What is a Backorder? How Not to Lose Customers

What Does it Mean if Your Item is Backordered?

In our world of online shopping and two-day shipping, getting those must-have items quickly is expected. High demand is a good thing for business, but there are certain times circumstances can push demand to a level that can’t be filled, and demand outpaces supply. For example, the holidays or Black Friday sales can create high demand, the company cannot fill the item, and it is placed on backorder.

What is the Difference Between Backorder and Out of Stock?

Backorders should not be confused with out-of-stock. These are two different situations. In the case of out-of-stock items, the supply or production of an item is unclear. Maybe an item was discontinued and it is no longer available. A backorder is in production, but it may have hit a snag in the fulfillment process along the way. The product will be made; it’s just not ready at the time a customer places the order.

What Causes Backorders?

Backorders can occur for many reasons.

Supplier Issues. When the supply chain is stretched across the globe, there will be the occasional issue. There could be labor strikes, regulatory compliance issues, or it could be the result of bad quality products on the supplier’s end.

Unusual Demand. A common reason for backorders is an unusual demand such as a seasonal event, Black Friday, Cyber Monday, or a new release on a high-demand item that the media is pushing.

Low Safety Stock. Companies try to manage their supply chain to keep from having too much or too little stock. Sometimes, even with the best supply chain management process, there will be a time when safety stock levels are miscalculated.

Tips for Minimizing Backorders

Backorders can be managed to be beneficial for the company. The key is to make sure your production system is properly balanced.

1.     Review High-Demand Items. A product that takes off is great, but lifecycles vary, and understanding the history of the popular items will help manufacturers develop strategies to balance the system.

2.     Set Safety Stock. Evaluating your safety stock to address multiple variables can reduce the need for backorders.

3.     Have Multiple Suppliers. Working with several suppliers can have its advantages if your main supplier encounters an issue and can’t supply an item in time.

Don’t Lose Customers to Backorders

Customers can flip back and forth between websites to find what they need. If an issue develops with an item, notify them. Communication is key. Let the customer know what to expect every step of the way. Give manageable arrival times and collect email addresses on the product page so you can notify customers when items are restocked.

Final Thoughts

While backorders are always a possibility, having the right strategies and processes in place and reviewing them often will ensure that you handle them efficiently. The bottom line is that you want to ship your orders quickly to deliver the best customer service.

Want a personalized consultation to discover what 3PL solutions can do for your business? Contact PFS today!