Picture this: You have this highly praised product that is literally selling off the shelves! So much so that you keep selling right through your inventory each time you reup. While this is somewhat good news for your company (because it is a sign that your products are in high demand), it is bad news for your customers. Backordered items mean that your customers will have to wait longer (in addition to regular processing and shipping times) because the product they ordered is currently out of stock. Having to wait on a product can easily turn an excited customer into a frustrated, angry customer rather quickly.
That same anger and frustration could cause a customer to purchase similar products elsewhere or cancel their order altogether. While backorders are a good problem to have (to an extent), you want to avoid them at all costs to maintain customer satisfaction and brand loyalty.
Backorder defined: What is a backorder? What does Back Order Mean?
A backorder refers to items that are currently out of stock but promised to ship once available. This is different from a stock out (when an item isn’t available in your warehouse). A backorder occurs when the retailer must make a request to the supplier or manufacturer for when the item becomes available again. This process allows your customers to purchase a product now and receive it later, when available.
Wait times can be anywhere from a few days to several weeks, depending on the reason for the backorder. To avoid any hiccups in your supply chain with backorders, follow these steps:
1. Communicate Openly with Your Fulfillment Partners
Thorough communication within your supply chain is extremely important and will greatly reduce the need for backorders. By communicating inventory stock levels as well as velocity times (how fast your products are selling), this will help to keep your stock levels steady.
It is very critical to know how much you’re selling and how fast you’re selling it, not just one or the other. Keeping an open line of communication helps to avoid any inflation or deflation in orders and will prevent you from having buffer stock, or an excess of stock. Buffer stock can ultimately affect your bottom line negatively if you’re not careful, so be sure to communicate the necessary information to reduce this issue.
2. Have a Modern Warehouse Management System
Having a modern warehouse management system will keep you from manually having to record inventory data and it is also able to keep up with the volume of your business. With an up-to-date data-driven inventory management system in place, you won’t have to guess when you need to reorder inventory or how much you need to order. Your reorder points will be crystal clear by the demand of your products because your inventory data will be shown in real-time.
Having a good management system in place also decreases the opportunity for imprecise inventory data to occur because your modern system should accurately reconcile your inventory without question.
3. Use a System that Gives Real-Time Data
When choosing a modern warehouse management system, make sure to get a system that gives real-time data. This means that whenever there is a change in stock levels, your system will make note of this change and update automatically. This is a true advantage and will help tremendously in staying on top of your numbers.
Inventory accuracy is a pivotal portion in maintaining stock and preventing backorders, or any type of disruption in the supply chain, for that matter. At Fulfyd, we have vigorous integration systems that are able to capture each step of your customer’s orders to ensure customer satisfaction.
4. Use Forecasting with Your Warehouse Management System
Another way to prevent backorders with your warehouse management system is to put alerts in place that are able to forecast when products are running low and reorder. For example, modern systems allow you to set up a notification to be informed when inventory reaches a certain point so that it can automatically reorder and prevent any disruptions or backorders. This alert also helps to reduce ordering excess inventory. With inventory alerts in place, you will be able to see just how much inventory is needed and how long it is taking products to move off the shelves.
It is also important to calculate how long it takes the items to be restocked as well, so that products can arrive in time without needing to be signaled as a backorder. By generating an alert to forecast and reorder your products, this will create a timeline of exactly when reorder points need to be scheduled to prevent backorders.
5. Invest in Proper Training
Properly training your warehouse workers will help to expedite backorder fulfillment. If an employee is not properly trained on your warehouse or they aren’t familiar with your warehouse management system, this could make room for a lot of errors. For example, an employee who is not well-trained on how to navigate the inventory management system could accidentally report something is in stock in the system, when it is not. If a customer orders the “imaginary” item, this could cause even more of a delay or you’d have to issue a refund, which will probably result in angry customers and a possible compromise of customer satisfaction and brand loyalty.
Here at Fulfyld, we make sure our employees are properly trained and efficient in warehousing expertise. Our employees can precisely fulfill backorders and if necessary, we provide line splitting for those orders. Line splitting is when a customer receives part of their order immediately, instead of waiting for every item in the order to become available and then shipped off. This is an optional service with each of our partners for backorder fulfillment.
6. Manage and Update All Order Channels
Be sure to keep all order channels updated with accurate inventory data. You never want your order channels to say a product is available when it is not. Keeping your order channels updated could also help in creating a sense of urgency for your products. For example, when a customer sees that there are only two or three of a certain product left, this will prompt them to go ahead and buy versus possibly missing out.
In a nutshell, try to limit and avoid the need for backorders as much as possible by communicating with your fulfillment partners, using data-driven methods and systems, and properly training your employees.
While some things may be unavoidable such as shipment delays due to unforeseeable circumstances or events (I.e. Covid-19) or weather delays, it is important to continue openly communicating with your partners to keep down the need for back orders as best as you can.
In addition to communicating with your partners, it is also important to communicate with your customers as well if you do have backordered items. Most ecommerce sites now have a back in stock plugin that will alert your customers by text or email when their favorite items are back in stock!
Of course, sometimes things happen, and some things are just unavoidable. However, putting these practices in place is a sure way to effectively decrease the need for backorders. Contact us today to get more information on our fulfillment services and how we accurately handle backorders in a timely manner!