Risk Assessment in the Global Supplier Selection Considering Supply Disruption: A Simulation Optimization Approach

Increasing uncertainties in the supply chains have caused more attentions to the supply chain risk management approaches. Because of the inherent turbulences in the international transactions, these uncertainties in the global context are more important. On the other hand, due to competitive pressures, businesses has been prepared themselves to operate in a global context to take advantage of the international markets. In addition, supplier selection is a challenge for purchasing managers by having more uncertainties in supply from the foreign supplier (exchange rate risk, extended lead times, regional risks). On the other hand, lower price procurement and having more diversified suppliers are the benefits that a company could obtain from global supply chains. In this paper a scenario based supply chain model for global purchasing of substitutable products is introduced and as a solution method a simulation-optimization approach is proposed. The model is applied on the modified data adopted from a case study and sensitivity analyzes (on the risk attitude of retailers, product substitutability and exchange rate) are presented for different amounts of parameters.