Compliance Management of Section Seven Limited

Chapter-1 Introduction
1.0 Preface Ready Made Garments (RMG) sector is the key manufacturing institutions that play a vital role in the countrys economy. Globalization in the garments sector has thrown up opportunities as well as challenges. Competition is getting edge day by day. It paces with the continuous development occurring in the tremendous competitive environment. Bangladesh has emerged as a key player in RMG (Ready Made Garment) sector since 1978. Textiles and clothing account for about 85% of total export earnings of Bangladesh. Out of which, 76% comes from the apparel sector which covers the major products of knit and woven shirts, blouses, trousers, skirts, shorts, jackets, sweaters, sports wears and many more casual and fashion items. The sector currently employs approximately 1.5 million workers, mostly females from underprivileged social classes. In order to export readymade garments, it is not only the quality parameters which are important towards acceptance of the product as per the intended end use, but also the working environment in which the garments are to be produced, is equally important so that sweatshop concept is totally taken care of and the code of conduct must be stretched towards achieving the objectives of social compliance issues. The core areas of social accountability are, basically, based on the principles of international human rights and local culture and tradition. The prime objective of the system is to protect the human rights in ready made garment industries. Thus, Bangladesh has a stiff challenge ahead to meet the demand of world market. 1.1 Report of the Study This report is prepared as the partial requirement of MBA program of School of Business, University of Information Technology & Science, Chittagong. After completing two years cumulative study, it is very important to conduct with practical study for having a strong idea about real happening. This program actually makes a relationship between theoretical and practical knowledge. By the help of the program we can build ourselves confident that we can handle the practical job life. Since it is true that by having only theoretical knowledge it is little bit difficult to adjust with the practical life. This program breaks our hesitation regarding job environment.

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Compliance Management of Section Seven Limited

The focus of the report is Compliance Management of Section Seven Limited. Actually this is a feedback which department accepts from the students who join in an organization after the completion of theoretical part of the MBA program. The report will definitely increase the knowledge of students to know the international trading system of the world and will teach to apply theoretical knowledge in the practical life. 1.2 Objective of the study General Objective: The research was conducted for a two-fold purpose. First to analyze various aspects of Compliance Management and second to have a practical knowledge of the professional life and to relate the two year theoretical learning to business. More importantly, it was required for the partial fulfillment of the MBA program. Specific Objectives: To find out the factors considered in the management of compliance in RMG sector. To assess significant aspects of compliance which distinguish it from the non-compliant factories in Bangladesh. To identify the most important prime compliant clients of Section Seven Limited with their respective ranking positions on that particular sector. To identify strengths and weaknesses along with threats and opportunities of Compliance Management of Section Seven Limited. 1.3 Scope of the study The scope of the study on a privately owned garments is vast and it is hardly possible to become familiarized with the total compliance system as new concept is emerging day by day. Therefore, the scope of the report encompasses the areas covered by the theoretical discussion and the project part (i.e. analysis of strategies and challenges of compliance. Maximum endeavor has been carried out to focus on the management of compliance. This part will also provide evidence of the garments activities and nature of compliance in garments sector. The project work done by me to get the factual data of import and export of the country as a whole, which is: 1. Policies that is adopted to manage or comply with Local Labour Law. 2. Rules & regulatory system that is applied for complying with buyers Code of Conduct

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Compliance Management of Section Seven Limited

(CoC). 3. Challenges and strategy of compliances. 4. Problems identified by analysis of complying with Local Labor Law and CoC as well. 1.4 Methodology of the study The study is based on theoretical and practical analysis of the compliance and related issues. To prepare this report I have collected information mainly from different resource persons who are engaged in this sector and form my own experience. The books of Bangladesh Labour Law (BLL) 2006, BEPZA Instruction 1 & 2, International Compliance Standards maintained at Section Seven Ltd like as WRAP (Worldwide Responsible Accredited Production) standard etc. The collected data and information have been processed manually and the report has been prepared in the present form in order to make the study informative and useful. It is very difficult to conduct an exclusive analytical work within limited time bound. Furthermore, finally I conducted the analysis within the systems of the Section Seven Ltd. and BLL 2006. In this study, exploratory research was undertaken to gain insights and understanding of the overall compliance of garments industry and also to determine some of the attributes of service quality in Garments. Along with it, a more comprehensive conclusive research is also undertaken to fulfill the main purpose of the study. Sources of Information: Primary data Informal discussions with employees, respective Unit Heads of Section Seven Ltd. Secondary data I have elaborated different types of secondary data in my research. Sources of secondary information can be defined as follows:

Various books of Labour Law, articles, policies regarding HR operations. Buyers or third party social compliance audit report Profile of the Section Seven Ltd. Group Instruction Manual & Business Instruction Manual Social Responsible Management (SRM) Policy. Websites of Section Seven Ltd.

After collection of data the statistical tools are applied to interpret the collected data.

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Compliance Management of Section Seven Limited

1.5 Limitations of the study

Time frame for the research was very limited. This was a bigger problem because toward the end as my report. Large-scale research was not possible due to constraints and restrictions posed by the organization. Part of organizational culture was written from individuals perception and may vary from person to person. In many cases, up to date information is not published. To protect the organizational loss in regard of maintaining confidentiality, some parts of the report are not in depth. Getting Relevant papers and documents were strictly prohibited. Ad furthermore documents that are given access were not allowed for coping. I had to write the in formations that I found useful for my report by hand.

The study is confined to only Section Seven Limited, CEPZ.

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Compliance Management of Section Seven Limited

Chapter-2
Organization Overview
2.0 Section Seven Limited at a glance Section Seven Limited, a member of Shirt Makers Group, is one of the largest garments manufacturing and exporting organizations in Bangladesh. It began operations in EPZ more than 4 years ago. The Shirt Makers Group, head office in Dhaka, comprises some 7 (seven) factories in Bangladesh. It has office also in Belgium, Thailand, China, Hong Kong & Europe. Through a global network linked by advanced technology, including a rapidly growing ecommerce capability, Section Seven Limited provides a comprehensive range of quality services. It starts its journey from 2005 with 231000 sft area that manufactures woven shirts and pants. And at present around five thousand (5000) employee is working over here. It manufactures garments for the reputed buyers like Wal*Mart, Yamaki, AEON, MGB, Tema, CMT, Lloyd, Tesco, Charles Voegele and so on. Assets Staff Technology US $ 36 million at 30 June 2005. 5000 employees. Section Seven Limited maintains private data communication networks and is reconfiguring its business for the e-age. Its rapidly growing e-commerce capability includes the use of the Internet, PC banking over a private network, interactive CCTV, and fixed and mobile telephones. Product range Production Capacity Production Unit Major Fabrication Woven Tops and Bottaoms for men, women and kids. 30000 pcs per day 15 T/C, CVC, 100% Cotton, Plain Dyed, Printed Yarn Dyed, Solids, Stripes, Checks of Mill Made, Power Loom, Hand Loom.

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Compliance Management of Section Seven Limited

Sampling

Capacity 120 Pcs / Day Engaged People 100 Fully Equipped Sample Room

Specialized Section

Embroidery Printing Research & Development Section ( R & D) Pattern & Designing CAD Section

Quality Control System

Highly Skilled Quality Control Team Ensuring 2.5 Standard Quality Level

Minimum Order Production Lead Time Mix Men 80% Ladies 10% Children 10% Main Buyers

1000 Dzn 75 - 120 Days Market Shares Europe 50% Japan/Yamaki 40% USA 10% Yamaki, Aeon, Tesco, MGB, CMT,Charles Vogele, C & A, WalMart, New Man,Tema, Lloyd, Tchibo, American Classic, George etc

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Compliance Management of Section Seven Limited

Liaison Offices Thailand Office Shirt Makers Limited S. B. Tower, 7th Floor Silom, Bangrak Bankok 10500, Thailand. Tel: +662-6377-406 Fax: 662-6377-405 E-mail: rpbk@truemail.co.th ATTN: Ms. Koong China Office Shirt Makers Limited Flat-13f, Kings Tower, No-12, Shishan Road Suzhou 215011, New District Area, Jiangsu, China Fax: +86-512-8093707 E-mail: worldlak@public1.sz.js.cn ATTN: Mr. Mahbubul Haque Talukder Hong Kong Office MAAS Traders (HK) Ltd. Unit- 901, 9/F, Celebrity Commercial Centre 64 Castle Peak Road, Sham Shui PO Kowloon, Hong Kong Tel: +852-2199-7636 Fax: +852-2368-2474 E-mail: faysal@maastraders.com ATTN: Mr. Sheikh Razif Ahmed (Raju) Europe office CMT International nv.sa Watertorenstraat 2 B-3590 Diepenbeek, Belgium Tel: +32-(0)11-270077 Fax: +32-(0)11-270080 E-mail: maarten@cmt-international.be

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Compliance Management of Section Seven Limited

ATTN: Mr. Maarten Hoofs Japan Contact Office Osaka Office Yamaki Company Ltd. 1-3-1, Uemachi, Chou-ku, Osaka 540-0005 Japan Tel: +816-6764-2255 Fax: +816-6764-2394 Tokyo Office Yamaki Company Ltd. 2-22-1, Midori, Sumida-ku Tokyo 130-0021 Japan Tel: +816-3633-1277 Fax: +816-3632-5292 2.1 Growth of the company Section Seven Limited is named after a space started its journey in 1995. Firstly it commenced its production with three floors and around twelve hundred (1200) manpower. With the passage of time, its production volume was increasing by its qualitative production and its manpower also increasing. At present it owns around four thousand two hundred (4200) workforce in six (06) production floors and two hundred fifty (250) employees. Daily production capacities is now thirty thousands (30000) pieces. It started its journey accompanied by three buyers whereby now about twenty reputed buyers is working with Section seven Limited satisfactorily.

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Compliance Management of Section Seven Limited

2.2 SSL Principal Business Entities SSL brand & corporate identity represents what SSL wants its brand to mean to its customer. It is derived from the groups- SSL is a prudent, quality conscious, ethically grounded, trustworthy international builder of long-term customer relationships. A prudent, quality conscious, ethically Corporate Character grounded, builder of trustworthy long-term international customer

relationships. Higher productivity, Team Orientation, Basic Drives achieving Customer Satisfaction & Customer Orientation. To be the worlds leading apparel Vision manufacturing company.

The essence of SSL is integrity, trust and excellent customer service. It gives confidence to customers, value to investors & comfort to colleagues.

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Compliance Management of Section Seven Limited

2.3 Vision, values, and governing objective of SSL

SSL Vision

To

Become

the

worlds

leading

apparel

manufacturing company.

Long term ethical client service; High productivity through team work;

SSL Values
International character, conservative orientation; Confident and ambitious sense of excellence;

2.4 SSL is committed to five Business Principles Provide our valued customers with Quality Products Comply with all rules, regulations and applicable laws to the business Provide employees with better Environmental, Health and Safety Standards in the workplace. Develop more than adequate safety measures Create growth opportunities through training, periodic evaluation and feedback Actively support continuous improvement activities to raise the standard of operations in all areas of the Company. Ensure Safety and Security of all man, material and information.

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Compliance Management of Section Seven Limited

Chapter-3 Compliance Management of SSL

In order to ensure our products are produced under lawful, humane and ethical conditions Section Seven Limited introduced Compliance Principles to guide our human rights practices in addition to the local regulatory laws of the land. 3.1 Principle of Compliance : The Principle by which compliance is sustained are as follows: Compliance with Laws and workplace regulations Prohibition of Forced Labor Prohibition of child labor Prohibition of Harassment or Abuse Compensation and Benefits Hours of Work Prohibition of Discrimination Health & Safety Freedom of Association and collective Bargaining Environment Custom compliance Security

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Compliance Management of Section Seven Limited

Chapter-4
Compliance with Laws and Workplace Regulations
4.1 Policy
4.1.1 Section Seven Limited Continuously updates itself and complies with local and

national laws and regulations including workers & buyers requirements related to all workplace regulations and social laws including environmental regulations, customs laws and security. 4.1.2 4.1.3 Procedure General Updates the Policies and Procedures Manual for all changes in laws and regulations 4.1.3.2 related to labor practices, factory conditions, and environmental and customs compliance. Assigns a qualified person with responsibility for informing the facility management of changes to laws and regulations related to labor practices, factory conditions, and environmental and customs compliance. 4.1.3.3 4.1.4 Designates an employee with responsibility for incorporating changes to laws and regulations in Facility procedures. Responsibility, authority and communication:

4.1.3.1

4.1.4.1 For Labor Law requirements Sr. Manager - HR seeks updates from Local

Labor Organization.
4.1.4.2 For environmental requirements Sr. Manager - HR updates from

Environmental Ministry.
4.1.4.3 For Customs related requirements General Manager Commercial updates

from Customs. 4.1.4.4 4.1.4.5 HR & Compliance Department are responsible to communicate with other management regarding the rules and regulation change. Sr. Manager - HR is responsible to keep copy of Factory License Building Approval Certificate Fire License Incorporate Certificates

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Compliance Management of Section Seven Limited

Chapter - 16 Problems, Recommendations & Conclusion

16.1 Problems : To implement the issues of compliance, there are few problems that we the management have to face and they are as follows : 16.1.1 What is the main problem to implement the compliance issues is that lacking of awareness workforce and supervisors about social responsibility and the practical implementation of health & safety issues. They dont bother for the same. They just understand the production. To what extent they (workforce) produce garments. And the main concern of supervisors is to what extent they (supervisors) meet their daily target. 16.1.2 Another major problem that is related to first one is that lacking of education. Manager of production, supervisors and workforce all of them are poorly educated. For which implementation of all compliance issues fully becomes very difficult for HR & compliance staffs. 16.1.3 On the other hand, the top management of Section Seven Limited often compels the workforce to work extra time that is known as overtime. Their management also does not fully cope with the principles of compliance. Even most often they remain open factory on Friday that is major violation of compliance. 16.1.4 Another problem in Section Seven Limited the quality of lunch that are provided for workforce is very poor. 16.2 Recommendations : 16.2.1 The main recommendation for first problem (16.1.1) is to arrange effective training & awareness program. It many be arranged by the compliance staffs or by BEPZA counselor and BGMEA staffs as well. Emphasize should be given on in-house training program that can be arranged during their lunch period by audio-visual medium as it may be a source of entertainment for them. 16.2.2 As it is a national problem (16.1.2), awareness based on compliance principles & practical effectiveness can be taught to the workforce, supervisors and production managers also. 16.2.3 The owner should recruit educated & skilled key employee in top management level by terminating old & traditional employee. Then this problem (16.1.3) may be solved. 16.2.4 In this regard, supplier of food need to be changed and cost of food should provide more from management.

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Compliance Management of Section Seven Limited

16.3

Conclusion

Basically, overall compliance are managed and implemented based on these i.e. Compliance with Laws and workplace regulations, Prohibition of Forced Labor, Prohibition of child labor, Prohibition of Harassment or Abuse, Compensation and Benefits, Hours of Work, Prohibition of Discrimination, Health & Safety, Freedom of Association and collective Bargaining, Environment, Custom compliance and Security etc. principles in Section Seven Limited and also all factories of Shirt Makers Group. These are designed by Management based on mainly labour law 2006, BEPZA Instruction 1 & 2 and few reputed buyers Code of Conduct as well. While following the above criteria is compulsory for satisfying COC, local culture and regulation of Govt. can not be overlooked. For instance, limit of working hours and compensation for extra work may not be the same for all geographical zones in the globe. Minimum basic wage also depends on the economic situation of a particular country in question. The introduction of rights of free association and collective bargaining is guided by the political environment, the maturity level of workforce and above all the basic training of the management of the organization. Basic Training for Mid-level management is very significant as concept in garments sector is very new. So , training should be provided them first on compliance issues. Otherwise awareness creating is not possible. Being aware of them is very also very important as they controlling workforce and workforce is the key term for compliance.

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Bibliography
1. Boiler Rules 1928 2. The Customs Act 1969 3. Memo No. F/ILO/BGMEA/207/88/CIF&E dated April-09/2003 4. Circular No. BGA/CIS/04/49 dated june-09/2004 5. BEPZA Rules and Regulation http ://www.hsbc.com 6. ILO Convention 29, Bangladesh Constitution Article 34 7. Bd Labour Law 2006 : Section 2 (45), 120, Section 121,Section 149,Section 108, Section 123, Section 126, Section 127, 128, Section 25, Section 19, Section 115, Section 116, Section 117, 117 (3), 117 (4), 117 (5), 117 (7), 117 (8), Section 118, 118 (3), 8. Bd Labour Law 2006 : Section 2 (45), 120, Section 121, Section 149, Section 108, Section 123, Section 126, Section 127, 128, Section 25, Section 19, Section 115, Section 116, Section 117, 117 (3), 117 (4), 117 (5), 117 (7), 117 (8), Section 118, 118 (3), Section 28, Section 264 (10), 264 (9), Section 26, 27, Section 23 (1), section 23 (3), 23 (2), Section 23 (4), Section 24, Section 45, 9. ILO Convention 100, ILO Convention 111, Constitution Article 27 & 28, Bangladesh Labor Law 2006 section 345 10. OSHA standard, Section 53, Section 54, Section 55, Section 56, Section 57, Section 58, Section 59 & 60

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