The project was mainly performed at CAMR, Centre of Advanced Manufacturing Research in Adelaide, Australia between September 2003 and January 2004. The aim of the project was to develop a methodology for CAMR to investigate and improve the productivity in small and medium manufacturing enterprises (SMME). The outcome is a booklet with a supporting handbook, which will be used as a diagnostic tool to identify and to analyse inefficiencies in companies, such as bottlenecks, constraints and non-value adding activities. In the initial stages of the project a project definition was set up and a large amount of literature about e.g. manufacturing, productivity, analysis and quality was studied. Together with the authors’ own experiences and knowledge, the booklet and handbook started to take form. Throughout the whole project the study of literature has been an important issue. Other tools that have been used are brainstorming, the internet, company visits and weekly meetings with a project group. To make the tool user-friendly it was separated into a booklet and a handbook. The booklet contains worksheets with questions, tables, space for comments etc. and the handbook contains descriptions and explanations of the booklet and the theory behind it. The diagnostic tool consists of 8 steps where steps 1 to 4 are mainly about collecting data. Step 5 is where the data is analysed for the first time with the goal of finding the problem areas, bottlenecks and non-value adding activities. In step 6 data is collected once again, and the data is then analysed in step 7. The motive in the second analysis is to find the reasons for the problems. In step 8 an implementation plan will be provided with solutions and directions for improving the productivity. According to the cost and time required for the implementation, some of the solutions are grouped short, medium, and long term. Only the first two steps of the diagnostic tool have been tested at a company and therefore our recommendation for the future is to test the tool carefully and rework parts of it if necessary. Also the implementation plan in step 8 can be extended with more general solutions.