Abstract: This paper aims to find out how to make the best decision regarding multi-source transnational procurement-assembly under the situation that the production service level and component quality are stochastic. First, stochastic process theory is used to describe the ripple effects of production service level and component quality. Then a multi-cycle transnational purchasing-assembly decision model with multiple stochastic factors is constructed, and the operation situation and reliability assessment mechanism of stochastic system is presented. The findings are as follows. When the coupling effect of multiple quality fluctuations makes the production state dominant, the expected order quantity and profit have an upward trend. When the production service level process is an irreducible ergodic Markov chain, the optimal expected profit has a good robustness, otherwise vice versa. The reliability of the supplier’s production system can be revealed by the first-reach target assessment mechanism. In order to avoid risks and achieve the goal of good operation, the corresponding supply contract or quality investment contract can be designed according to the mechanism.

Key words: transnational procurement, assembly system, quality rippling effect, assessment mechanism