Abstract—Due to today’s globalization as well as outsourcing practices of the companies, the Supply Chain (SC) performances have become more dependent on the efficient movement of material among places that are geographically dispersed, where there is more chance for disruptions. One such disruption is the quality and delivery uncertainties of outsourcing. These uncertainties could lead the products to be unsafe and, as is the case in a number of recent examples, companies may have to end up in recalling their products. As a result of these problems, there is a need to develop a methodology for selecting suppliers globally in view of risks associated with low quality and late delivery. Accordingly, we developed a two-stage stochastic model that captures the risks associated with uncertainty in quality and delivery as well as a solution procedure for the model. The stochastic model developed simultaneously optimizes supplier selection and purchase quantities under price discounts over a time horizon. In particular, our target is the study of global organizations with multiple sites and multiple overseas suppliers, where the pricing is offered in suppliers’ local currencies. Our proposed methodology is applied to a case study for a US automotive company having two assembly plants and four potential global suppliers to illustrate how the proposed model works in practice. Keywords—Global supply chains, quality, stochastic programming, supplier selection. I. INTRODUCTION YNAMIC markets lead organizations to be under the pressure of the global competition. An organization’s primary goal is satisfy customer demand in high quality and low cost on timely basis. Therefore, the organization should assist, improve and control every element in the Supply Chain (SC) network. The first element in the SC network is supplier since purchasing has an high impact on quality, customer satisfaction, profitability, and market share [2],[16] both in the short or long terms. The purchasing issues, their strategies and plans are important along with marketing, finance, and accounting and operational issues. Purchasing transactions can constitute 55% of an organization’s revenue [2]. The global purchasing has been increasing due to the current trends in industrial expansion and globalization. Thus, selecting a supplier becomes a strategic level decision [11]. Currently, the companies are having several sites located worldwide as well as multiple overseas suppliers. Global Abeer Amayri and Akif A. Bulgak are with the Department of Mechanical and Industrial Engineering, Concordia University, 1455 de Maisonneuve Boulevard, West Montreal (Quebec), Canada H3G 1M; (e-mail: a_amay@encs.concordia.ca, bulgak@encs.concordia.ca). purchasing has unplanned consequences which enforce organizations to consider sourcing risks and face new challenges that must be considered in the supplier selection process [7]. Some researchers discussed the significant risks associated with global outsourcing; such as [13], [10] and [15]. In particular, the vertical integration between cross- countries and across-times are central to quality issues because of increasing the complexity of network and decreasing the visibility of information. For example, Toyota recalled millions cars because of suppliers’ low quality parts [17]. Therefore, supplier selection is a complex decision, which should include both quantitative and qualitative aspects, as well as global factors to account effectively for suppliers’ performance. Supplier selection strategies play a key role in achieving the objective of an effective SC and it should suit the technical requirements as well as the organization’s overall strategy. In addition, geographically dispersed suppliers increased the impact of transportation costs and the exchange currency [7]. Thus, the purchasing cost should include whole purchasing process cost in addition to the purchasing price. In this article, we developed a mix integer optimization model to find a minimal set of suppliers to achieve certain quality and delivery goals while minimizing the risk of having uncertainty in suppliers’ quality and delivery. Our techniques are applied for a US automotive firm, considering a typical case reported by [7] and [18] where a global company is purchasing a given product from its different sites. The potential suppliers are evaluated under quantitative data and uncertainty in suppliers’ quality and delivery. The rest of paper is organized as follows. Section II reviews related work. Section III gives the problem formulation of stochastic programing. Section IV presents a case study by applying our approach to the supplier selection problem as a real world case study. The results of the case study and sensitivity analysis are discussed in Section 0. Finally, Section V summarizes this paper and states our future work. II. RELATED WORK Many analytical techniques have been used to address the supplier selection problem. The selection of techniques is based on the criteria involved in the process. The supplier selection technique includes all suppliers with critical criteria, which is an important for SC and production and operation management [1], [6], [14] based on organization specific requirements and objectives. Thus, the decision makers try to Supplier Selection in a Scenario Based Stochastic Model with Uncertain Defectiveness and Delivery Lateness Rates Abeer Amayri, Akif A. Bulgak D World Academy of Science, Engineering and Technology International Journal of Economics and Management Engineering Vol:9, No:6, 2015 1995 International Scholarly and Scientific Research & Innovation 9(6) 2015 ISNI:0000000091950263 Open Science Index, Economics and Management Engineering Vol:9, No:6, 2015 publications.waset.org/10001854/pdf