In a supply chain (SC) system, products are damaged during shipping due to transportation hazards and inadequate packaging. The most common hazards in transportation include shocks, vibrations, accidents, and poor handling. Damage from accidents and handling issues are not completely within the control of packaging. However, proper packaging can prevent most damages from shocks and vibrations. In this dissertation, a mathematical model that minimizes total costs (damage, shipping, and packaging) has been developed to address the issue of damage costs. This model was implemented in MATLAB and verified by using a total enumeration strategy. The damages during shipping are stochastic in nature. To minimize the impact of damage, the selection of routes should consider not only the expected damage but also the variability of damage. In this research, two models, the first of which aims at minimize total cost in the supply chain network, which consists of product cost and transportation cost while considering multiple routes and multiple products under stochastic yield conditions. In the second model, the concept of robust design has been applied to minimize damage while maximizing yield. This research also focuses on the recovery of products that are damaged during transit. Different recovery models based on the type of damage are also developed. Also, a network that recovers the damaged product at different stages in the supply chain network is considered. A methodology for determining the best recovery model to ensure maximum profit and meet demand is developed. Results indicate that the location of inspection and recovery stations influence the cost models and the subsequent profits.