The Greenville Operation Case Report

What are Co-locations Effects on Partnerships?

The Beginning: The Greenville Operation was an operation undertaken by Carlsen group that
set up a new site with much larger capacity to manufacture photoresist imaging film at a higher
quality and with a lower overall cost. This operation proved successful for Carlsen group and
resulted in a 100% supply agreement with Phanchem for 10 years.

The Environment:

Both Carlsen group and Phanchem have heavily invested in each other and are mutually
reliant on each other’s success. Phanchem needs Carlsen to be successful to be able to
fulfill their orders and Carlsen directly benefits from Phanchem’s success as their sole
supplier of photoresist imaging film.

The Issue:

Phanchem and managers at Carlsen have determined that moving Phanchem to an

extension of the Greenville plant would be beneficial to both Phanchem and Carlsen. The
main board of Carlsen has concerns over this move as providing factory space is a long
way from Carlsen’s core business, and operating this close to a customer opens up even
more concerns.

Relationship:

During the start up of The Greenville Operation, Phanchem began co-operation with
Carlsen and significaly contributed to the overall success of the operation. Phanchem staff
undertook burdens that were caused by Carlsen machines and Carlsen invested in more reliable
machines to ensure supply was continual to Phanchem. Sharing each other’s burdens created a
stronger bond between the two companies that could not be defined in a contractual agreement.

Purposed Options

1) Reject having Phanchem operate out of an extension of the Carlsen facility and have
them operate in a facility close, but not attached.
2) Allow Phanchem to operate out of an extension of the Carlsen facility.

Close but not Attached:

This option entails Phanchem moving closer than they are currently operating to the
Greenville location yet, not attached to the facility.
Benefits:

i) Carlsen is able to maintain independence from their customer. That is any future
strained relationship would be easier to sever than a joint facility.
ii) This allows Carlsen to stay true to their core business of producing photoresist
imaging films and not venture into real estate leasing.
iii) Carlsen is able to operate with privacy without concern of their customer learning
trade secrets that keep Carlsen competitive.

Cons:
i) Refusing to allow Phanchem to move on site after realizing the benefit that
Phanchem would obtain from such a move could be seen as hostile and
deteriorate the good will relationship between Carlsen and Phanchem
ii) Carlsen would directly benefit from Phanchem moving onsite as Phancehm would
become more competitive and thus require a larger supply produced by Carlsen.
iii) Infromation between customer (Phanchem) and supplier (Carlsen) would be able
to flow more freely with Phancem on site, resulting in higher customer
satisfaction very likely higher quality of production for Carlsen.

Risks:

1) Financial
a. Carlsen is forgoing the financial opportunity of allowing Phanchem to move
onsite and have lower operating cost that would directly benefit Carlsen.
2) Operational
a. Even moving a large amount of product across the street is more complicated
that moving product within the same facility. By not undertaking the
expansion, Carlsen is taking on the additional operational risk of the logistics
of moving their product to Phanchem.
3) Reputational
a. By not allowing Phanchem to move on site after working so congruently
previously, Carlsen risks giving up the good working reputation that has been
built by Carlsen towards Phanchem.

Build an Extension for Phanchem:

This option entails undertaking the task of building an extension onto the Greenville
facility to lease to Phanchem and to allow them to operate in said extension.

Benefits:

i) The symbiotic relationship between Carlsen and Phenchem would be able to grow
stronger, offering potential for better collaboration resulting in higher quality and
decreased costs of production.
 ii) Phanchem would be able to achieve a lower operating cost leading to a higher
competitiveness for Phanchem and as a result, more orders place to Carlsen.
iii) Shipping costs would be completely eliminated resulting in a higher profit.

Cons:

i) Carlsen could become complacent again by putting too much trust in Phanchem
resulting in a lack of competitiveness similar to the occurrence in 1998
ii) Should Carlsen obtain a better offer after the term of the 10 year contract, the
offer will be harder to take with Phanchem in the building.
Risks:

1) Financial
a. A large financial investment will be required of Carlsen to build and maintain
an extension facility for Phanchem to operate out of. Further, Carlsen
indicates no experience in operating in the commercial leasing business.
2) Operational
a. Carlsen has no operational experience in the commercial leasing business.
Operating in this business, even on a small scale would require new systems
and procedures and produces a new set of risk that Carlsen is not currently
positioned to handle.
3) Reputational
a. Carlsen and Phanchem have maintained a very positive working relationship
built on the business that is currently in place. By undertaking a business that
Carlsen is unfamiliar with, Carlsen risk making a mistake against Phanchem
that could reflect negatively on Carlsen’s reputation.
4) Legal
a. As Carlsen is not set up to operate in the commercial leasing business, Carlsen
is opening themselves up to potential lawsuits that Carlsen would not be
aware of or have clarity on how to deal with these potential lawsuits.

Linking Theory and Practice

Partnerships, in theory, are built on trust and that trust is mutually beneficial to all parties.
In practice we know that partnerships often result in one side taking advantage of the
other at significant expense to the victimized party. That said, the benefits of a good
partnership can add greatly to a profit margin. The advantages of join learning, sharing
success, and joint problem solving are far greater than working in a vacuum.

Conclusion:

With a relationship as new as the one with Phanchem the risks of undertaking an
extension to house Phancem operation seems strategically misplaced. Although intentions
may be good, the execution of undertaking such a task can be riddled with un-necessary
burdens that could prove to be a very heavy strain on the great relationship Carlsen and
Phanchem currently have. I would not agree with the decision to build the extension.