Question

In order to determine the critical point in the operations cycle when the business could do this, he decided to talk to the three top executives. (which operation is the critical point and why?)

His first conversation was with Brian Chu, V.P. Production. Brian told him that catching crocodiles was the most critical activity for the business since “it is difficult to trap them suckers and you can lose a few limbs in the process if you are not careful.”

Norman next spoke to Marco Diaz, V.P. Sales. Marco pointed out that while catching may be a dangerous activity, no one is likely to buy a crocodile because it is risky for us to catch them. He felt the company’s success this year was largely due to his clever holiday season advertising campaign with its theme of: “this year give that special someone something live! Someday they can produce their own shoes, handbags, and belts.

” Norman's final conversation was with Shelley Maze, V.P. of Operations. She told Norman that, in her opinion, the crucial activity for the business was cash collection. As she put it: “Brian and Marco have never tried collecting cash. If they did, they would find out in a hurry that it is difficult to collect cash from people who keep crocodiles as pets. Besides, we don't have a collection agency that is willing to repossess live crocs!”

Answer 1

Answer:- Evaluation of critical point of operation cycle

Critical point of operation cycle is cash collection, lets understand cash collection process:-

The plurality of skills required and the ability to implement them together, although they may seem contradictory, are critical to the performance of each collector.
These difficulties (it's an art!) explain the differences in performance that can be abysmal between two collectors.
For managers and other CFOs, the risk is to underestimate this function in their organization and to consider it as a non-value-added activity (just call customers, ...), whose cost must be reduced to a bare minimum, when in reality it represents opportunities for considerable improvement of quote to cash process.

The four pillars of cash collection:-

• Time management-The time factor is an essential and decisive element in the success of this mission.Indeed, there is a direct link between the time spent and the probability of recovery of a bill, whether for customer solvency issue or because administrative reasons (loss of information, change of contacts, difficulties in mobilizing people on old files, ...).
• Adapt to the customer's organization-Sending blind robotic reminders to a generic address (for example, mass mailing) has never been effective, and is less and less efficient.
  The search for the right contact(s) as well as the understanding of the internal customer-side invoice management process is essential.Thus, the recovery action is oriented successively depending on the identified problem (a late payment = a problem) to the right person or department, who can unlock the situation, and move on to the next step.
  Indeed, the payment of invoices is more and more standardized with processes allowing a more efficient management, especially in large companies and administrations. The seller must adapt to these operating rules and act accordingly.
• The quality of Accounts Receivable management on a daily basis-How to agree with your customer on the invoices to be paid if the customer account is not perfectly clear in your accounting system, updated day by day? Any discrepancy between customer accounting (AR) and supplier accounting (AP) leads to late payments, time lost on both sides to reconcile and loss of credibility towards the customer.
• An excellent relationship-The quality of the relationship established with customers contacts is essential. The objective is to build a balanced relationship over the long term, just like the business relationship, both cordial and demanding (an iron fist in a velvet glove).
  
  Sensitivity, in order to perceive blocking problems and to create a positive relationship, is therefore combined with the rigor required to the client to respect his commitments to pay his bills on their contractual due date.

It is not so simple to combine these four pillars, sometimes complex, often contradictory. This is a real art, done by the collector who, depending on the customer and the commercial situation, makes a careful mix so that the financial interactions between the two actors are fluent.Those who do this help to solve problems and obtain payment of bills, improving the cash flow and profitability of their business, while contributing to the quality of the customer relationship.now we can say that Critical point of operation cycle is cash collection.The statment given by Shelley Maze, V.P. to Norman's are correct.