Backup supply strategies under supply disruptions and stochastic demand: a case study of crude oil procurement via the Strait of Hormuz

Maritime transport faces increasing “double random” risks—simultaneous supply disruptions and stochastic demand fluctuations. This study investigates the effectiveness of backup supply strategies in mitigating such risks, using crude oil procurement via the Strait of Hormuz as a case study. We develop a stochastic optimization model comparing two procurement scenarios: sole reliance on a primary supplier versus inclusion of a backup supplier. The model determines optimal order quantities and reservation levels by minimizing total expected costs (shortage costs, excess inventory costs, and backup activation costs). A European refinery sourcing crude oil through the Strait of Hormuz is used to validate the model with industry-calibrated parameters. Results show that incorporating a backup supplier reduces total expected costs by up to 34%, especially when supply disruption probability is high. Sensitivity analysis reveals that as disruption probability increases from 0.1 to 0.3, cost savings grow from 5.4 million to 7.8 million; the optimal order quantity from the primary supplier decreases while backup reservations increase, demonstrating a strategic risk-transfer mechanism. Backup sourcing provides an insurance-like effect, with marginal benefits greatest when primary supply becomes most unreliable. These findings offer quantitative evidence for the strategic value of backup suppliers and practical guidance for improving resilience, flexibility, and cost-efficiency in high-risk maritime supply chains.