Integrated Manufacturing can enhance productivity as well

as better quality products, efficient working process and can create good working condition to

the employees.

Automation can improve product quality, increase labor productivity, reduce labor cost,

mitigate the effects of labor shortages, reduce or eliminate routine manual and clerical tasks,

reduce lead time, and improve worker safety (Mikell P. Groover, 2007). Mikell P. Groover

(2007) Computerized Manufacturing Support Systems, automation of the manufacturing

support systems is aimed at reducing the amount of manual and clerical effort in product

design, manufacturing planning and control, find the business functions of the firm. Nearly

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all modern manufacturing support systems are implemented using computer systems. Indeed,

computer technology is used to implement automation of the manufacturing systems in the

factory as well.

According to S. A. Kumar et al (2008), the term computer integrated manufacturing (ClM)

denotes the pervasive use of computer systems to design the products, plan the production,

control the operations, and perform the various business- related functions needed in a

manufacturing firm. True CIM involves integrating all of these functions in one system that

operates throughout the enterprise. Other terms are used to identify specific elements of the

CIM system. For example, computer-aided design (CAD) denotes the use of computer

systems to support the product design function. Computer-aided manufacturing (CAM)

denotes the use of computer systems to perform functions related to manufacturing

engineering, such as process planning and numerical control part programming. Some

computer systems perform both CAD and CAM are used to indicate the integration of the

two into one system. Computer-integrated manufacturing includes CAD/CAM, but it also

includes the firm’s business functions that are related to manufacturing. All these benefits fall

into three categories; increase quality, decrease cost, and improve safety.

Mikell P. Groover (2002) companies undertake projects in manufacturing automation and

computer-integrated manufacturing for a variety of good reasons. Some of the reasons used to

justify automation are the following:1) to increase labor productivity , to reduce labor cost, to

mitigate the effects of labor shortages, to reduce or eliminate routine manual and clerical

tasks of working condition, to improve worker safety, to improve product quality, to reduce

manufacturing lead time, to accomplish processes that cannot be done manually and to avoid

the high cast of not automating.

Nowadays, Information system is vital to any organization. A successful and quality IS can

bring enhanced efficiency and effectiveness in operation, possible better business

performance and stronger organizational culture. IS means not only capture process and

disseminate information but good and quality information system. Quality information

system is a system which contains relevance, accurate, complete, comprehensive, detail,

flexible, reliable and timeliness information so as to ensure streamline its operations into a

cohesive functioning unit, support business decision-making by providing management with

critical data, and they serve to enhance the organization’s communication, reduce human

29

labor, support short- and long-term organizational goals, improving employees’ productivity

and distribute complex information.

Srinivasan, K., & Jayaraman, S. (1999) today’s manufacturing enterprise, whether it produces

consumer goods or weapons systems, must often juggle a range of conflicting demands.

Smaller lot sizes, increased product flexibility, higher product quality, decreased delivery

time, and smaller profit margins are typical of the ambitious goals in many such

organizations. Through it all, the enterprise must consistently aim for the five R’s—produce

the right product, with the right quality, in the right quantity, at the right price, and at the

right time—and it must do more than satisfy its customers.

Figure 2.4: How information technology influences all aspects of the manufacturing

enterprise

Source: Srinivasan, K., & Jayaraman, S. (1999)

In its more traditional role, IT helps the manufacturing enterprise effectively harness

information from all its operations. However, because it is becoming the enterprise’ s digital

nerve center , IT is beginning to take another role—that of catalyst— providing the enterprise

with new processes and even products. According to Brynjolfsson (2003), information

technology has been increasing productivity and annual output per worker for more than

three decades. Kudyba (2004) concluded that greater information technology skills increased

firm output. Enhanced information technology skills among employees resulted in higher

productivity, organizational performance, and firm output (Hitt & Brynjolfsson, 1995;

Kudyba, 2004). Brynjolfsson and Brown (2005) also found that information technology

intensive companies tend to be more productive.

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Productivity comes from working smarter, which normally requires new production

technologies and techniques. Productivity gains from information technology can be realized

in three ways: decrease information technology costs and business benefits remain the same;

increase business benefits and information technology costs remain the same; or decrease

information technology costs and business benefits increase (Brynjolfsson, 2003;

Brynjolfsson & Hitt, 1998; Keller, 2004). Mahmood and Mann (2005) concluded that

companies which invest more in information technology appear to achieve a higher level of

performance and productivity.

T. RAVICHANDRAN (2014) on the resource-based theory to examine how information

systems (IS) resources and capabilities affect firm performance. A basic premise is that a

firm’s performance can be explained by how effective the firm is in using information

technology (IT) to support and enhance its core competencies.

According to Smith (2008), an information technology investment can increase productivity,

but only if the investment is included in a plan that integrates organizational changes and

improved business processes. Information technology is a tool that can increase productivity

and improve an organization’s performance. In other words, IT need fairly a long time within

which the employee learns how to work and apply it in practice. So, IT capital impact could

be negative in short term, when the labor does not have high skill to use IT (Badescu and

Garces-Ayerbe 2009).

Enterprise resource planning software (ERP) defined by American Inventory and

Production Control System dictionary: “Enterprise Resource Planning: An accounting

oriented information system for identifying and planning the enterprise-wide resources to

make ship and account for customer orders.” Again in encyclopedia, it has defined as an

integrated computer-based application used to manage internal and external resources,

including tangible assets, financial resources, material and human resources. Basically, an

ERP combines several traditional management functions into a logically integrated system

and facilitate the flow of information across these functions. It is designed to model and

automate basic processes across the organization over a centralized database and eliminates

the need of disparate systems maintained by various units of the organization.

The impact of ICT investments on service delivery and business value is an important issue

for researchers, resource managers and other stakeholders. IT business value and service

delivery include productivity enhancement, profitability improvement, improved work

31

relations, competitive advantage and efficient use of resources at both intermediate level and

organizational level (M.P. Muriithi, 2011). In order to compete and win in today’s global

market field, better management of resources is an important criterion. Implementation of

ERP controls different functions and enhance company efficiency. Latest technologies

equipped with in ERP software package helps in better controlling and management of data.

If implementation of ERP is done according to company goals, it assures you more return on

investment, reducing inventory cost, better order tracking, proper utilization and

management of resources, enhances operational process and maximizes the return on

investment rates, enhancing the customer relationship management, increases the quality of

services, shortens delivery times and enhances the performance rate offered by companies,

error controlling, better planning and coordination of business resources so as to achieve

maximum profit.

Machinery’s found in manufacturing industries in Ethiopia whose establishment dates back to

the 1950 are still on production, which operates the early 20th century techniques. On the

other hand some latest machine is now emerging but there were a problem on skilled man

power. Human resources of any organization hold the key to its survival, profitability and

sales growth which entails prosperity, future economic and social development. Hence, the

decision to improve productivity through technology is necessary and it is not enough by

investing on new technology adoption but also it needs well managed. Otherwise, the

consequence is losing productivity.

2.1.5. Factors Influencing Productivity

Factors influencing productivity can be classified broadly into two categories as examined by

Hyder (2011), Telsang (2010) and Stevenson (2007) to include: Controllable or internal

factors which are products, plant and equipment, Technology, material, human, work

methods, management style, financial, sociological, worker participation, incentive schema,

quality cycle, work hours and conditions etc. whereas uncontrollable or external factors are

structural adjustments economic and social, natural resource, government policy,

infrastructure etc.

2.1.6. Productivity Measurement

Productivity measurement is basically a process of identifying the appropriate measures or

metrics to be used, and the computation of their results to determine the effectiveness and

efficiency of the resources used. In a factory, it might be measured based on the number of

32

hours it takes to produce a good while in service industry, might be measured based on the

income generated by an employee divided by his/her salary.

A productivity measure is expressed as the ratio of output to inputs used in a production

process, i.e. output per unit of input. Productivity is a crucial factor in production

performance of firms and nations. Increasing national productivity can raise living standards

because more real income improves people’s ability to purchase goods and services, enjoy

leisure, improve housing and education and contribute to social and environmental programs.

Productivity growth also helps businesses to be more profitable. There are many different

definitions of productivity and the choice among them depends on the purpose of the

productivity measurement and/or data availability. (Wikipedia, the free encyclopedia)

According to Asian Productivity Organization the four productivity levers are: Enhance

Sales Revenue (Output), Increase Output per Unit Cost of Production (Output), Optimize

Labor Utilization (Input), and Optimize Capital Utilization (Input). Once the productivity

levers are established, a structured approach could be adopted to measure the key

productivity indicators and productivity indicators in each of the productivity levers.

Figure 2.5: The key steps of an effective productivity measurement system

Source: George Wong) Asian Productivity Organization

3Develop theProductivityIndicators to

be usedDetermine

Process Areaand to bemeasured

1

5Review the

Results

4Implement theMeasurement

System

2Determine

Process Areasto be

measured

6Executeprocess

Improvement

7Evaluate andfollow up tobe measured

33

Based on the topic – human resource management, raw material management, working

capital management and technology management were detailed reviewed under here.

2.1.7. Productivity Improvement

Productivity measurement and improvement goes hand in hand, because one cannot improve

what one cannot measure. Muthiah et al (2006) the most established methodologies among

manufacturing plants are Agile manufacturing, Lean manufacturing, Six Sigma, Lean and Six

Sigma , Theory of constraints (TOCs) , TQM , Toyota production system (TPS) etc.

Improvements can be realized by: achieving more output for the same input, achieving the

same output from less input, achieving much more output for slightly more input and getting

slightly less output for much less input

There are six lines of attack to improve the productivity ratio of an organization, namely:,

Improve basic process by research and development (long term), Improve and provide new

plant, equipment, and machinery (long term), Simplify product and reduce variety (medium

term), Improve existing methods and procedures (short term), Improve the planning of work

and the use of manpower (short term) and Increase the overall effectiveness of employees

(short term)

2.1.8. Productivity Indicators

Some indicators are commonly used by management to measure the overall productivity

performance of an organization. Some of under productivity indicators:- Labor productivity,

Direct labor productivity, Capital productivity, Energy productivity, Raw material

productivity, Direct cost productivity, Material productivity and total factor productivity.

In most businesses, the employees represent both an organization's biggest expense, and its

most valuable asset. This means the company's productivity, and ultimately, its profitability

depend on making sure all of its workers perform up to, if not exceed their full potential. To

survive and prosper in today's economic times, companies can no longer manage using

financial measures alone. Businesses have to track non-financial measures such as speed of

response and product quality; externally focused measures, such as customer satisfaction and

brand preference; and forward looking measures, such as employee satisfaction, retention and

succession planning.

Key Performance Indicators (KPIs) are a company's measurable goals, typically tied to an

organization’s strategy, as revealed through performance management tools such as the

34

Balanced Scorecard. Most goals are achieved not through the efforts of a single person, but

by multiple people in a variety of departments across an organization. Performance

management experts agree that cascading and aligning goals across multiple owners creates a

"shared accountability" that is vital to a company's success. The company then uses its Key

Performance Indicators as the foundation to analyze and track performance and base key

strategic decisions regarding staffing and resources.

2.1. Empirical Review

The empirical review section is basically bringing the previous research studies or that

conducted with similar to fields of study. All previous research was conducted more: human

resource, working capital, raw material and technology variables independently taken as one

of a topic in their studies. Empirically productivity is defined as the relationship between the

amount of output produced (goods and services) relative to the amount of inputs/resources

(labor, machinery, equipment, raw materials, energy, etc.) used.

1. Partial productivity (output relative to one class of input). This includes Labor productivity

(output produced relative to labor resources used number of labor hours or number of

persons); Capital productivity (output produced relative to capital input); and Material

productivity (output produced relative to materials used).

2. Total factor productivity (the ratio of net output to the sum of associated labor and capital

(factor) inputs). By “net output,” it means total output minus intermediate goods and

services purchased. Note that the denominator of this ratio is made up of only the labor

and capital input factors.

3. Total productivity (the ratio of total output to the sum of all input factors used). Thus, a

total productivity measure reflects the joint impact of all the inputs in producing the

output. 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.

Single Factor Measurements

Labor Productivity

Quantity (or value) of output / labour hrs

Quantity (or value) of output / shift

Machine Productivity

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Quantity (or value) of output / machine hrs

Energy Productivity

Quantity (or value of output) / kwh

Capital Productivity

Quantity (or value) of output / value of input

All-factors measure = Goods or Services produced/ All inputs used to produce them

Total tangible output = Total Productivity / total tangible input

All-Factor Productivity = Output /Labor + Materials + Overhead

Productivity may also be considered as a measure of performance of the economy as a whole.

Mathematically,

Productivity = Output Value/Input

Value Factor Productivity = Output due to the factor/ Input factor employed

Productivity will is calculate by using Value Added ratio in the addition method namely

Value Added = Labor Cost + Financial Cost + Capital Cost ±Profit/Loss for the Year + Tax

(indirect tax).

2.2.1. Related Empirical Review

According to Lucy (2000), productivity improvement is an increase in productivity and

involves the use of high quality resources to produce outputs that are of constant or better

quality. For many organizations, inventory control perhaps is the single most important

control technique that have direct relationships with production, marketing, purchasing and

financial policy.

Padachi (2006) in his study also the trends in working capital management and its impact on

firms’ performance: analysis of Mauritian small manufacturing firms, to identify the causes

for any significant difference between the industries. The dependent variable return on total

assets is used as a measure of profitability and the relation between working capital

management and corporate profitability was investigated for a sample of 58 small

manufacturing firms, using panel data analysis for the period 1998-2003. The key variable

used in the analysis was inventories days, accounts receivables days, accounts payable days

and cash conversion cycle.

Thus it can be deduced that the companies have monitored the accounts receivable

reasonably well and this could be partly due to their need for generating funds from the

operating activities instead of relying from outside funds. The prefabricated metal product is

36

financing 85% of its assets out of current liabilities and this over-reliance may be a threat to

the industry’s survival.

This implies that these two industries can operate with a relatively low investment in fixed

assets as compared to the other industries like printing and garments where the production

tend to be heavily mechanized. Another plausible reason could be that the Mauritian small

manufacturing firms have been more concerned about current operations than about longer

term issues like capacity and technology.

DURU et al (2014) this study examined the impact of working capital management on the

profitability of Nigerian quoted Manufacturing firms. The working capital variables studied

comprise accounts payable, accounts receivable, cash conversion cycle, stock/inventory

turnover and liquidity. This study also used sales growth and Debt as control variables.

Secondary sources of data were sourced from the Annual Reports of the 22 manufacturing

firms selected for this study for the period 2000-2011. Five Hypotheses were estimated with

the use of generalized least square multiple regression. The findings of the study show that,

accounts payable ratio had negative relationship with the industries’ profitability. On the

other hand, accounts Receivable ratio had positive and significant relationship with

profitability of the firms studied.

Ghanavati, et al, (2012) did the research on the effect of working capital management over

the performance of firms listed in Tehran Stock Exchange. Average Collection Period,

Inventory Turnover in days, Average Payment Period, Cash Conversion Cycle, and Net

Trading Cycle were used to assess working capital management, and Net Operating

Profitability was used to assess firms’ performance. The findings of studying 50 different

companies during the time period between 2006 and 2009 by using a multi- regression model

showed that there is a negative and significant relationship between the variables of Average

Collection Period, Inventory Turnover in day, Average Payment Period, Net Trading Cycle

and the performance of firms Listed in Tehran Stock Exchange. In other words, managers can

increase the profitability of their companies reasonably, by reducing Collection Period,

Inventory Turnover, and Payment Period.

According to Tacsir et al (2015), ICT as a driver of firm productivity in developed countries.

However, the evidence about the impacts of ICT on services and manufacturing and

particularly for developing countries is scarce. This paper focuses on understanding the

determinants of investments in ICT at firm level and how this adoption ultimately affects

37

innovation and productivity of Uruguayan services firms vise a manufacturing. Results show

that ICT investments are more subject to economies of scale than other types of investments,

are important for obtaining product or process innovations in services and its absence

conspires against non-technological (organizational or marketing) innovations. Both ICT and

other innovation investments are positively associated with productivity in services but only

ICT affect productivity in manufacturing. Interestingly, the absence of investment in ICT is

associated with lower levels of productivity.

P.V.C. Okoye et al (2013) did a research on “The Effect of Human resource Development on

organizational productivity.” The study aims to determine the extent at which effective

human resource development can enhance productivity in order to reduce poor performance

in organization, to determine the efficiency of human resource training and development in

organization growth, to ascertain if human resource development have any significant impact

on organizational profitability, to determine and identify the factors affecting human resource

development and organizational productivity and to ascertain the attitude of the senior

management and other employees on the need for proper utilization of available human

resources which have tremendous effect on the firm’s profitability. The five research

questions and three hypotheses were formulated in line with the objectives of the study. To

achieve the aims of the study, data were collected from both primary and secondary source.

Data collected were analyzed by use of means, variance and standard deviation and the three

hypothesis formulated were tested using z-test statistical tool. The findings from this study

are as follows: 1) the human resources development is very vital to any organization ranging

from small to large scale enterprise since it is well known that no business can exist entirely

without human being. 2) It shows that one of the major functions of human resource

development is the engagement of people to work in order to achieve sales growth and

profitability. 3) The method of training and development as gathered from the interview

contract by the researcher are just by reason of the problems. The company has for instance,

the company train less of its employee through role play because of lack of fund to engage in

such training. 4) From the data gathered, we discovered that the use of qualified staff in the

company under study brings about increase in productivity. This means that human resources

employed in any organization whether profit or nonprofit oriented, small or large scale should

be able to manipulate other resources of the company to see to their full efficient utilization

so that productivity will positively affected.

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Abri, A. G., & Mahmoudzadeh, M. (2015). The aim of this research was to assess the impact

of information technology (IT) on the productivity and efficiency of manufacturing industries

in Iran. The data were collected from 23 Iranian manufacturing industries during 2002–2006

and the methods such as Efficiency Data envelopment analysis and panel data used to study

the subject. Results obtained by the above two methods represent that IT has a positive and

statistically significant effect on the productivity of manufacturing industries. It will be more

in high IT-intensive industries than the other industries. But, there is no significant difference

between the growth of labor productivity in IT-producing and IT-using industries.

According to Ince, H., Imamoglu, S. Z., & Turkcan, H. (2016) raw materials are cost drivers,

particularly in raw material intensive production processes. At the latest since the recent rise

in prices on international commodities markets it is an own best interest of enterprises to

reduce these costs and to obtain therewith competitive advantages. Therefore, the increase of

resource productivity is in almost all sectors a long pursued strategic business objective.

Ince, H., Imamoglu, S. Z., & Turkcan, H. (2016) did the study on the Effect of Technological

Innovation Capabilities and Absorptive Capacity on Firm Innovativeness. In today’s rapidly

changing environment, firms have to adapt to these conditions and open to innovations in

order to survive. Technological innovation capabilities make it possible for firms to response

to changes rapidly and to acquire technological innovation strategies and innovative outputs.

Absorptive capacity enabling the firms to obtain the information necessary, allows firms to

make the external knowledge useful, to take opportunities in the market, to come to a leading

position and to develop new capabilities. Technological innovation capabilities and

absorptive capacity are critical factors of innovativeness and thereby competitiveness. The

extensive literature review is undertaken to develop the three hypotheses and explain the

relationships among three variables technological innovation capabilities, absorptive capacity

and innovativeness. It is concluded that; absorptive capacity has a positive impact on

technological innovation capabilities and moreover technological innovation capability and

absorptive capacity have a positive impact on innovativeness.

Fagerberg J. (2000) did a research on the Technological progress, structural change and

productivity growth: The relationship between the economic structure of a country and its

productivity growth has received a lot of attention in recent decades. For instance, several

theoretical models in this area now suggest that countries that specialize in technologically

progressive industries will enjoy high rates of growth compared to other countries. This paper

39

focuses on the impact of specialization and structural changes on productivity growth in

manufacturing, using a sample of 39 countries and 24 industries between 1973 and 1990. The

results show that while structural change on average has not been conducive to productivity

growth, countries that have managed to increase their presence in the technologically most

progressive industry of this period (electronics) have experienced higher productivity growth

than other countries. The results reported indicate that structural change still matters, but in a

different way than before. The main difference concerns the role played by new technologies

in generating structural change. In the first half of the 20th century, growth of output,

productivity and employment were strongly correlated. New technology, in this case the

electronics revolution, has expanded productivity at a very rapid rate, particularly in the

electrical machinery industry.

According to Kasahara, H., & Rodrigue, J.(2008), developing nations where it is believed

that importing new technologies is a significant source of productivity and economic growth.

Through adoption and imitation of imported technologies, countries can take advantage of

research and development (R&D) abroad to improve the efficiency of domestic production.

Fagerberg, J. (2000) several theoretical models in this area now suggest that countries that

specialize in technologically progressive industries will enjoy high rates of growth compared

to other countries. This paper reports a survey of 1000 firms in Singapore about their

adoption and implementation of advanced manufacturing Technology (AMT). Statistical

analysis such as factor analysis and discriminate analysis were used to identify those

"successful factors" that contribute positively to adoption and implementation of advanced

manufacturing technology. From the 27 "successful factors" studied, showed that project

team integrity, strategic planning and Project championship, and technical knowledge are

significant, and training at all levels is instrumental in reducing uncertainties in AMT

implementation. The results also indicated that firm size and financial availability

differentiate successful from unsuccessful firms in AMT adoption and implementation.

Although firms with large financial resources are likely to be more successful, large firms, in

terms of the number of employees, are not necessarily beneficial to AMT and

implementation.

Hall, B. H., & Khan, B. (2003) did a research the contribution of new technology to

economic growth can only be realized when and if the new technology is widely diffused and

used. Diffusion itself results from a series of individual decisions to begin using the new

40

technology, decisions which are often the result of a comparison of the uncertain benefits of

the new invention with the uncertain costs of adopting it. An understanding of the factors

affecting this choice is essential both for economists studying the determinants of growth and

for the creators and producers of such technologies.

According to Nakamura, T., & Ohashi, H. (2008), examines the impact of new technology on

plant‐level productivity in the Japanese steel industry during the 1950's and 1960's. We

estimate the production function, considering the differences in technology between the

refining furnaces owned by a plant. We find that a more productive plant was likely to adopt

the new technology and that the adoption would be expected to occur immediately following

the peak of the productivity level achieved with the old technology. The adoption of the new

technology primarily accounted not only for the industry's productivity slowdown but also for

the industry's remarkable growth.

UNDP (2017) did a study on 55 private and public manufacturing enterprises were requested

to rate problems they face while in operation. The firms were selected from seven industry

groups: food and beverage, textile, garment, leather, plastic, chemicals, and metal industries.

Constraints were identify Power interruption and foreign exchange constraint at the top

electric power, shortage of domestic raw materials, and poor internet services access to credit

in particular operational loan, weak market demand, high lease price of land, excessive

control by regulating institutions, excessive tax, absence of level playing field for

competition, unnecessarily and long bureaucratic red tapes to get land, expensive raw

materials from abroad, and poor quality of domestic raw materials were the main constrain in

sampled industries.

Yibeltal (2017) did in this study to examine the technical efficiency of metals and

engineering industry of Ethiopia. The data set utilized during the years 2010 to 2014. The

data was extracted from the CSA annual manufacturing survey raw data bases. The study

consists of maximum 146 and minimum 105 individual firms‟ observations throughout the

panel period of five years. The study further identifies that the average technical efficiency of

Metals and Engineering industries vary among the industries and yearly average seems to be

unstable during the study period. Therefore, in order to effectively utilize the potential of the

industries, efforts have to be made in improving investment intensity, financial and non-

41

financial capital access, availing raw material access and infrastructural and institutional

development.

Alie et al. (2017) did the study to determine the demand and supply performance of the

Ethiopian basic metal industries (BMIs) over the period of 2010/11 to 2016/17 and then how

they balance demand and supply, so as to improve firm performance and competitiveness.

The collected primary and secondary data was analysis using fish bone diagram and

correlation analysis. The basic metal product demand and supply are used as variables to

evaluate the relative efficiency of basic metal industries in the country. Since the study

examines the gap between demand and supply of basic metal products in country wide. In

addition, the study also shows the possible impacts of non-equilibrium demand and supply

performances of basic metal products. This unbalanced demand and supply were occurred

due to insufficient raw material, low production capacity, problems on management systems,

poor market chain ,problems on information exchange, power supply fluctuations, QMS and

warehouse problems were investigated as principal causes on the deficiency of metal product

supply’s. Beside, the study indicates that due the above constraints the performance and

global competitiveness of basic metal industry is poor and infant. Finally the study indicates

that, proper management support and people involvements, supply chain integration,

implementation of quality management systems, material management system, improved

manufacturing process, and proper warehouse design and systems are some solutions that

suggested improving the performance and competitiveness of basic metal industries. This

deficiency supply of basic metal products is reducing the performance and global

competitiveness of basic metal industries. Based on filed observation and literature survey

data of this study indicates that insufficient raw material, power supply fluctuations, old

production & manufacturing processes, information shearing, improper leader ship systems,

infrastructure problems(landlocked), and poor quality management systems(TQM, Kaizen

etc.) are the major constraints investigates in basic metal industries. Though due to the above

factors there were unbalanced demand and supply of basic metal products occurred.

Ultimately negative supply and positive demand on basic metal products were formulated in

a country wide. In addition to this, due to such influences the market shearing, the

performance and competitiveness of basic metal industries are still infant. Nevertheless

achieving sustainability and competitive advantage of the industry, it needs to be an effort to

positive balance between demand and supply of basic metal products.

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Dametew AW, et al (2017) did the study on the Performance Analysis of Manufacturing

Industries for System Improvement in Ethiopia basic metal sector. This research paper uses

industrial survey 86 Ethiopian basic metal sectors and literature review, raw material

performance, productivity, technological capability, supply chain integration and job creation

and labor force performances were investigated. Discuss related to manufacturing industries

growth, performance, economic contribution, challenges, strengths and performances were

assed and also according to the result high cost of international market, problems on foreign

currency, logistics and public infrastructure, warehouse problems, outdated technology,

system are the main constraints of the sectors that reduce the performance and

competitiveness of the sectors. Those constraints, the overall performance and GDP

contribution of the sector is recorded on 0.4% of the five light manufacturing sectors. The

challenges and constraints grouped in to four themes including institutional inefficiency,

physical constraints, government inefficiency, system and strategies problems and

miscellaneous and these needs for remedial actions.

Dirk J. Van Wasbeek (2004) did a study on the human management practice on four

manufacturing and four service companies in Addis Ababa. The researcher is claim that

Ethiopian human resource management practice differ from West. Due to different culture

factors, economic system, political system and legal and industrial relations. The findings are

the importance of human resource management is not uniformly understood at all the study

companies.

Mohammed (2014) did research mainly focused to assess the performance and

competitiveness of the steel manufacturing industries and to identify their gap and develop a

competitive model that will indicate intervention areas based on international best practices.

The researcher was identifying the performance factors that affect the competitiveness cost,

technology, quality, marketing and Time/delivery time (on logistics). 10 interviews and 54

questionnaires were designed. The researcher was identified that cost, quality, technological,

marketing and delivery time are the critical challenges in the steel manufacturing industries

that affect their competitiveness. Power interruption, lack of scrap and distribution are the

challenges mentioned as major problems of the day. The respondents also gave emphasis on

the points that in most cases the quality of products are not competent, new technology

transferring system is very limited and innovation trends are very low. Accordingly more

than 85 % of the respondents for interview questions mentioned raw materials shortage,

43

foreign currency (hard-currency) shortage, electrical power supply, interruption and

fluctuation, availability of skilled manpower, marketing and technological problem,

standardization and quality problems, insufficient competence level of employee, insufficient

trends on research and development are seriously affect the industries. Hence, the finding

linkage among industries and between industries and leading institutes and associations

should be strengthening further to solve the problems. The industries should also develop

strategies to improve the above challenges and rational solutions that help promote the

industries for better competitiveness have to be developed from the concerned government

institutions. Therefore, trainings and skill development programs should be arranged by

common effort of industries, developmental partners, government, and educational and other

institutes. Concerning the market issues, although some initiations for import of billet and

bulk purchase for rebar manufacturer was made by the government to support the industries,

it is also required from the government to involve and give privileges for local manufacturers

on large procurement processes of rebar and other construction inputs to be supplied by the

local manufacturers.

Demissie M. (2015) conducted a research to assess the training and development practices in

Metal Industry Development Institute in Ethiopian. This research paper assessed the training

and development practices which the institute offers to its own employees. A sample of 62

employees was selected from four core directorate and HR department, and 59 questionnaires

which enclosed multiple closed ended questions were distributed and all collected. According

to the data collected the findings shows that; trainings sponsored do not have tight link with

the objective of the institute, there is no well documented training manual, internationally

accepted training steps (Training Need Analysis, Design, Development, Implementation,

Evaluation) have not been applied, trainees are not selected based on the training policy of

the institute, profiles of employees also does not considered for selection. Based on the

findings, the researcher recommended, the institute to carefully revise its training practices

for the success of training and organizational objectives.

However, this issue rise to attract the attention of researchers in Ethiopia. Thus, while

searching on internet, browsing through the books and journals the researcher didn’t find

directly enough related to research topics carried out in Addis Ababa as well as in Ethiopia.

44

2.2.2. Summaries of Empirical Studies

Table 2.2 Summary of Related Literatures

S.N.

Name of theresearcher,

Year,Country

Topic of theresearch Researched variables Research findings

1 FagerbergJ. (2000)Norway

Technologicalprogress,structuralchange andproductivitygrowth:

Specialization,structural change andproductivity growth.

Countries that have managed to increasetheir presence in the technologically mostprogressive industry of this period(electronics) have experienced higherproductivity growth than other countries. Inthe first half of the 20th century, growth ofoutput, productivity and employment werestrongly correlated.

2P.V.C.

Okoye andRaymondA.Ezejiofor(2013)

The Effect ofHumanResourcesDevelopment onOrganizationalProductivity

The five researchquestions and threehypotheses wereformulated in line withthe objectives of thestudy.

To achieve the aims of the study, data werecollected from both primary and secondarysource. Data collected were analyzed by useof means, variance and standard deviationand the three hypothesis formulated weretested using z-test statistical tool. Based onthe analysis, the study found that humanresource development is very vital to anyorganizations ranging from small to largescale enterprise

3Byremo,

C. S.(2015).OSLO

HumanResourceManagementandOrganizationalPerformance

Employees’ attitudesand behavior,operationalperformance,productivity, qualityand innovation,financial and marketperformance.

HRM contributes to increase theorganizational performance. These studieshave shown evidence indicating that HRpractices affect the organizations’ employeeattitudes and behaviors, operationalperformance and financial and marketperformance.

4 GARBA,S. (2014)Nigeria

Working CapitalManagementand thePerformance ofSelectedQuotedManufacturingCompanies inNigeria

working capital (WC) isdependent and netoperating profitability(NOP),AverageCollection Period(ACP), InventoryTurnover in Days(ITID), AveragePayment Period (APP),Cash Conversion Cycle(CCC), andNet Trading Cycle(NTC)].

Working capital (WC) is positively relatedto the net operating profitability (NOP)suggesting that increase in working capitallevel will increase the level of profit. Thenet operating profitability (NOP) isnegatively associated with measures ofworking capital management. AverageCollection Period (ACP), InventoryTurnover in Days (ITID), Average PaymentPeriod (APP), Cash Conversion Cycle(CCC), and Net Trading Cycle (NTC)].These results are consistent with the viewthat making payments to suppliers,Collecting payments from customers earlierand keeping products or inventories in stockfor lesser time are associated with increasein profitability. A negative relationshipbetween average payment period (APP) andnet operating profitability (NOP) furthersuggests that the sampled firms wait longerto pay their account payable.

5 Padachi,2006Mauritania

working capitalmanagementand its impact

Current Ratio,Inventory Turnover andWorking Capital Days.

The conclusions are that there is a negativecorrelation between the variables. Aneffective WCM does increase both liquidity

45

on firms’performance

One dynamicmeasurementcombining the factors ofinventory, accountsreceivable and accountspayable and CashConversion Cycle(CCC)

and Profitability simultaneously .Smallfirms should ensure a good Synchronizationof its assets and liabilities than larger one.

6 Soekhoe,S. G.(2012).Twente).

The effects ofworking capitalmanagement onthe profitabilityof Dutch listedfirms (Master’sthesis,University of

Profitability and ROAare dependent variableand CCC independentvariables which haveNumber of DaysAccounts ReceivablesNumber of DaysInventory Number ofDays Accounts Payableand also a controlvariable Firms size,Fixed Financial assetratio, Financial deptratio, Gross DomesticProduct Growth Rateand Industry WorkingCapital policy

There is significant and negativerelationship between the profitability ofDutch listed firms and the number of day’saccounts payables and the number of day’saccounts receivables. This implies that firmswhich wait longer to pay their bills tosuppliers and which grant a longer creditperiod to their customers generate lessprofit. There is a positive and significantcorrelation between the profitability and thenumber of day’s inventories which indicatesthat firms with high inventory levels havehigh profits. The study also results in apositive correlation between the profitabilityof firms and the cash conversions cycle.

7 Ghanavati,et al,Tehran

effect ofworking capitalmanagementover theperformance offirms

Average CollectionPeriod, InventoryTurnover in days,Average PaymentPeriod, CashConversion Cycle, andNet Trading Cycle

using a multi- regression model showed thatthere is a negative and significantrelationship between the variables ofAverage Collection Period, InventoryTurnover in day, Average Payment Period,Net Trading Cycle and the performance offirms

8 Diego andEzequiel,(2015))Uruguay

Innovation andProductivity inServices andManufacturing:The Role of ICTInvestment

ICT investment,Innovation andProductivity

Both ICT and other innovation investmentsare positively associated with productivityin services but only ICT affect productivityin manufacturing. Interestingly, the absenceof investment in ICT is associated withlower levels of productivity.

9 Abri, A.G., &Mahmoudzadeh, M.(2014).

Impact ofinformationtechnology onproductivity andefficiencyin Iranianmanufacturingindustries

Physical capital, ITcapitalHuman capital andproductivity

IT has a positive and statistically significanteffect on the productivity of manufacturingindustries. It will be more in high IT-intensive industries than the other industries.But, there is no significant differencebetween the growth of labor productivity inIT-producing and IT-using industries.

10 Ince, H.,Imamoglu,S. Z., &Turkcan,H. (2016).

The Effect ofTechnologicalInnovationCapabilities andAbsorptiveCapacity onFirmInnovativeness

Technologicalinnovation capabilities,absorptive capacity andInnovativeness

It is concluded that; absorptive capacity hasa positive impact on technologicalinnovation capabilities and moreovertechnological innovation capability andabsorptive capacity have a positive impacton innovativeness.

11 Dirk J.VanWasbeek(2004)Ethiopia

HumanResourceManagementpractices inselectedEthiopian

With fourmanufacturing andservice companies,.Management and HRMpractices are largelyinfluenced by political,

The finding of the research is theimportance of human resource managementis not uniformly understood at all case-studycompanies. Although the multinationalcompanies’ most important asset, as humancapital the local companies generally do not.

46

privatecompanies

economic and culturalfactors.

The HRM practice differs from the westcountries due to differences in culturalfactors, economic systems, politicalsystems, and legal and industrial relations.

12 Demissie,M. (2015).Ethiopia

Assessment ofTraining andDevelopmentPractice

to training practiceslike; training link withthe institute's objective,training processes usedby the institute,trainee’s selection, andtrainer selection

; trainings sponsored do not have tight linkwith the objective of the institute, there is nowell documented training manual,internationally accepted training steps(Training Need Analysis, Design,Development, Implementation,Evaluation)have not been applied, traineesare not selected based on the training policyof the institute, profiles of employees alsodoes not considered for selection

13 Wobshet,2014,Ethiopia

The impact ofworking capitalmanagement onfirms‟performance

Variables are payable indays, receivable in days,inventory turnover andCash Conversion Cycle(CCC) as independentvariables and ROA usedas dependent variables.

From this study the researcher find that,most of metal manufacturing companies inAddis have large amounts of cash investedin working capital. Therefore, it can beexpected that the way in which workingcapital managed will have a significantimpact on profitability of those firms.

14Alie

Wube etal. (2017)Ethiopia

PerformanceAnalysis on theDemand andSupply of BasicMetal Products

Manufacturing process,quality managementsystems, impropermaterial utilization,poor governmentsupport and improperindustry managementsystems, problems onsupply chainintegrations and relatedissues,

Basic metal industries should be adoptcentralize material ordering system to makeensure availability and eliminating duplicityof order; maintain strong supplier’srelationship to reduce costs. They shouldthink about material warehouses systems,work to overcome the storage of materialresources, integrate basic metal industriesinto a supply chains, use modern industrymanagement systems and apply improvemanufacturing process and systems as well.

15 Mohammed, 2014,Ethiopia

performanceandcompetitivenessof the steelmanufacturingindustries

Performance factors thataffect thecompetitiveness cost,technology, quality,marketing andTime/delivery time (onlogistics).

Raw materials shortage, foreign currency(hard-currency) shortage, electrical powersupply, interruption and fluctuation,availability of skilled manpower, marketingand technological problem, standardizationand quality problems, insufficientcompetence level of employee, insufficienttrends on research and development areseriously affect the industries.

16 DametewAW, et a l(2017)Ethiopia

PerformanceAnalysis ofManufacturingIndustries forSystemImprovement

Discuss related tomanufacturingindustries growth,performance, economiccontribution,challenges, strengthsand performances wereassedand also Thestudy and analysismainly focused on theperformance of rawmaterial,productionperformance, demandand supplyperformance, jobcreation andemployment

This research paper uses industrial survey86 Ethiopian basic metal sectors andliterature review, raw material performance,productivity, technological capability,supply chain integration and job creationand labor force performances wereinvestigated. According to the result highcost of international market, problemsforeign currency, logistics and publicinfrastructure, warehouse problems,outdated technology, system are the mainconstraints of the sectors that reduce theperformance and competitiveness of thesectors. Those constraints, the overallperformance and GDP contribution of thesector is recorded on 0.4% of the five lightmanufacturing sectors. The challenges andconstraints grouped in to four themesincluding institutional inefficiency, physical

47

opportunity, import-export and innovationand technologicalcapability

constraints, government inefficiency, systemand strategies problems and miscellaneousand these needs for remedial actions.

17 Yibeltal(2017)Ethiopia.

to examine thetechnicalefficiency ofmetals andengineeringindustry ofEthiopia

Variables that affectsthe technical efficiencyof metals andengineering industriesare; investmentintensity, age, distanceand labor capital mixwere used

The output result of the estimated inputvariables coefficients shows that fixedcapital and wages and salary (Labor) werestatistically significant and got positive sign.While the coefficients of cost of rawmaterial and fuel and energy were negativeand only cost of raw material wassignificant. Among the four determinantvariables incorporated to explain technicalinefficiency, only two factors investmentintensity and labor-capital ratio had asignificant effect on the technicalinefficiency of the metals and engineeringindustries.

Source: different literature review

2.2.3. Literature Gap

To be discussed the relevant literature and earlier research was conducted here. Although, the

interrelated concepts of human resource, working capital, raw material and technology

impacted with productivity is the basic variable to investigate. However, this issue rises to

attract the attention of researchers in Ethiopia. Thus, while searching on internet browsing

through the books and journals the researcher didn’t find directly related to research topics

carried out in Addis Ababa as well as in Ethiopia.

2.3. Conceptual Frame Work

Young (2009) states that conceptual framework is a diagram that represents the relationship

between study variables. So framework is basically develops to describe the relationship

between variables. Resources (variables) were selected based on having highly effects on

organization and selected from deferent scholars (Senyucel, 2009; Javid. S., 2014; Nicholas,

B., John, V. R. 2010; Nkechi, A. O. 2014). Based on the literatures reviewed among the

organizational resources - Human Resource Management, Raw Material Management,

Working Capital Management and Technology Management were selected for independent

variables and productivity is dependent variables.

48

ProductivityWorking capital management

Raw material management

H1

H3

H2

Technology management

Human Resource management

H4

Figure 2.6: Model of Conceptual Frame Work

Source: Developed by my own based on the objective of the study and literature reviewed

49

CHAPTER THREE

RESEARCH METHODOLOGY

3.1. Research Design

A research design is the arrangement of conditions for collection and analysis of data in a

manner that aims to combine relevance to the research purpose with economy in procedure

C.R. Kothari (2004). Research design is obviously a plan and which incorporates a

framework of what the research is going to do from writing the basic questions & their

operational implications to the final analysis of data. The purpose of this research is to

examine the effects of resource management the case of metal products factory in Addis

Ababa. Therefore, Addis Ababa regions are the place where the majority metal industries

located, thus the selected sample industries can be considered to be sufficient indicatives of

the metal industries in Ethiopia as a whole. The sample size and the specific metal industries

are chosen considering required acceptance sampling number, industries profile regarding the

year of establishment, type of products and production performance (Appendix B). In

addition to that it was selected based on geographical distribution and minimum survey cost

had been into considered. Therefore, the target population for the study was top management,

middle management and supervisors /senior employees.

Both Descriptive and Exploratory research design were used. Here in this research both

qualitative and quantitative study approaches were employed and also both types (probability

and non-probability) sampling were implemented for this study. The investigator was

collected data from both primary and secondary sources. The researcher used “five-point

Likert scale. Therefore, the researcher has preferred to use descriptive and inferential

statistics in this study. Finally collected raw data was interpreted by Microsoft Excel and

SPSS version 20 software and presented in the form of graphs, tables, and charts.

3.2. Sources of Data

Both primary (interview, questioner, observation) and secondary data were collected from

Published and unpublished documents which are relevant to the study was taken from

(published in books, journals, previous research work, annual reports, internet sources and

manuals of the companies).

50

3.3. Research Approach

According to C.R. Kothari et al (2004) they are two basic approaches to research, quantitative

approach and the qualitative approach. The former involves the generation of data in

quantitative form which can be subjected to rigorous quantitative analysis in a formal and

rigid fashion approach. Qualitative approach research is concerned with subjective

assessment of attitudes, opinions and behavior. Enhance validity, there is a need to collect or

analyze data through triangulation and where correctness or precision is important. Hence, it

is quite logical to collect information through different methods and angles. Creswell, J. W.

(2003) a mixed methods design is useful to capture the best of both quantitative and

qualitative approaches. For example, a researcher may want to both generalize the findings to

a population and develop a detailed view of the meaning of a phenomenon or concept for

individuals. To accomplish the objectives of this study, a mixed research - both qualitative

and quantitative research approach were applied.

3.4. Population of the Study

Population refers to a set of people or items with similar characteristics that a researcher

intends to study and to draw statistical inferences or conclusions (Gall et al., 2006). The total

number of population eligible and used for the study is 84 employees found at four metal

products factories in Addis Ababa. The study assumes that, the respondents (key persons)

have full knowledge about the effects of resource management on productivity as well as

overall organizational performance.

Table 3.1: Population of the Study

Number Company’s NameNumber of middle management,supervisor and senior employees

(Population)1 kaliti metal products factory 40

2 Sunny steel Plc 25

3 Osaka Steel Plc 10

4 Mami steel mill Plc 9

Total 84

Source: Computed based on the researcher’s Primary Data

51

3.5. Sample Design

A sample design is a definite plan for obtaining a sample from a given population. It refers to

the technique or the procedure the researcher would adopt in selecting items for the sample

C.R. Kothari (2004). The target population for the study was top management, middle

management and supervisors /senior employees of metal products factories. They are two

types of sampling design. Probability sampling: In probability sample, every unit in the

population has equal chances for being selected as a sample unit. Non–probability sampling:

In non-probability sampling, units in the population have unequal or zero chances for being

selected as a sample unit. Hence, researchers used both sampling techniques: probability

sampling and non-probability sampling.

3.6. Sampling Frames

Sampling frame of the study is populations that the researcher was intended to draw and

indicate in sample frame. Sample shall be representative because the sample generalization is

given for the entire population. Therefore under this study the sampling frames were carried

out at kaliti metal products factory, Sunny steel Plc, Osaka Steel Plc and Mami steel mill Plc.

which consists of only Top management, middle management, supervisor/senior employees

in each factories.

3.7. Sampling Unit

Sampling unit is the individuals whose characteristics are to be measured in the analysis or a

sampling unit can refer to any single person, animal, plant, product or ‘thing’ being

researched. The sampling unit for this study was 69 individual employed that drown from

target population.

3.8. Sample Size

(C.R. Kothari, 2004) having decided how to select the sample, you have to determine the

sample size. The research proposal should provide information and justification about sample

size. It is not necessarily true that the bigger the sample, the better the study. Beyond a certain

point, an increase in sample size will not improve the study. It is better to make extra effort to

get a representative sample rather than to get a very large sample. Therefore, based on the

objects of the study the appropriate sample size, A simplified formula for proportions

Yamane (1967) provides to calculate sample sizes. A 95% confidence level and P = .5 are

assumed.

52

n , N = 84

Where, n= the sample size , N=the population

e=the acceptable sampling error

A 95% confidence level and p=.05 are assumed

n = 84/ 1+84 (0.05) 2

n= 84/1.21

n=69

Table 3.2: Sampling size

Number Company’sName

Number of middlemanagement, supervisor andsenior employees (Population)

Targetsampling

size1 K 40 33

2 S 25 21

3 O 10 8

4 M 9 7

Total 84 69

Source: Computed based on the researcher’s Primary Data

Response rate 64/69 = 92.7% ≈ 93%

40/84*69= 33

25/84*69=21

10/84*69=8

9/84*69=7

Table 3.2 shows us the sampling size is proportionally distributed based on the number of

company’s wide sampled size.

3.9. Sampling Technique

The ultimate goal of survey research design is to learn about a large population by surveying

C.R. Kothari (2004) if a population from which a sample is to be drawn does not constitute a

homogeneous group, stratified sampling technique is generally applied in order to obtain a

representative sample. Under stratified sampling the population is divided into several sub-

populations that are individually more homogeneous than the total population (the different

sub-populations are called ‘strata’) and then we select items from each stratum to constitute a

sample.

53

Based on the objective of the research probability sampling (stratified sampling) was

designed to select the target population to classified based on job position. They were

assumed that a key person of the organization so that they have a general knowledge to be

answered the designed question. Non probability sampling (purposive sampling) was

designed for questioner (middle management and supervisor/senior employees) and interview

for Top management was designed.

3.10. Methods of Data Collection

The researcher used semi-structured interview and questionnaire for this particular research.

The questionnaires contained demographic information of the respondents in terms of age,

sex, educational status and work experience: The researcher used “five-point Likert scale

from 1 to 5 rating from Null to Very high. The total population for this study was 84 people

which are found in four factories. 69 questioners were distributed according to the sampling

size. Out of 69 it was collected 64 and the response rate of 93%. The interviewees were

conducted with top management’s members in four factories that are relevant to topics,

believed to have a quite good understanding of the subject matter and able to discusses the

issues `clearly.

3.11. Data Analysis Method

The collected data was analyzed, interpreted, and discussed by using quantitative and

qualitative method of analyses. After completion of data collection, descriptive and

inferential statistical analyses were employed to analyze and interpret the raw data. The

Collected data is checked for consistency and then frequencies and percentages were used to

show response distribution. Correlation analysis was used to identify the relationship between

the dependent and independent variables under consideration and regression analysis was

used since it shows the impact of the independent variables on the dependent variable.

Microsoft Excel application and SPSS version 20 software tools to interpreted the collected

data. Data were presented by using different statistical tools such as graphs, tables, and

charts.

3.11.1. Model Specification

To analyses the data collected via the survey instrument, an appropriate statistical procedure

were been used. The hypotheses were analyzed and tested via regression analysis, with the

aid of SPSS (Statistical Package for Social Sciences). From the formulated methodologies,

54

specific relationship between human resource management, working capital management,

raw material management and technology management with productivity were established.

Therefore, the formula for the regression is provided below.

y=A + Bpxp + Bqxq + Brxr+ Bs Xs+.... e

y is the dependent variable (Productivity) being predicted by the equation xp, xq, xr and xs are

the independent (HRM, WCM, RMM and TM) variables. The basic statistical test is whether

Bp, Bq, Br and Bs (called the regression coefficients) differ from zero. A = the y intercept

when x is zero. This result is either shown as a p value (p<0.05) or as a 95% confidence

interval.

3.12. Validity and Reliability

3.12.1. Reliability

To ensure the reliability of the instrument in this study and the researcher had tested the

reliability using Cronbach's Alpha (α). Cronbach‘s Coefficient (α) is calculated to estimate

the internal consistency of reliability of a measurement scale. Cronbach's alpha is a

coefficient of reliability that gives an unbiased estimate of data generalization (Zinbarg,

2005).

Table 3.3: Reliability of Data Collection Instruments

Cronbach’s Alpha Value InterpretationGreater than .90 ExcellentGreater than .80 Very GoodGreater than .70 AcceptableGreater than .60 QuestionableGreater than .50 PoorLess than .50 Unacceptable

Source: Zikmundet al, 2011

For this particular study, the reliability result is illustrated in table 3.4.

Table 3.4.Reliability Statistics

S. No Variables Cronbach's Alpha N of Items1 Raw materials Management .986 92 Human resource Management .990 123 Working capital Management .986 74 Technology Management .985 7

Over all reliability test .986 35

Filed survey 2018

The SPSS result as shown in Table 3.4 above, the overall Cronbach’s alphas coefficients for

55

expected scale items were 0.986. Therefore, the expected scale was used demonstrate

Excellent reliability.

3.12.2. Validity

Validity is the extent to which the instrument measures what it is intended to measure,

whereas reliability refers to the consistency of the measuring instrument yields the same

result when repeating the same thing when the entity being measured hasn’t changed (Leedy

and Ormrod, 2010). This study is obvious face validity because it was developed an

assessment and evaluation frame work based more of on primary data obtained from

interview response from top level managers, and questionnaire response of middle level

manager, supervisors/ senior who actually expected as skilled and professional. All

interviewee were asked the same set of very simple in a plain English language open ended as

much as possible structured question well-matched with the knowledge of the interviewee

was prepared. And also all interviewee had been given chance to ask for clarification without

any pre condition, if not understand what they had been asked. The process of interviewing

could be done again under the same situation in order to establish reliability thus it is possible

to generalize based on the actual finding of the study process. The researcher was used

observation, interviews, documents, annual reports as instruments of data gathering which are

found to be relevant to the study. So the validity and reliability of the qualitative and

quantities research is ascertained by triangulation. Multicollinearity (or collinearity) occurs

when there are high inter-correlations among some set of the predictor variables. If the

tolerance value is lower than 1-R2 than there is a probability a problem with multicollinearity.

In other words, multicollinearity happens when two or more predictors contain much of the

same information. If any of the Variation Inflation Factor values exceeds 5 or 10, it implies

that the associated regression coefficients are poorly estimated because of multicollinearity

(Montgomery, et al 2001). It can be removed by merging the same variables or dropping

variables and also by changing sampling size.

3.13. Ethical Considerations

The interview questions and questionnaires clearly hold parts which explain the intent of the

researcher, and that the information from the respondent will not serve for personal

identification. And the consent of the respondent and relevant authority and enterprise has

been obtained to get the information needed. Thus the research proposal had been approved

by the assigned steady leader from the university before the researcher gathered data. To

56

undertake the research, the questionnaire ensuring participant’s secrecy or confidentiality that

information is obtained from them cannot be disclose to the third party. Hence, the

respondent’s rights to privacy, to be fully informed consent or permission and confidentiality

or secrecy was addressed individually. Respondent’s name and other identifying information

were not used in the study. Finally, the appropriate acknowledgement was made for the use

of numerous works of others.

57

CHAPTER FOUR

DATA PRESENTATION, ANALYSIS AND INTERPRITATION

This chapter presents the results of the various indicators of the effects of resource

management on productivity of metal products factories in Addis Ababa. Empirical results

from quantitative data analysis using Statistical Package for Social Science (SPSS) as well as

presenting results from descriptive statistics, correlation matrix and regression results was

used as the study main statistical tool. Concerning response rate even though 69

questionnaires were distributed to the key person from each company only 64 questionnaires

are returned hence the response rate of questionnaire was 93%.

4.1. Demographic Characteristics of Respondents

Table 4.1:.Demography of Respondents

No Item Frequency Percentage1 Sex of the Respondent

Male 56 88

Female 8 12

Total 64 100

2 Service year of Respondent< 2 years 13 212 - 5 Years 15 235 – 10 Years 15 23> 10 years 21 33Total 64 100

3 Educational Qualifications of Respondents

Below Diploma 4 6Diploma 8 13BA/BSC Degree 46 72MA/MSC 6 9Total 64 100

4 Position of RespondentsMiddle Level Management 23 36Supervisor/Senior Employees 41 64Total 64 100

Filed survey 2018

Table 4.3 shows concerning respondent of gender, majority of the respondent participating in

the study are males which counts 56(87.5%) and the remaining 8(12.5%) were females. This

implies that females do not get equal opportunities to lead as males.

Regarding the respondent service year, out of the total 13(20.3%) had served less than 2

years, 15(23.4%) are served between 2- 5 years, 15(23.4%) also served between 5-10 years

and the remaining 21(32.8%) serve their respective firms. This implies majority of the

58

respondent 36(56%) serve their respective firms more than five years and this shows that the

respondent have work experience with in the respective firms and it is sufficient to judge and

give views. This is because when the respondents are more and more experienced within the

organization they have better opportunity to know more and more about their organizations

resource management.

Regarding the respondent 4(6.3%) of the respondents had below diploma; 8(12.5%) of the

respondents had diploma and 46(71.9%) of the respondents had BA/BSC degree and the

remaining 6(9.4%) of them were MA/MSC & above degree holders. Based on this the above

data more than 52(81%) of the respondent were first degree and above holder. This implies

that the companies are led by qualified people. This can shows respondents have sufficient

knowledge about over all organizational resource management.

Regarding respondent position, 41(64.1%) of the respondent were from supervisor and senior

employees and the remaining 23(35.9%) was from middle level managers. This implies that

the study involves senior level managers to get the right information.

4.3 Respondent’s opinion about the effects of resource management on productivity

Table 4.2: Respondent’s opinion about the effects of RMM on productivity

No. Serial no Questions MeanStd.

Deviation1.1 The Quality of raw material in your firm 4.03 .992

1.2 Lack of outbound logistic 3.20 1.057

1.3 Lack of available raw material locally 3.48 1.623

1.4 The distance between raw material stock and production floor 3.11 1.323

1.5 Availabilities of machine accessories and forming die 3.27 1.172

1.6Lack of inbound logistics (Mobile crane/fork left/Overhead

crane)2.83 1.304

1.7 Lack of Spare parts 3.00 1.247

1.8 Frequency of electric power interruption 3.20 1.184

1.9 Frequency of machine breakdown 3.06 1.067

Table 4.2 shows mean of 3.48 and 1.623 of standard deviation on the statement “Lack of

available raw material locally” among RMM in their firm’s majority of the respondents

shows moderate level. So, we can understand that RMM needs improvement to the respective

59

firms by implementing resource management software like inventory, logistic with inbound

and out bound supply chain integration.

Table 4.3: Respondent’s opinion about the effects of HRM on productivity

No. Serial no Questions Mean Std. Deviation2.1 Required training and development given by the firm 2.77 1.0952.2 Lack of skilled manpower 2.80 1.0262.3 Employee job satisfaction 2.89 .9112.4 Absenteeism 2.78 1.0762.5 Rate of labour turnover 3.31 1.0372.6 Loyalty of employees 3.42 .8692.7 Motivation given to workers 2.94 1.0672.8 Incentives/ recognition for best performance of workers 2.59 1.2312.9 Placement of the right person on the right job 3.17 1.0322.10 Leadership competence 3.20 .8942.11 Cooperation and teamwork in your work place 3.48 .9592.12 Working Environments 3.09 1.137

Table 4.3 shows mean of 3.48 and .959 of standard deviation on the statement “Cooperation

and teamwork in your work place” among HRM in their firm’s majority of the respondents

shows moderate level. So, we can understand as HRM needs to improvement productivity by

giving a special attention for cooperation within their employees’.

Table 4.4: Respondent’s opinion about the effects of WCM on productivity

No. Serial no Questions Mean Std. Deviation3.1 Shortage of working capital 3.03 1.1543.2 Efficient use of working capital 3.39 1.1213.3 Efficient utilization of budget 3.42 1.0203.4 Cost control techniques 3.28 1.0613.5 Accounts receivable 3.39 .9193.6 Account payable 3.41 .9713.7 Cycle time from raw material to production and sales 3.47 1.023

Table 4.4 shows mean of 3.47 and 1.023 of standard deviation on the statement “Cycle time

from raw material to production and sales” among WCM in their firm’s majority of the

respondents shows moderate level. So, we can understand as WCM needs improvement the

process from the beginning of raw material, manufacturing, store and finally to sale. Just by

implementing inbound management system.

60

Table 4.5: Respondent’s opinion about the effects of TM on productivity

No. Serial no Questions Mean Std. Deviation

4.1 Trends in adopting new technology in your firm 2.98 1.091

4.2 Information communication system between your firm and

your customers (consumers and suppliers).2.88 1.016

4.3 Automated machines installed in your factories 3.08 .997

4.4 The impacts of using old technology machine 3.19 .957

4.5 Resistance to new technology in your firm 2.83 1.001

4.6 Information technology improves the processing time and

better information for decision making in your company.3.17 .901

4.7 Information technology facilitates the automation of core

business processes in your firm3.16 .877

Table 4.5 shows mean of 3.19 and 0.957 of standard deviation on the statement “The impacts

of using old technology machine” among TM in their firm’s majority of the respondents

shows moderate level. So, we can understand as the impacts of using old machine needs

improvement otherwise they are encountered highly maintenance and also cannot be

competent, and cannot keep quality of products. So replacing advanced technology machine

is so important for respective firms.

4.2. Relation of Resources Management among Productivity

Table 4.6: Full correlation

Productivity RMM HRM WCM TM

ProductivityPearson Correlation 1 .987** .979** .978** .972**

Sig. (1-tailed) .000 .000 .000 .000N 64 64 64 64 64

RMMPearson Correlation .987** 1 .982** .981** .969**

Sig. (1-tailed) .000 .000 .000 .000N 64 64 64 64 64

HRMPearson Correlation .979** .982** 1 .980** .985**

Sig. (1-tailed) .000 .000 .000 .000N 64 64 64 64 64

WCMPearson Correlation .978** .981** .980** 1 .959**

Sig. (1-tailed) .000 .000 .000 .000N 64 64 64 64 64

TMPearson Correlation .972** .969** .985** .959** 1Sig. (1-tailed) .000 .000 .000 .000N 64 64 64 64 64

**. Correlation is significant at the 0.01 level (2-tailed).

Field survey 2018

61

Table 4.5.Illustrated that RMM, HRM, WCM and TM have a significant strong positive

relation with productivity(r=.987, p<.05), (r=.979, p<.05), (r =.978, p<.05), (r=.972, p<.05)

respectively. This implies that the Ethiopian metal products industry need to give a special

attention to manage their resource; if they need to improve productivity.

Table 4.7: Partial correlation

Control Variables Productivity RMM

HRM & WCM & TM

Productivity

Correlation 1.000 .569

Significance (2-tailed) . .000

Df 0 59

RMM

Correlation .569 1.000

Significance (2-tailed) .000 .

Df 59 0

Control Variables Productivity HRM

WCM & TM & RMM

Productivity

Correlation 1.000 -.061

Significance (2-tailed) . .641

Df 0 59

HRM

Correlation -.061 1.000

Significance (2-tailed) .641 .

Df 59 0

Control Variables Productivity WCM

TM & RMM & HRM

Productivity

Correlation 1.000 .257

Significance (2-tailed) . .045

Df 0 59

WCM

Correlation .257 1.000

Significance (2-tailed) .045 .

Df 59 0

Control Variables Productivity TM

RMM & HRM & WCM

Productivity

Correlation 1.000 .288

Significance (2-tailed) . .024

Df 0 59

TM

Correlation .288 1.000

Significance (2-tailed) .024 .

Df 59 0

Table 4.7: above sought to analyze the single effect of each independent variable to

Productivity while keeping the others on hold as control variable so as to see the non-

62

combined unique effect. We clearly see that is only the HRM that is negatively correlated to

productivity while keeping RMM, WCM and TM as control variables. The other predictors

are all positively related to Productivity. Universally a unit change in HRM practice it can be

changes in some amounts of positively or negatively effects on productivity. Martin N.

(2015) a negative Effects of Poor Human Resource Management can result an unproductive

and inefficient workplace. It is also create decreased Productivity, Ineffective Recruitment,

Employee Turnover, Noncompliance and the like.

4.3. Effects of Resource Management on Productivity

A major weakness of Pearson Correlations is that they do not allow identifying causes from

consequences. To overcome this shortcoming, the researcher use regression analysis to

investigate the effect of independent variables (human resource, raw material management,

working capital management, new technology) on the dependent variables which is

productivity.

To minimize the influence of potential violations, regression assumption are tested

(normality, linearity, homoscedasticity and independence of residuals) by examining the

normal probability plot (P-P) of the regression standardized residual and the scatter plot of

the standardized residuals for all the four independent variables and there was no serious

violation of the normality assumption for models. (Appendix)

(Table 4.9) The value of F test explains the overall significance of a model. It explains the

significance of the relationship between dependent variables and all the other independent

variables. It is also used for judging the significance of multiple correlation coefficients

(C.R. Kothari (2004).

(Table 4.8) There is a rule of thumb which can be used to determine the R2 value as follows:

< 0.1: poor fit, 0.11 to 0.30: modest fit, 0.31 to 0.50: moderate fit, > 0.50: strong fit (Muijs,

2004, p. 166). To evaluate the study models, the value of R2 has been considered to determine

the amount of variance in the dependent variables which is explained by all variables in the

formula (Pallant, 2007, p.158).

(Table 4.10) As the B coefficients have different scales, the absolute value of Beta parameter

under Standardized Coefficients is used in order to compare and determine the influence of

independent variables on the dependent variable (Muijs, 2004, p. 167). The Significant value

63

is used to measure the statistic significant unique contribution of each independent variable to

the formula (Pallant, 2007, p.159).

Table 4.8: Model Summary

Model R R Square Adjusted R Square Std. Error of the Estimate

1 .990a .980 .979 .16558

Predictors: (Constant), RMM, HRM, WCM, TM

Filed survey 2018

Linear multiple regression was calculated to predict productivity Model 1; it had the ability to

predict the productivity of the firms significantly, F (4, 59) = 733.9, p < .000b, with R2 of

.980. This indicate that the model is strong fit with the predictor variables (human resource,

technology, working capital and raw materials ) accounted for 98% of the variance in the

dependent variable( productivity) is explained by the model and the remaining 2% of the

variation in the dependent variable is explained by other variables which is not included in

this study.

Table 4.9: ANOVAa test

Model Sum of Squares df Mean Square F Sig.

1

Regression 80.497 4 20.124 733.999 .000b

Residual 1.618 59 .027

Total 82.114 63

Dependent Variable: ProductivityPredictors: (Constant), RMM, HRM, WCM, TMFiled survey 2018

Table 4.10: Coefficients a

Model UnstandardizedCoefficients

StandardizedCoefficients

t Sig.

B Std. Error Beta

1

(Constant) -.221 .098 -2.260 .028

RMM .586 .110 .599 5.317 .000HRM .087 .185 .075 .469 .041WCM .250 .122 .220 2.045 .045TM .309 .134 .254 2.312 .024

a. Dependent Variable: ProductivityFiled survey 2018

64

4.3.1. The Effects of Raw Materials Management on Productivity

Regarding the effects of raw materials management on productivity, table 4.8., shows that

raw material management have positive significant effects on productivity (β =.599, p

<.001).This means that; if we improve the raw material management ; the productivity of the

respective firms will also improve by .599 unit of standard deviations if other factors remain

constant. This implies raw materials management affects the productivity of the metal

products factory significantly uness and otherwise they give special attention. The finding of

this study also supports by (J.R.Tony. Armold and S.N. Chapman, L.M.Clive, 2008) to

improve productivity and wealth, a company must first design efficient and effective systems

for manufacturing. It must then manage these systems to make the best use of material. One

of the most effective ways of doing this is through the planning and control of the flow of

materials into, though, and out of manufacturing and this finally leads to manufacturing

creates wealth by adding value to goods.

4.3.2. The effect of Human Resource Management on Productivity

The effect of human resource management on productivity is analyzed using linear multiple

regression method with a two-tailed significance level of 5% (α= .05) and the result is

analyze and interpreted based on (table 4.8) for the model.From the coefficient table we can

observe that human resource practice have positive significant effect on productivity (β

=.075, p =.041). This means if we improve the human resource practice; the productivity of

the firms will improve by .075 units of standard deviations, if other factors remain the same.

And this implies that the human resource practice of the metal products firm have a positively

impact on the productivity of respective firms.

4.3.3. The effects of Working Capital Management on Productivity

Regarding working capital management we observe from table 4.8, working capital have

significant effect on productivity (β =.220, p =.045).This leads to, if we improve the working

capital management; the productivity of the respective firms will improve by .220 units of

standard deviations, if other factors hold constant. Because the main objective of WCM is to

maintain the optimum balance of each account, namely; receivables, inventory, and payables

that influence firm’s productivity & performance (Flibeck & Krueger, 2005).

4.3.4. The effects of Technology Management on Productivity

Regarding technology we observe from table 4.8, technology management have significant

effect on productivity (β =.254, p =.024).This leads to if we improve the technology

65

management; the productivity of the respective firms will improve by .254 units of standard

deviations, if other factors hold constant. The finding of this study support with to

Brynjolfsson (2003) technology has been increasing productivity and annual output per

worker for more than three decades. Kudyba (2004) concluded that greater technology skills

increased firm output. Enhanced technology skills among employees resulted in higher

productivity, organizational performance, and firm output (Hitt & Brynjolfsson, 1995;

Kudyba, 2004). S. A. Kumar et al (2008) computer integrated manufacturing benefits fall into

three categories; increase quality, decrease cost, and improve safety. Brynjolfsson and Brown

(2005) also found that technology intensive companies tend to be more productive.

Therefore, the predictive model of the study is:

y=A + Bpxp + Bqxq + Brxr+ BsXs+.... e

Productivity = -.221 + .599(RMM) + .075 (HRM) + .220 (WMC) + .254(TM) +.098

4.4. Summary of Hypothesis

Table 4.11: Summary of overall outcome of the research hypothesis

Hypothesis Result

1 H1: Raw material resource management has positively impact to firm’sproductivity.

β =.599 , p=.000Ho : RejectedH1: Accepted

2 H1: Human resource management has impact on firm’s productivity β =.075 , p =.041Ho : RejectedH1: Accepted

3 H1: Working capital management practices have strong relation to firm’sproductivity.

β =.220 , p=.045Ho : RejectedH1: Accepted

4 H1: Technology adoptions have positively impact on firm’s productivity β =.254 , p=.024Ho : RejectedH1: Accepted

Filed survey 2018

4.5. Summary of Major Findings

From table 4.8., shows that raw material management have positive significant effects on

productivity (β =.599, p =0.000). In similar manner the interview from top management of

the sample factory support the above regression result; the metal factory, implemented raw

material management practice in their respected firms to improve productivity because the

top management understand that, when they reduce waste productivity would improve and

hence based on the nature of raw material they practice raw material management but the

implementation it is not as such effective because of lack of skill and luck of motivation of

worker specially in production floor as expected.

From table 4.8 it is observed that human resource management have positive significant

effect on productivity (β =.075, p =.041). In similar manner the interview from top

66

management of the sample factory support the above regression result; i.e when they make

best and transparent the human resource practice in their respective factory like (provision of

sufficient training & development for their employee, when they implement incentive system,

when they give reward, when there is salary increment based on performance and when there

is promotion based on performance the productivity of their respected factory shows

improvement but some time when salary increment is biased productivity of the respected

firms decline & some employees are motivated to leave the factory for certain period and

these kind of action affect the productivity of their factory.

From table 4.8, working capital management have significant effect on productivity (β =.220,

p =.045). In similar way from the interview we understand that, majority of the factory top

management believed that working capital have positive significant effect on productivity by

smoothening the operation of the factory especially in provision of resources for operation

and to execute obligations of the respected firms without headache but without proper

managing working capital did nothing.

From table 4.8, technology management have significant effect on productivity (β =.254, p

=.024). In line with the above researcher and scholar from the interview; we can understand

that some factories were implemented new technology and improve their productivity but

they exposed highly for machine spare part cost and managing of the technology but some of

them even if they understand that, technology improve productivity, they prefer to stick with

the old fashion operating system since the initial capital requirement to adopt the technology

needs huge funds and skilled employees.

Figure 4.1: Models of conceptual frame work Results

Source: Filed survey 2018

0.024

Working CapitalManagement

Humana ResourceManagement

Raw MaterialManagement

TechnologyManagement

Productivity

0.045

0.041

0.000

67

CHAPTER FIVE

CONCLUSIONS AND RECOMMENDATIONS

5.1.Conclusions

The study has investigated the effect of resource management on the productivity of the

Ethiopian metal products manufacturing in Addis Ababa. Based on the finding of the study,

the following conclusions are drawn.

5.1.1. On Effects of Raw Material Management

From table 4.8., shows that raw material management have positive significant effects on

productivity (β =.599, p <.001). from the interview understand that, the metal factory,

implemented raw material management practice in their respected firms to improve

productivity because the top management understand that, when they reduce waste

productivity would improve and hence based on the nature of raw material they practice

raw material management but the implementation it is not as such effective because of lack

of skill and luck of motivation of worker specially in production floor as expected. Raw

material are a crucial for any manufacturing sector, and have significant impact on the

productivity of respective firms, Since the basic objective of materials management as

explained by Banjoko (2000) and Jacobs et al. (2009) is to ensure that the right item is

bought and made available to the manufacturing operations at the right time, at the right

place and at the lowest possible cost. Yibeltal (2017) in order to effectively utilize the

potential of the industries, efforts have to be made in improving investment intensity,

financial and non-financial capital access, availing raw material access and infrastructural

and institutional development.

5.1.2. On Effects of Human Resource Management

From the regression analysis, on table 4.8 it is observed that human resource management

have positive significant effect on productivity (β =.075, p =.041). In similar manner the

interview from top management of the sample factory support the above regression. Human

resource management have a significant effect on productivity, as the result firms needs to

give a special attention to the human resource to boost their productivity because unless and

other wise firms improve the managements of their human resource through development and

68

training and establishing of incentive system in their practices to boost morale of employees

and to reduce mobility, since motivation and mobility affect significantly the productivity

levels. This is empirically supported by P.V.C. Okoye et al (2013) the study found that

human resource development is very vital to any organizations ranging from small to large

scale enterprise.

5.1.3. On effects of Working Capital Management

Working capital management have significant effect on productivity (β =.220, p =.045). In

similar way from the interview we understand that, majority of the factory top management

believed that working capital have positive significant effect on productivity by smoothening

the operation of the factory especially in provision of resources for operation and to execute

obligations of the respected firms without headache but without proper managing working

capital did nothing.

Since the objective of WCM is to maintain the optimum balance of each account, namely;

receivables, inventory, and payables that influence firm’s productivity & performance

(Flibeck & Krueger, 2005).

5.1.4. On Effects of Technology Management

Technology management have significant effect on productivity (β =.254, p =.024). Now a

day’s technology is becoming one of the effective weapons in the computation world and

hence the study finding also shows that technology have significant effect on productivity.

This is empirically supported by Fagerberg, J. (2000). In the first half of the 20th century,

growth of output, productivity and employment were strongly correlated. It is also supported

by Diego and Ezequiel, (2015) both ICT and other innovation investments are positively

associated with productivity in services but only ICT affect productivity in manufacturing.

Interestingly, the absence of investment in ICT is associated with lower levels of

productivity.

Unsal, E et al (2015) Technology Management (TM) can contribute to sustainable

competitive advantage. This is because, creating and sustaining competitive advantage

requires more than operational efficiency and cost minimization. For technology intensive

companies, creating competitive advantage is related to capability of managing technological

assets (Skilbeck and Cruickshank,

69

5.2. Recommendations

Based on the findings and conclusions of the study, the following recommendations are

forwarded to Ethiopian metals products manufacturing company.

Regarding the raw materials, the Ethiopian metal products firms needs to established

/improve/ raw material handling system to reduce the wastage amount implementing

KAIZEN and to improve the productivity and also they need to adopt SCM for efficient

manage inbound and outbound relationship, Implement Total Quality Management of the

products, inventory management, transportation operation management, warehousing

management. Since the effects of raw materials is significant to the productivity of the firms.

By establish material management handling techniques to boost the utilization of raw

material in doing so, they can improve the productivity of their respective firms.

Regarding the human resource management, the study findings show that the Ethiopian metal

products industry they have a gap on handling of their man power due to absence of

incentive and reward policy, less attention are given to safety and skilled man power, lack of

training and development programs, lack of promotion policy, lack of creating good working

environment lack of Recognition, Appreciation, Interpersonal relationship and Innovation

policy are seen the major gaps on this industry; since human resource practice have

significant effect on productivity the respective firm needs to take corrective actions on these

trends in their respective firms to boost their productivity.

Regarding working capital management, majority of the respondent agreed that the working

capital management practice is above average hence still it needs improvement specially on

efficient utilization of working capital, efficient utilization of budget, cost control techniques

and account receivable turn over and account payable turnover rate to utilize their resources

efficiently by giving appropriate training for top management and finance personnel to

improve the productivity of their respective firms. In addition to this the concerned

government bodies need to give special emphasis in solving of the foreign currency problem

by giving special privilege to local manufacturer than the finished product importer since

they add value and giving job opportunity and also helps the country in transforming the

technology. Financial sector in Ethiopia should be give equal opportunities for their working

capital. Working capital need a special attention because it affects productivity of firm’s

significantly. The metal products factory need to manage these components properly to run

70

their respective firms day to day operations efficiently and to become profitable and

productive.

Regarding the technology management, the Ethiopian metal products industry have a gap on

Information exchange between higher and lower management, adopting the necessary

technology to simplify the operation because of the nature of the machine. Exchange

information without paper, to reduce production time and production costs, create customer

handling system, implementing enterprise resource planning, adopting online business to

stand and survive. Efficient utilization of the information technology is necessary because

technology have a significant effect on productivity. As the result the Ethiopian metal

products top management need to take a corrective action in utilizing of the information

technology to exchange information at the required time to minimize the gap between their

employees and automating of their machineries to increase productivity. As the result the

Ethiopian metal products and respective firms need to give a special attention like the other

resources to become productive and competent enough and also to survive and win the

competition in the market. Hence, the decision to improve productivity through technology is

necessary and it is not enough by investing on new technology adoption but also it needs well

managed. Otherwise, the consequence is losing productivity.

71

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Appendix

81

Appendix - A

ADDIS ABABA SCIENCE AND TECHNOLOGY UNIVERSITY

Field of study: MBA in Industrial Management

Researcher: Sintayehu Zeleke

E-mail: sintayehuu@gmail.com

Mobile No: +251911184205

Advisor: Dr. Dellesa Daba

Code ................

Thesis Title: Effects of Resource Management on Productivity the case of Metal

Products Factories in Addis Ababa.

Hereby, I would like to express my gratitude for your dedicated cooperation. Had it not been

your genuine cooperation of filling this questionnaire, it would have not been possible to

conduct this research paper. This questionnaire is conducted for the purpose of research

submitted to partial fulfillment of the requirement for the Degree of Master of Business

Administration in Industrial Management. Therefore, I assure you that the information

obtained from this questionnaire will be kept confidential and will not be transferred to other

parties for any other purpose.

Thank you for taking your time to fill the questionnaire!

A. Questionnaires for middle management and supervisor. Please tick √ for your response.

Respondent Profile

1. Your current position: 1. Middle management 2.Supervisor/senior employee

2. Gender: 1. Male 2. Female

3. Qualification level:

1. Below diploma 2. College diploma 3.BA/BSc 4.MA/MSc & Above

4. Your work experience in this factory:

1. Below 2 years 2. 2-5 years

3. 5-10 years 4. Above 10 years

82

5 = Very high

4 = High

3 = Moderate

2 = Low

1 = Null

Please tick √ for your response. Answer the following questions by rating

1 Raw Material management effects on productivity 1 2 3 4 5

1.1 The Quality of raw material in your firm1.2 Lack of outbound logistic1.3 Lack of available raw material locally1.4 The distance between raw material stock and production floor1.5 Availabilities of machine accessories and forming die1.6 Lack of inbound logistics (Mobile crane/fork left/Overhead

crane)1.7 Lack of Spare parts1.8 Frequency of electric power interruption1.9 Frequency of machine breakdown1.10 If you have any additional suggestion which do not address in the above, you can explain here

2 Effects of human resource management on productivity 1 2 3 4 52.1 Required training and development given by the firm2.2 Lack of skilled manpower2.3 Employee job satisfaction2.4 Absenteeism2.5 Rate of labour turnover2.6 Loyalty of employees2.7 Motivation given to workers2.8 Incentives/ recognition for best performance of workers2.9 Placement of the right person on the right job2.10 Leadership competence2.11 Cooperation and teamwork in your work place2.12 Working Environments2.13 If you have any additional suggestion which do not address in the above, you can explain here.

3. Effects of working Capital management on productivity 1 2 3 4 5

3.1 Shortage of working capital3.2 Efficient use of working capital3.3 Efficient utilization of budget3.4 Cost control techniques3.5 Accounts receivable3.6 Account payable3.7 Cycle time from raw material to production and sales3.8 If you have any additional suggestion which do not address in the above, you can explain here

83

4 Effects of technology management on productivity 1 2 3 4 54.1 Trends in adopting new technology in your firm

4.2 Information communication system between your firm andyour customers (consumers and suppliers).

4.3 Automated machines installed in your factories

4.4 The impacts of using old technology machine

4.5 Resistance to new technology in your firm

4.6 Information technology improves the processing time andbetter information for decision making in your company.

4.7 Information technology facilitates the automation of corebusiness processes in your firm

4.8 If you have any additional suggestion which do not address in the above, you can explain here

5 Key Productivity Indicators 1 2 3 4 55.1 Your firm’s ability to reduce waste

5.2 Your firm’s ability to keep customer satisfaction

5.3 Your firm’s ability to keep consistency of its product quality

5.4 Your firm’s ability to reduced delivery time

5.5 Your firm’s ability to adjust its changes in product mix quickly

5.6 If you have any additional suggestion which do not address in the above, you can explain here

84

B. Interviewer questions designed to top management

1. How could you explain the effect of human resource management on productivity in the case

of your factory?

2. How could you explain the effect of raw material management practice on productivity in

your factory?

3. Do you think, working capital management affects the productivity of your factory

positively?

4. How could you explain the effects of technology management relative to productivity in the

case of your factory?

85

Appendix - B

Maximum imported and Local attainable as a base year.

No product type 2007E.C Net Wt. (Ton) 2008E.C Net Wt. (Ton) 2009E.CNet Wt. (Ton)

ImportedLocal

AttainableImported Local Attainable Imported

LocalAttainable

1 Aluminum profile 5,568 468 5,836 1,431 4,583 2,0552 Hollow section 63,509 48,642 144,981 80,370 108,568 87,7073 Rebar 518,559 386,270 974,804 408,259 688,823 441,3364 Roofing tiles 48,868 144,019 75,834 137,013 79,517 134,3635 Wire and nails 50,040 34,118 69,030 30,906 69,805 28,006

Source: Basic Metal Industry

Three year best performanceS.No

Item From 2007 to 2009 E.C best performance (Taken as base year) in Ton

No product typeImported

(1)

Localfactories

Attainable(2)

DesignCapacity

(3)

Gapbetween 1&2

Gapbetween 3&2

1 Aluminum profile 5,836 2,055 8,100 3,781 6,045

2 Hollow section 144,981 87,707 597,063 57,274 509,3563 Rebar 974,804 441,336 2,573,359 533,467 2,132,0234 Roofing tiles 79,517 144,019 676,440 (64,502) 532,421

5 Wire and nails 69,805 34,118 104,470 35,688 70,352

1,274,943 709,235 3,959,432 565,709 3,250,197

Source: Basic Metal Industry

Import vs Local manufacturer attainable annually

No product type Imported(Ton) Average Local Manufacturers Attainable(Ton)

1 Aluminum profile 5,836 2,5842 Hollow section 144,981 158,2483 Rebar 974,804 941,6414 Roofing tiles 79,517 325,8205 Wire and nails 69,805 74,359

Total 1,274,943 1,502,652

Source: Basic metal

86

Top ten metal products factories maximum Production capacity (Ton)

NOFactories Name

Max Production capacity(Ton)1 Cortex PLC 220,0002 Kality Metal Products Factory 98,659

3Osaka engineering plc / Alem steel Millplc 70,000

4 Ethiopian Steel PLC. 69,0005 Kality l. spring 61,5006 Sunny Steel Pipe manufacturing PLC. 60,0007 Mame Steel Plc 40,0008 Alemgenet Trade and Industry plc. 27,0429 Ethiopian Iron & Steel Factory 16,85910 B & C Aluminum 6,500

Source: Basic Metal Industry

87

Figure:-Constraints in the manufacturing sector in Ethiopia as ranked by responding firms

Source: Alie Webe, United Nations Development Programme (UNDP)

88

Appendix – C

Correlation and Regression Analysis Result

Full correlation

Productivity RMM HRM WCM TM

ProductivityPearson Correlation 1 .987** .979** .978** .972**

Sig. (1-tailed) .000 .000 .000 .000N 64 64 64 64 64

RMMPearson Correlation .987** 1 .982** .981** .969**

Sig. (1-tailed) .000 .000 .000 .000N 64 64 64 64 64

HRMPearson Correlation .979** .982** 1 .980** .985**

Sig. (1-tailed) .000 .000 .000 .000N 64 64 64 64 64

WCMPearson Correlation .978** .981** .980** 1 .959**

Sig. (1-tailed) .000 .000 .000 .000N 64 64 64 64 64

TMPearson Correlation .972** .969** .985** .959** 1Sig. (1-tailed) .000 .000 .000 .000N 64 64 64 64 64

**. Correlation is significant at the 0.01 level (2-tailed).

Partial correlation

Control Variables Productivity RMM

HRM & WCM & TM

Productivity

Correlation 1.000 .569

Significance (2-tailed) . .000

Df 0 59

RMM

Correlation .569 1.000

Significance (2-tailed) .000 .

Df 59 0

Control Variables Productivity HRM

WCM & TM & RMM

Productivity

Correlation 1.000 -.061

Significance (2-tailed) . .641

Df 0 59

HRM

Correlation -.061 1.000

Significance (2-tailed) .641 .

Df 59 0

Control Variables Productivity WCM

TM & RMM & HRM

Productivity

Correlation 1.000 .257

Significance (2-tailed) . .045

Df 0 59

WCM

Correlation .257 1.000

Significance (2-tailed) .045 .

Df 59 0

89

Control Variables Productivity TM

RMM & HRM & WCM

Productivity

Correlation 1.000 .288

Significance (2-tailed) . .024

Df 0 59

TM

Correlation .288 1.000

Significance (2-tailed) .024 .

Df 59 0

Model Summary

Model R R Square Adjusted R Square Std. Error of the Estimate

1 .990a .980 .979 .16558

ANOVA

Model Sum of Squares df Mean Square F Sig.

1

Regression 80.497 4 20.124 733.999 .000b

Residual 1.618 59 .027

Total 82.114 63

Coefficients

Model UnstandardizedCoefficients

StandardizedCoefficients

t Sig.

B Std. Error Beta

1

(Constant) -.221 .098 -2.260 .028

RMM .586 .110 .599 5.317 .000HRM .087 .185 .075 .469 .041WCM .250 .122 .220 2.045 .045TM .309 .134 .254 2.312 .024

90

Regression assumption Test

91