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Determinants of manufacturing productivity: pilot study on labor-intensive industries

Shahidul Islam and S.T. Syed Shazali
University Malaysia, Sarwak, Malaysia
Abstract
Purpose The purpose of this study is to address the impact of three issues: degree of skills, favorable working environment and R&D on manufacturing productivity of labor-intensive industries. Design/methodology/approach Convenience sampling method has been used to conduct this study. Three categories of labor-intensive manufacturing industries (A, B and C) have been chosen to perform this research. Industrial category A represents the manufacturing operations which are based on skill of labor. Category B is a group of industries which provides a favorable working environment to utilize the potential of skill in manufacturing process. Category C is a specialized group of industries and its manufacturing process is dependent on R&D. Input output data for manufacturing operations of the sample industries have been analyzed by using standard statistical techniques to establish the relationship between dependent and independent variables. Findings The degree of skill and productivity is positively correlated, but not strongly (r , 0.5). The study found that productivity is positively (r . 0.5) associated with favorable working environment. However, a signicantly positive correlation (r . 0.7) is found between R&D expenditure and productivity. The study concludes that a higher degree of skills, favorable working environment and R&D are important inputs to a labor-intensive manufacturing process, which is positively associated with productivity. Research limitations/implications Manufacturing productivity is an important parameter of industrial growth, and this paper addresses this issue. The current work addresses the garments sector, i.e. a part of the labor-intensive industries. Though this work is focused on only one part of this sector; the ndings of this study have signicant policy implications. The results would be useful for manufacturing business executives and policy makers. Originality/value This study addresses the important issue of productivity of labor-intensive manufacturing industries, and generates quantitative evidence of the impact of degree of skills, favorable working environment and R&D on productivity. The generated information enriches the present knowledge stock of manufacturing systems. The ndings could be the basis for further academic research on manufacturing systems. Keywords Manufacturing productivity, R&D knowledge, Skills, Working environment, Research and development, Manufacturing industries, Manufacturing systems, Costs, Labour, Working conditions Paper type Research paper

Determinants of manufacturing productivity 567

Received February 2010 Revised September 2010 Accepted September 2010

1. Introduction The labor-intensive manufacturing industries are generally dened as industries where labor costs are more important than capital costs. More specically, labor-intensive means use of manpower in the production process with little support of technology. Labor-intensive companies generally have greater earning stability compared to capital-intensive ones due to their lower capital intensity. It is also evident that the

International Journal of Productivity and Performance Management Vol. 60 No. 6, 2011 pp. 567-582 q Emerald Group Publishing Limited 1741-0401 DOI 10.1108/17410401111150751

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remuneration package for labor in this type of industry is much less compared to the industries that are based on capital. What are the reasons behind this? As stated by Shahidul and Anwar (2008), lower working capacity of workforce, unfavorable working environment, poor R&D intensity and low process capability are the main causes of low productivity which lead the industry to provide a poor remuneration package. The concept of manufacturing productivity can be discussed in different ways but the most common aspects available in the literature are; Partial productivity, Total factor productivity and Labor productivity. Partial productivity relates the multiple inputs to net outputs. Whereas, Total factor productivity expresses the ratio of all outputs produced to all resources used. Labor productivity is determined by that persons potential to reach the highest level of his possible performance (Singh et al., 2000; Battisti et al., 2006). Indeed, labor productivity mainly measures the performance of labor (BLS, 1997). The skill of the workforce is a dominant input of a manufacturing system. Caves et al. (1982) observed that efciency of transformation of inputs to outputs is largely dependent on the skill of the workforce. As stated by Cobb-Douglas, workforce skill is one of the main inputs of a production process. Furthermore, degree of skill is recognized as an effective driving force for enhancing manufacturing performance (Shahidul and Anwar, 2007). It is evident that the highly-productive manufacturing organizations tend to have a highly-educated and skilled workforce; more so than the least productive (Tamkin, 2005). Haskel and Hawkes (2003) found that higher qualications support innovation and a more sophisticated production process and these are known to be a leading cause of higher productivity. It has been estimated that the equivalent of an extra year of schooling raised productivity between 4.9 and 8.5 per cent (Black and Lynch, 1996); this has been supported by other researchers (Mason and Wagner, 2002). A favorable working environment, such as working with a good team, having a good boss, and liking the physical surroundings in the workplace, is a contributory factor for motivating the workforce towards higher output. Indeed, job security, a sustainable compensation package, and the availability of food and drink at the workplace, are also considered to be principal indicators of a favorable working environment. The presence of all these factors in the workplace could gear up the morale of workers and contributes to increased manufacturing productivity. In a most recent study, Battisti and Iona (2009) had found a strong association between favorable working environment and productivity. Huang et al. (2003) stated that when all factors operate at the optimum level, the productivity is said to be at its highest level or in other words; any productivity gap has been reduced. Production schedule, materials movement planning and process layout design are the important components of a manufacturing system. The quality of these parameters is dependent on R&D activities of the manufacturing enterprise. Eventually R&D can improve the process capability of manufacturing systems and contribute to reducing non-value-added inputs of the manufacturing process. Czarnitzki and OByrnes (1999) pointed out that R&D intensity in manufacturing industries is playing a vital role in increasing process capability, which could lead to achieving higher outputs. Furthermore, they added, the accumulating R&D expenditure of a rm is often interpreted as its knowledge stock of the manufacturing process. Tassey (2009) found that an 8.6 percent positive change in R&D intensity contributed to an increase of about 38 per cent in output. Griliches (1980) stated that at an elasticity of 0.07, a 10 percent

increase in R&D expenditure would bring 0.7 percent increase in output. However, the research found that the rate of return on R&D is signicantly higher (10 to 27 percent). Sher and Yang (2005), in a study on Taiwanese integrated circuit industry, found that R&D capability is positively correlated with manufacturing performance. Bangladesh provides the example of successful use of low cost labor in export industries. The textile and garment sector has made a remarkable contribution to the economy of this country. This sector is expanding at a rate of about 20 percent per year (Siddiqi, 2005). In 2007-2008, garments account for 81 percent of the total exports ($12 billion) of that country (Export Process Bureau, 2009). Presently, this sector is using labor-intensive technologies and about 2.5 million workers are engaged in 4,500 registered companies. Regardless of labor productivity, the labor price per hour is xed about USD 0.3. Indeed, it looks as though the Bangladesh garment industry is executing the policy of cut costs regardless of manufacturing productivity. However, a low and unsustainable remuneration package has been creating crises in the Bangladesh garments manufacturing sector (Mohiuddin, 2005). Wage and productivity issues are researched well in developed and many developing countries but no study is found which attempts to address this issue from the Bangladesh perspective. This paper aims to address this issue in order to nd the answer to: how can the remuneration package of labor be increased? Should industries go for a higher skill level? And does industry need to pay attention to improving the working environment? Or, does industry need increased R&D to improve process capability? Furthermore, are these factors associated with higher productivity? Under this scope of study, this research will examine and estimate the impact of these factors on manufacturing productivity of the garments manufacturing industries of Bangladesh. The structure of this paper is such that the description of research objectives is placed in section 2, section 3 is dedicated to describing the research methodology, analysis and research ndings are placed in section 4 and nally, section 5 is reserved for the conclusion. References and appendices are placed at the end of this paper. 1.1 Productivity and theory of manufacturing operations of labor-intensive industry When an attempt is made to estimate outputs and manufacturing productivity; it starts from a production function. Typically, the mathematical presentation of input-output operating model is based on Cobb-Douglas form such as: YM f K; L; R; Fp 1

Determinants of manufacturing productivity 569

Where, (K,L,R,Fp) is the total factor of inputs. A schematic diagram of this manufacturing operating model is presented in Figure 1. Here, K-capital consists of cost of raw materials, energy and machine hours. L cost of labor hours associated directly with the manufacturing process. R expenditure of R&D associated directly with conducting research on the manufacturing process. Fp factors associated with production costs that consist of motivation cost of labor and other logistics. Y(M) outputs in terms of revenue. This concept is valid when industries operate in a highly competitive market, then the price variation DM, among the same group of products is nearly zero Dm < 0. This input-output manufacturing operation can also be expressed in log form: Log YM LogPm lt alogL blogK glogRp dlogFp 1 2

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Figure 1. Manufacturing operations model

where, Pm is manufacturing productivity, l is technical change of the industry in operating time t, a is the coefcient of labor, b is the coefcient of capital used in manufacturing process, g is coefcient R&D, d is coefcient of investment for maintaining favorable working environment. 1 represents standard error terms. According to equation (1) and Figure 1, it is reasonable to believe that any higher value added inputs such as higher degree of skills, favorable working environment and R&D has the capability to impact on outputs. The impact could be positive or negative but denitely it will reect on outputs and nally on productivity. These components of inputs are mostly dedicated to reducing non-value-added inputs from the manufacturing process and shortening the production cycle time. When these two components are optimized, ultimately the outputs per unit time would be increased and the cost of inputs per unit of product would eventually be reduced. This relationship can also be visualized from the following equations: DQ Q2 2 Q1 while Q2 . Q1 DYM Y2m Y1m 2 7t Dt2 Dt1 while: Y2m Y1m . t2 t1 7P Y2M Y1M 2 Q2 Q1 5 4 3

P2 2 P1; while P2 . P1

DQ;

7YM ; 7Pm are to be considered as impacts of R&D and Fp 7t

where, DQ refers to the amount of inputs reduced and known to be the non-value-added inputs. Q1 and Q2 refers to total cost of inputs, Y1 (m) and Y2 (m) refer to the outputs in terms of revenue generated from the respective outputs, and P1 and P2 refer to the productivity of these two cases. Estimating the manufacturing productivity from this production function is not a trivial task because it could be biased by several factors associated with manufacturing systems. For instance, a rm could have better R&D management or improved working environment, which would lead to higher output. Then, there would be a difference in productivity. As a result, the estimated coefcient of R&D and working environment will be biased upwards. 2. Objectives of the research This study attempts to measure the impact of three vital inputs on manufacturing productivity. The inputs are; the skills of the labor force engaged in the manufacturing process, favorable working environment in the manufacturing system, and new knowledge of the manufacturing process which is generated by R&D activities. The specic objectives of this research are to measure the inuence of the following inputs on manufacturing productivity; . degree of skills of the workforce; . favorable working environment; and . R&D knowledge of the manufacturing process 3. Research methodology 3.1 Sampling criteria The convenience sampling method has been used to conduct this study. It is also known as the non-probability sampling technique. This method provides the opportunity for selecting those industries that are convenient to get access for collecting information. The criteria of sample industries, their labor mix and research variables are shown in Tables I and II. 3.2 Data and methods The manufacturing data in terms of the cost of inputs and the revenue arising from the corresponding outputs have been gathered from audited documents of the relevant sample industries. The data range and quality levels are shown in Table I. 3.3 Research variables The input-output model as shown in equation (1) and Figure 1 is the basis for selecting independent and dependent variables of this research. (1) Independent variables: . Independent variable number one. Expenditure on different degree of skill, to be known as labor mix, is independent variables which are marked as Sk-1, Sk-2 and Sk-3. The labor mix plays an important and dominant role in

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3

Manufacturing variables 1 No of industries in each category 2 Manufacturing data of inputs cost

Industrial category A, B and C

572

4 5 6 7 8 9 10 11

Table I. Matrix of manufacturing variables

12 13 14

10 30days/month 8 hours/day No of workers per production line (homogeneous 6 labor mix of skill grade Sk-1, Sk-2, Sk-3) Labor mix in production line of A, B, and C category Sk-1, Sk-2, Sk-3 No of production lines in each industrial category 6 Production capacity (design) per line 24-27 unit/8hrs Revenue of outputs 30 days 8 hours/day Experience of sample industries 5-8 years Capability of manufacturing supervisor Minimum college graduate Experience 4 years Product quality Within process capability index of 1.2 , Cp # 1.5 Price level The price is within 3 percent standard deviation Market 100 percent export to USA market Product type Shirt 14 to 17 inch Data quality level Statistically 95 percent condence level data is used

the labor-intensive manufacturing process. The characteristics of these variables are shown in Table II (sections 1.1 to 1.3). . Independent variable number two. Expenditure to maintain favorable working environment is to be known as independent variable two. The components of favorable working environment are shown in Table II (2.1 to 2.3). . Independent variable number three. Expenditure on R&D for improving manufacturing process is to be known as independent variable three. The meaning of R&D activities is shown in Table II (3.1 to 3.3). (2) Dependent variables: Productivity is the dependent variable for this study. The variation in productivity measures the impact of the independent variables. The characteristics of the independent variables have been shown in Table II. 3.4 Skill composition of the sample industries . Unskilled primary school graduate, six months in probation and has minimum three years working experience. . Semi-skilled high school graduate, minimum six months in probation and minimum three years working experience. . Skilled high school graduate, minimum six months in vocational school, six months in probation and has minimum three years working experience.

Industrial category Category A Used basic skills such as Sk-1 and cognitive skills, marked as Sk-2 and Sk-3 in manufacturing process. The sample industries are non R&D and the friendly working environment is absent

Characteristics of independent variables Independent variable one: Labor mix 1.1 Sk-1. Unskilled-45 percent, Semi skilled 30 percent,skilled 15 percent 1.2 Sk-2. Unskilled-40 percent, Semi skilled 40 percent,skilled 20 percent 1.3 Sk-3. Unskilled-25 percent, Semi skilled 45 percent,skilled 30 percent Here; Sk-1 , Sk-2 , Sk-3 in terms of strength Independent variable two: Favorable working environment 2.1. Drinking water, tea, lunch and rst aid is supplied by the industries free of cost 2.2 Regular payment of salary and wages, standard practice of bonuses, paid sick & casual leave, group insurance 2.3 Moderate degree of bossing in industry and empowering Independent variable three: R&D 3.1. R&D activities focused on for improving process capability 3.2. R&D activities are directed to reduce ow paths of inputs through process for reducing manufacturing cycle time 3.3. R&D activities is guided to identify non-valueadded inputs for removing it from manufacturing process

Determinants of manufacturing productivity 573

Category B Provide favorable working environment to utilize potentials of all level of skills, Sk-1, Sk-2 and Sk-3 in manufacturing process. The sample industries are non R&D

Category C Only rms with positive investment in R&D are included in the category. R&D budget is spent on improvement of manufacturing process and expenditure on friendly working environment seems to be absent in the sample industries

Table II. Characteristics of sampled manufacturing industries and skills

3.5 Analytical statistical tools

1 Ym P P30 1 IC

P30

P6 Pmean where: P Pmean IC

1 Pr

Ln

Productivity of individual production line of same manufacturing period, Mean productivity of all production lines of each category. Cost of all inputs consisting of wages, entertainment, cost of raw materials, energy, R&D and for maintaining favorable working environment (See Figure 1). Number of production line contained in each category of industries.

Ln

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Y(m)

Revenue of outputs of individual production line, here revenue is the proxy of outputs and it is used to estimate productivity with a consideration that it will not create any negative effect on measurement.

574

Additionally, 3.5.1. Garment business is operating in a highly competitive market and price of selecting categories of products will remain within small variation. 3.5.2. The sampled industries are exporting 100 percent of their products to USA market. The price variation of products of the sample industries is found to be signicantly low and the standard deviation of prices is found to be 2.1 $ per 100 units of products. 3.5.3. Among the sampled industries, the standard deviation of cost of inputs is found to be 1.1$ per 100 units products. 4. Analysis and result The input-output model (see equation (1) and Figure 1) is used to establish the relationship among dependent and independent variables. To obtain ndings and in-depth analysis of the different variables, the statistical technique of correlation and regression has been used. The summary of the statistical analysis for all research variables are shown in Tables III, IV and V. 4.1 Research ndings According to Tables III, IV and V, the productivity and correlation coefcient increase with degree of skills, conversely the standard deviations of productivity are reduced. Table III shows that the correlation coefcients of all three skill grades are positive but not that strong; i.e. r ranges from 0.09 to 0.39. Table IV indicates that the value of r for industrial category B is higher than that of industrial category A. However, the average productivity of that category is also signicantly higher (10.8 percent) compared to category A (see also Appendix).
Elements of research variables Production operated by Sk-1 1.33
d

Variables

Production operated by Sk-2 1.56

d

Production operated by Sk-3 1.82

d

Remarks Mean productivity 1.57c

Dependent variables Productivity Independent variables Correlation coefcient (rb) Standard deviation of productivity (s) Input costs 0.09 0.086

ICSk-1a (56830) 0.13 0.014

ICSk-2a (66940) 0.39 0.03

ICSk-3a (74635)

Table III. Impact of skills on manufacturing productivity

Notes: IC- input cost of production operated by SK-1, Sk-2 and Sk-3; acost of inputs exclude R&D and favorable working environment (Figure 1); bCorrelation is signicant at 0.01 level (two-tailed); cBased on equation (7); dBased on equation (6)

Variables Dependent variables

Elements of research variables Productivity

Production operated by Sk-1 1.36

d

Production operated by Sk-2 1.75

d

Production operated by Sk-3 2.11

d

Remarks Mean productivity 1.74c

Determinants of manufacturing productivity 575

Independent Input costs variables Correlation coefcient (rb) Standard deviation of productivity (s)

ICSk-1a (61470) 0.12 0.032

ICSk-2a (74130) 0.358 0.0186

a

ICSk-3a (81780) 0.53 0.024

Notes: IC- input cost of production operated by SK-1, Sk-2 and Sk-3; Cost of inputs exclude R&D and favorable working environment (Figure 1); bCorrelation is signicant at 0.01 level (two-tailed); cBased on equation (7); dBased on equation (6)

Table IV. Impact of working environment

Variables Dependent variables Independent variables

Elements of research variables Productivity Input costs Correlation coefcient (rb) Standard deviation of productivity (s)

Production operated by Sk-1 1.55

d

Production operated by Sk-2 1.89

d

Production operated by Sk-3 2.56

d

Remarks Mean Productivity 2.0c

ICSk-1aa (64100) 0.148 0.10

ICSk-2a (76320) 0.589 0.023

a

ICSk-3a (83635) 0.80 0.023 Table V. Impact of R&D knowledge

Notes: IC- input cost of production operated by SK-1, Sk-2 and Sk-3; Cost of inputs exclude R&D and favorable working environment (Figure 1); bCorrelation is signicant at 0.01 level (two-tailed); cBased on equation (7); dBased on equation (6)

It can be seen from Table V that the correlation coefcient of category C is signicantly higher than other two categories. Additionally, the productivity of industrial category C is 27 percent higher compared to category A. However, the standard deviation of productivity of that group is the lowest among the sampled industries. 4.2 Result discussion There is a positive and signicant relationship between productivity and degree of skill for labor-intensive manufacturing industries. This result indicates that the degree of skill level, an important component of manufacturing process, has the strongest effect on productivity. It can be seen from Table III that the productivity of SK-2 and SK-3 are 17 percent and 36 percent higher compare to SK-1. This nding is in-line with the other studies such that of Black and Lynch (1996) which estimated 8.5 percent productivity growth for adding one higher level of skill in the manufacturing process.

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This result is also similar to the ndings of Mason and Wagner (2002). In the manufacturing process high degree of skill can be considered a high-value-adding agent as this variable is positively and signicantly correlated with productivity. According to Table IV, productivity and favorable working environment have a positive and strong relationship. In other words it can be said that working environment as a contributor to job satisfaction is a complementary positive factor of productivity. Indeed, the productivity of industrial category B is 11 percent higher than category A. Additionally, the correlation coefcient is also higher (rsk-1:0.12, rsk-2: 0.23,rsk-3:0.58) of this category compared to category A. A similar result is found in recent industrial meta-analysis (r: 0.18, r: 0.30), which indicates that favorable working environment as a translation of job satisfaction is signicantly associated with productivity. A positive correlation is found between R&D and manufacturing productivity. With regard to productivity, it is found that industrial category C is much higher (27 percent) than industrial category A. Table V shows that the correlation coefcient of this category is also signicantly higher compared to non R&D manufacturing operations as instanced by industrial categories A and category B. This nding is in-line with other international studies such as that of Griliches (1980), which reports that a 10 percent increase in R&D would bring about a 27 percent higher return. In a recent study, Tassey (2009) found that a 8.6 percent positive change in R&D intensity had contributed to an increase of about 38 percent in output. Thus, these three factors of the manufacturing process have greatly affected the output of labor-intensive manufacturing industries, which leads to higher productivity.

5. Conclusions The garment manufacturers of Bangladesh must have budgets to provide favorable working environments and to conduct R&D to improve the manufacturing process by increasing productivity. The ndings of this study could be the basis of formulating favorable working environment in terms of supplying drinking water, tea, lunch and rst aid. Additionally, there must be a provision of regular payment of salary and wages, bonuses, and paid sick and casual leave. However, moderate degrees of bossing and empowering would also be contributory factors to motivate the workforce. The ndings of this study could be the guideline for labor-intensive industries, especially Bangladesh garment manufacturing, to design R&D for the manufacturing process to reduce non-value-added inputs and to improve productivity which would eventually increase revenue. Thus, the additional amount of revenue would support the Bangladesh garment-manufacturing sector to design higher remuneration packages for the workforce. On the basis of this research it can be concluded that expenditure to create favorable working environment and to execute R&D activities to generate new knowledge on manufacturing process is essentially important for labor-intensive industries to utilize the skill potential of the workforce. The return on this investment would greatly contribute to increased outputs and productivity.

References Battisti, G. and Iona, A. (2009), The UK productivity gap in the service sector: do management practices matter?, International Journal of Productivity and Performance Management, Vol. 58 No. 8, pp. 727-47. Battisti, G., Iona, A. and Thanassoulis, E. (2006), Productivity measurement in multi-input multi-output contexts and in the absence of prices, Proceedings of the 31st CEIES Seminar Are We Measuring Productivity Correctly?, European Commission, Eurostat, 12-13 October, Rome. Black, S.E. and Lynch, L.M. (1996), Human capital investments and productivity, American Economic Review, Vol. 86 No. 2, pp. 263-7. BLS (1997), Productivity measures: business sector and major subsectors, BLS Handbook of Measures, Chapter 10, available at: www.bls.gov/opub Caves, D.W., Christensen, L.R. and Erwin, D.W. (1982), The economic theory of index numbers and the measurement of input, output, and productivity, Econometrica, Vol. 50 No. 6, pp. 1393-414. Czarnitzki, D. and OByrnes, N. (1999), The impact of R&D on productivity, Quarterly Journal of Economics, Vol. 91 No. 2, pp. 315-29. Export Process Bureau (2009), Statistics of Garment Export Performance, 2000-2008, Export Process Bureau, Dhaka. Griliches, Z. (1980), R&D and the productivity slowdown, American Economic Review, Vol. 70, pp. 343-8. Haskel, J. and Hawkes, D. (2003), How much of the productivity spread is explained by skills? UK evidence using matched establishment/workforce survey data, CeRIBA discussion paper, London. Huang, S.H., Dismukes, J.P., Shi, J., Su, Q., Razzak, M.A., Bodhale, R. and Robinson, D.E. (2003), Manufacturing productivity improvement using effectiveness metrics and simulation analysis, International Journal of Production Research, Vol. 41 No. 3, pp. 513-27. Mason, G. and Wagner, K. (2002), Skills, Performance and New Technologies in the British and German Automation Components industries, DfES, London. Mohiuddin, G.M. (2005), Requirement of technical competence in RMG industry in the open market of 2005, key note paper read on the occasion of BATEXPO, 98, organized by BGMEA, Dhaka, 16-18 October 1998. Sher, P.J. and Yang, P.Y. (2005), The effects of innovative capabilities and R&D clustering on rm performance: the evidence of Taiwans semiconductor industry, Journal of Technovation, Vol. 22 No. 1, pp. 33-43. Tamkin, P. (2005), Measuring the Contribution of Skills to Business Performance: A Summary for Employers, Institute for Employment Studies, Brighton, pp. 1-10. Tassey, G. (2009), Rationales and Mechanisms for Revitalizing US Manufacturing R&D Strategies, National Institute of Standards and Technology, Gaithersburg, MD, pp. 7-17. Shahidul, M.I. and Anwar, H. (2007), Matrix of skill-automation product cost: few case studies on manufacturing enterprises in Bangladesh, Journal of Arthanity, Vol. 12 No. 1, pp. 150-8. Shahidul, M.I. and Anwar, H. (2008), Technology management: a conceptual framework for Bangladesh economy, Journal of Siddhant, Vol. 8 No. 1, pp. 1-9.

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Siddiqi, H.G.A. (2005), Development of backward linkages to face the challenges of 2005, a key note paper presented at the seminar held on 31 October, organized by BGMEA at Dhaka, on the occasion of BATEXPO, 1999. Singh, H., Motwani, J. and Kumar, A. (2000), A review and analysis of the state-of-the-art of research on productivity measurement, Industrial Management & Data Systems, Vol. 100 No. 5, pp. 234-41.

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Further reading Haskel, J. and Christopher, M. (2005), Skill shortages, productivity growth and wage ination in UK manufacturing, CEPR discussion paper, London. Huang, S.H., Dismukes, J.P., Shi, J., Su, Q., Wang, G., Mousalam, A.R. and Robinson, D.E. (2002), Manufacturing system modeling for productivity improvement, International Journal of Production Research, Vol. 21 No. 4, pp. 249-59. Melitz, M.J. (2000), Estimating Firm-level Productivity in Differentiated Product Industries Department of Economics, Harvard University Press, Cambridge, MA, pp. 1-7. Petropoulos, W. (2000), Productivity in an Industry with Differentiated Products, University of Michigan, Ann Arbor, MI. Rothman, M. (1987), Designing work environments to inuence productivity, Journal of Business and Psychology, Vol. 1 No. 4, pp. 390-5.

Appendix 1.

Skills grade 59,520 780 81,900

Parameters

L1

L2

L3

L4

L5

L6

Mean value

Sk-1

Sk-2

56,830 725 76,125 1.33 66,940

Sk-3

Input costs Output quantity (unit) Sales revenue of outputs Productivity 1.38 Input costs Output quantity 930 Sales revenue of outputs Productivity Input costs Output quantity (unit) Sales revenue of outputs Productivity 67,920 900 106,950 1.56 74,880 1,050 136,500 1.82

49,290 570 59,850 1.21 66,450 870 103,500 1.57 73,410 1,020 132,600 1.81

63,870 870 91,350 1.43 64,980 930 100,050 1.54 74,880 1,020 132,600 1.77

50,760 600 63,000 1.24 67,920 900 106,950 1.57 73,410 1,050 136,500 1.86

60,960 810 85,050 1.4 66,450 930 103,500 1.56 74,880 1,050 136,500 1.82

56,580 720 75,600 1.34 67,920 910 106,950 1.57 76,350 1,080 140,400 1.84

104,650 1.56 74,635 1,045 135,850 1.82

Note: Cost of inputs and revenue of 30 days of total six production lines (L) and each line has six labors (Labor mix-ref Table II)

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Determinants of manufacturing productivity

Table AI. Inputs-outputs data of industrial category A

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Skills grade

Sk-1

Sk-2

Sk-3I

Note: Cost of inputs and revenue of 30 days of total six production lines (L) and each line has six labors (Labor mix-ref Table II)

Table AII. Inputs-outputs data of industrial category B L1 63,450 750 88,500 1.39 73,920 960 129,600 1.75 79,560 1,080 167,400 2.1 58,470 660 77,880 1.33 72,660 930 125,550 1.73 80,460 1,080 167,400 2.08 66,510 780 92,040 1.38 75,180 990 133,650 1.78 81,720 1,110 172,050 2.11 57,870 660 77,880 1.35 73,920 960 129,600 1.75 82,980 1,140 176,700 2.13 L2 L3 L4 L5 61,530 690 81,420 1.32 75,180 990 133,650 1.78 84,240 1,170 181,350 2.15 L6 60,990 720 84,960 1.39 73,920 960 129,600 1.75 81,720 1,110 172,050 2.11 Mean value 61,470 710 83,780 1.39 74,130 965 130,275 1.75 81,780 1,115 172,825 2.1

Parameters

Input costs Output quantity (unit) Sales revenue of outputs Productivity Input costs Output quantity Sales revenue of outputs Productivity Input costs Output quantity Sales revenue of outputs Productivity

Skills grade

Parameters

L1

L2

L3

L4

L5

L6

Mean value

Sk-1

Sk-2

Sk-3

Input costs Output quantity (unit) Sales revenue of outputs Productivity Input costs Output quantity(unit) Sales revenue of outputs Productivity Input costs Output quantity (unit) Sales revenue of outputs Productivity

66,210 780 107640 1.63 75,270 960 141,120 1.87 80,910 1,080 205,200 2.54

57,450 600 82800 1.44 76,530 990 145,530 1.9 82,920 1,110 210,900 2.54

68,010 780 107640 1.58 74,010 930 136,710 1.87 84,180 1,140 216,600 2.57

60,630 690 95220 1.57 77,790 1020 149,940 1.93 84,180 1,140 216,600 2.57

66,030 630 86940 1.44 76,530 990 145,530 1.9 85,440 1,170 222,300 2.6

66,270 810 111780 1.69 77,790 1020 149,940 1.93 84,180 1,140 216,600 2.57

64,100 715 98670 1.63 76,320 985 144,795 1.87 83,635 1,130 214,700 2.54

Note: Cost of inputs and revenue of 30 days of total six production lines (L) and each line has six labors (Labor mix-ref Table II)

Determinants of manufacturing productivity

Table AIII. Inputs-outputs data of industrial category C

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About the authors Shahidul Islam is a Faculty Member at the Department of Mechanical and Manufacturing Engineering at Universiti Malaysia Sarawak. Prior to this, he was a Head in Operations Management group in American International University-Bangladesh. He holds degrees in Mechanical and Industrial Engineering. He received a PhD in Manufacturing SME from Dublin City University, Ireland. His expertise is in the eld of operations research, manufacturing operations, modeling on waste reduction, modeling on statistical quality control, and manufacturing productivity and performance. He has published numerous technical papers and Journals in the area of manufacturing engineering, operations management and operations research. He has worked with a number of institutions such as Fellow of Engineers Institutions (Bangladesh), Member TFE Associates (Bangladesh), Fellow, Bangladesh Society of Mechanical Engineer. Dr Islam is a reviewer of the International Journal of Desalination, Elsevier, the AIUB Journal of Business and Economics, and the AIUB Journal of Science and Engineering. Shahidul Islam is the corresponding author and can be contacted at: mislam@feng.unimas.my S.T. Syed Shazali is currently the Head/Senior Lecturer for the Mechanical and Manufacturing Engineering Department at the Faculty of Engineering in Universiti Malaysia Sarawak. Dr Syed was a Mechanical Engineer in Sarawak Public Works Department and prior to that he was attached to a consulting rm in the eld of mechanical and electrical engineering services for buildings. His main areas of interest in manufacturing engineering are product realization, manufacturing systems and human behavior computational modeling.

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