What Does Backorder Mean?
What Does “Backorder” Mean?
The meaning of “backorder” is found in the two root words. “Order” means a product was purchased, while “back” means it was ordered at a point on the timeline before the product was physically available. Having items on backorder means they are slated to be sent later, once inventory has caught up to demand.
How Does a Backorder Work?
When a shopper purchases a product from a company, if the product does not yet physically exist in the company’s warehouse, it can be purchased on backorder. That means the shopper receives an estimate of the date it will be available to be shipped.
Some shoppers are willing to order under these conditions. They may have an unusually high need or desire for a product. And even though the company states that the product cannot be shipped immediately—because of a manufacturing shortage or a sudden increase in demand due to a newsworthy event—customers might still place the order and wait.
How to Prevent Backorders
When it is possible, your organization will benefit from avoiding backorders. It is worth your time to learn how to prevent backorders, because by doing so you can avoid customer dissatisfaction and loss. Use these methods to keep enough items in stock more often:
- Identify the Problem: Often, the cause of short stock is a data error in a warehouse management system, a shortage in factory production, a labor error (such as entering an order incorrectly), or a faulty way of taking orders. Find the problem and work to correct it.
- Improve Communication with Vendors: Proactively increase the frequency and volume of communication with your supply chain partners. Find out if any external events could compromise products (e.g., inclement weather or local politics).
- Forecast Demand: Analyze all factors that have historically increased demand during certain times of the year, along with possible demand spikes due to marketing efforts.
- Coordinate Plans with Manufacturers: As demand increases and decreases, continually apprise partners of the estimated size of such changes. For example, if demand decreases by 5%, vendors should only decrease production by 5% (if at all).
Sharing more data between your company and your vendors can help you keep sufficient items in stock. Without this, a vendor that sees a sudden decrease in demand might drop production by, for example, 30% when the demand has only dropped 10%.
Contact Elite Ops for Inventory Management Services Today!
Elite OPS has worked for years on every aspect of logistics. We know how difficult it can seem to keep the right amount of stock available for orders. But we have learned how to prevent backorders and can apply that expertise to your organization’s needs.
Learn all about the problems and solutions associated with backorders in our featured blog post. And get a free quote from Elite OPS for better inventory storage, shipping, warehousing, kitting and assembly, and much more in Utah or Atlanta, Georgia.
