An evaluation of simulation to support contract costing

As global markets have become more customer oriented, rapid response rates are now often among the most important metrics in business. To achieve the required agility many companies have turned to outsourcing in order to focus on developing their core activities. By its nature, outsourcing increases the complexity of supply chain networks as more companies are drawn into global logistics networks. The relationships between each of these companies are controlled by contractual agreements. The fast pace of modern industry means that these contracts are entered into relatively quickly often without a full understanding of the true cost implications. This paper presents research conducted as part of a project with the aim of developing contract costing software for outsourcing enterprises. Findings are presented from a study conducted on a number of companies in the electronics sector. A simulation-based study focused on one of these companies, with some associated experimentation, is also presented.