Proceedings of the 2009 INFORMS Simulation Society Research Workshop L. H. Lee, M. E. Kuhl, J. W. Fowler, and S. Robinson, eds. A WEB BASED SIMULATION APPLICATION Cathal Heavey James Byrne Paul Liston Enterprise Research Centre University of Limerick Limerick, IRELAND P.J. Byrne Business School Dublin City University Dublin, IRELAND Abstract This paper presents an example supply chain application of simulation based decision support. Specifically, the paper focuses on contract costing in electronics contract manu- facturing where a study of current practices showed that costing methods used do not capture the cost implications of operational contract stipulations. Discrete event simulation is proposed as a means of supporting more in-depth costing and risk analysis. However, as simulation requires specific expertise not typically available in companies there is need to embed simulation in an application that is easy to use and maintain. A web-based simulation application for contract costing in outsourcing enterprises is presented. The example presented demonstrates the advantages of web-based sim- ulation applications and highlights the need for improved development environments in this area. 1 INTRODUCTION Outsourcing is a widely practiced business model used in a range of business sectors including electronics, pharma- ceuticals, and medical devices. For example, in a recent on-line report, Friedlos (2007) notes that the total value of outsourcing deals during the first quarter of 2007 increased in Europe by 67% to 7.7bn euros compared to the same period in 2006. The process of inviting vendors to bid for business has become known as the Request For Quotation (RFQ) process. Having decided to outsource a business process (in this study a manufacturing function), a company will issue an RFQ (a document containing a clear description of the work to be completed and outlining all other customer requirements) to each of the contract manufacturers (CMs) deemed relevant to the work. These RFQs often contain elements that directly affect the operational aspects of pro- viding the product/service. However, it can be extremely difficult for a CM to determine their affect on product cost and these aspects are often entirely overlooked. If CM com- panies are to gain a true understanding of the contracts they enter into, they must adopt a more system wide approach to costing their outsourcing projects. Achieving this requires cost analysis tools of greater sophistication than currently available, so that all elements of the RFQ can be considered. The outline of the paper is as follows. The next section presents a simulation model developed using a Commercial of the Shelf Software (COTS) simulation tool that allows a CM to cost a contract. Section 3 presents justification for a web simulation based decision support tool for contract costing. Section 4 describes an architecture for a web- based simulation tool for contract costing. Finally, section 5 concludes briefly with the needs for future development in the area of web-based simulation decision support applications. 2 SIMULATION SUPPORT FOR CONTRACT COSTING The purpose of this section is to highlight the role that simulation can play to support decision making for CM in contract costing. Focusing on the electronics sector, eight companies were analyzed to understand their requirements for modeling support in the outsourcing contracting process (Liston, Byrne, and Heavey 2008). The companies were selected from across the supply chain spectrum. They included two OEMs, one first tier CM, two second tier CMs, one 3PL and two 4PLs. One finding of the study was that based on the CMs reviewed, the scope of current cost calculations is limited to material, labor, and overhead. Average demand figures are used to cost the activities conducted within the “4 walls” of their manufacturing facility. By focusing on the cost incurred inside the “4 walls” of the factory, further costs influenced by the design of a supply chain, are neglected (see Figure 1). These costs are not explicitly accounted for in submitted quotations and pose additional risk for those agreeing to the outsourcing contracts. The involved companies were found to be aware of these factors but unable to quantify the monetary implications as the complexity involved would Page 39