Backorders: What They Are and Tips To Help Avoid ThemApril 28, 2021
Backorders can be a major inconvenience in today’s world of instant access. It can be disappointing for customers to see their desired product live and in full color on your site, only to learn of its backorder status.
We know the customer experience is vital. Is there anything you can do about backorders? We’ll explain what backorders are and show you tips to help avoid them.
What Is a Backorder?
Backorders are products that are out of stock when a customer lands on a product page but promise to ship when they’re available (typically with a ship date provided). Backordering an item means the customer can buy the product and receive it in the future.
Is There A Difference Between Backorder and Out of Stock?
If a product is out of stock, this means it does not currently have an inventory or a date for resupply. On the other hand, a backordered product implies that there is a set delivery date.
When products are out of stock, this may be the case permanently, or it will be out for so long the seller cannot provide a delivery date.
The Main Causes of Backorders
Backorders happen for many reasons, including:
- Manufacturer or supplier issues: When manufacturers or suppliers run out of the resources they need to make your products, or they shut down, they may not be able to hit production goals. In many cases, this will result in backorders.
- Demand spikes: If demand for your product or traffic to your online shop is unusually high, backorders could happen. This could be a result of a television show (For example, Shark Tank), having a social media influencer speak about your product and more.
- Lack of safety stock: Safety stock is the surplus product you keep in case supply chain issues cause less of your average inventory to be available.
Top Tips To Help Avoid Backorders
When you’re left with no option but to use a backorder, your customer is being hit with a delay. This is not an ideal situation if you want to create a great customer experience, so here are some tips to help you avoid backorders and optimize stock levels.
1. Keep an Optimal Amount of Safety Stock
Ecommerce companies need to have an inventory management system to keep track of stock levels in real-time before issues occur. Do your best to forecast future demand and sales orders by keeping enough safety stock on hand.
Keeping safety stock and replenishing your inventory can help you avoid running out of products.
2. Calculate Reorder Quantity and Point
Knowing your reorder quantity and point can help you to minimize backorders.
Your reorder quantity is the total number of product units requested from a supplier or manufacturer on an inventory replenishment purchase order.
The reorder point is the precalculated number of units left in stock at which you’ll need to reorder more inventory to avoid running out of stock.
You’ll need to know both and act upon your data to help minimize backorders.
3. Track Inventory Levels and Set Alerts
Popular products can sell out quickly, so be sure to keep an eye on your stock levels. Regularly monitor your inventory levels and set low-level inventory alerts so you’re quickly notified of supply issues.
Backorders Can Be Minimized
Understanding what backorders are and following the tips above can help to minimize the number of backorders you get. However, we understand some businesses may not have the resources and systems in place to follow through successfully with our tips. If you’re struggling with backorders, consider using a 3PL like Fulfillment Works. Our industry-leading order processing and warehouse management system gives you up-to-the-minute inventory status and real-time reporting to help prevent backorders and lets your customers rest easy knowing their orders are on the way.