Backorder: How to Navigate and Minimize Their Impact on Your Business

Did you know that nearly 34% of consumers are less likely to shop with a retailer again after experiencing delayed orders? 

While it can signal strong demand for a product, backorders also come with the risk of frustrating customers and damaging your brand reputation.

Effectively managing it is essential for businesses that want to maintain customer satisfaction and prevent lost sales. 

Understanding how to navigate backorders – without sacrificing quality or customer experience – can make a significant difference in maintaining trust and loyalty. 

In this article, we’ll dive into everything you need to know about backorders, their benefits, and strategies to minimize their impact on your business.

What is a Backorder and How Is It Different?

A backorder refers to a situation where a customer places an order for a product that is temporarily unavailable in stock but will be fulfilled as soon as inventory is replenished. It reflects the business’s commitment to supply the item despite delays caused by inventory shortages. 

Here’s a breakdown of how it works:

  • Example: A customer orders a popular pair of running shoes that are out of stock. The retailer marks the shoes as “backordered” and notifies the customer that the item will ship as soon as new stock is available.
  • Key Point: Unlike cancellations, a backorder allows businesses to fulfill the order when the product is restocked, ensuring the customer still receives the desired product.

Terms like backorders, out-of-stock, and pre-orders often come up in this context, but each serves a different purpose and impacts businesses in unique ways.

Understanding these concepts and their differences can help streamline operations and enhance the customer experience.

Backorders vs. Out-of-Stock

Backorders allow customers to purchase items that are temporarily unavailable but will be delivered once restocked. In contrast, out-of-stock items cannot be purchased until inventory is replenished. 

While backorders help retain sales and assure customers informed about their orders which will be fulfilled, out-of-stock situations may push customers to competitors, leading to lost opportunities. The main difference lies in whether orders can still be placed or not.

Backorders vs. Pre-Orders

Backorders deal with existing products that are out of stock temporarily, while pre-orders apply to items not yet released. It fulfills demand for current inventory gaps, whereas pre-orders generate interest and revenue for upcoming products. 

The key difference is timing – it addresses supply shortages, while pre-orders focus on future availability. Both methods, when managed well, enhance customer satisfaction and drive sales.

What causes a Backordered Item

Backorders occur for various reasons, often stemming from issues in demand, production, or logistics. Let’s break down the most common causes of backordered items and why they happen.

1. Unexpected Demand

One of the leading causes of it is when demand exceeds supply. Sometimes, a product becomes unexpectedly popular, and the demand outpaces the available inventory, including safety stock. 

  • This can happen when a product goes viral on social media.
  • It may also occur if a product is featured in a popular TV show or movie, driving sudden interest.

2. Production and Supply Chain Delays: Backorder Fulfillment

Delays in manufacturing or supply chains can also lead to backorders. When production slows, it directly impacts product availability.

Common causes include:

  • Equipment malfunctions in factories.
  • Disruptions in supply chains, such as material shortages.
  • Labor shortages affect manufacturing schedules.

3. Shipping and Logistics Challenges

Shipping delays, whether international or domestic, are another major factor. Products can get held up during transit for several reasons:

  • International shipments: Delays in customs clearance or logistical issues.
  • Domestic shipments: Weather disruptions or other unexpected events causing slower deliveries.

Advantages and Disadvantages of Backorders

Understanding the pros and cons of backordering is crucial to optimizing its benefits while mitigating potential drawbacks.

Advantages of Backorders

While backorders can be frustrating for both businesses and customers, they also provide several key benefits:

1. Increased Sales

  • It enables companies to keep up sales even in the event that inventory is momentarily unavailable.
  • They give customers a way to secure their desired products, reducing the chances they’ll turn to a competitor.
  • This means you don’t lose potential revenue due to stockouts and can boost your overall sales.

2. Better Inventory Management System

  • Backorders provide valuable insights into product demand, helping you avoid overstocking or understocking.
  • By analyzing backorder data, you can fine-tune future inventory orders to match customer demand better.
  • This prevents tying up cash flow in excess inventory or dealing with the costs of unsold goods.

3. Happier Customers

  • Offering backorders demonstrates transparency and a willingness to meet customer needs.
  • Customers appreciate the option to reserve backordered items and avoid missing out on high-demand products.
  • Backorder data can also help you identify your best-selling items and make smarter inventory decisions.

4. Cost Savings

  • Avoiding overstocking reduces costs associated with storage and waste.
  • It eliminates the need for expensive rush shipping or emergency restocking to meet unexpected demand.
  • Businesses can allocate resources to high-demand products, driving better profitability.

Disadvantages of Backorders

While backorders offer benefits, they also come with potential challenges that need to be carefully managed:

1. Customer Dissatisfaction

  • Long wait times for a backordered item can frustrate customers, leading to negative experiences.
  • Customers may cancel orders or choose to shop with competitors offering immediate availability.

2. Operational Challenges

  • Managing backorders can create logistical complexities, especially for businesses with multiple suppliers or warehouses.
  • Errors in tracking or fulfilling backorders can result in delays, further frustrating customers.

3. Brand Reputation Risks

  • Frequent or poorly handled backorders can harm a company’s reputation and erode customer trust.
  • Customers may perceive consistent backorders as a sign of poor planning or unreliable service.

4. Potential Revenue Loss

  • If backorders are not fulfilled promptly, there’s a risk of order cancellations and lost sales.
  • Customers who experience delays may hesitate to shop with your brand again in the future.

How to Reduce Backorders in 6 Simple Ways

Reducing backorders is crucial for improving customer satisfaction and maintaining smooth business operations. By following backorder best practices, you can streamline your inventory management and minimize delays. 

Here are six simple methods to help you reduce backorders and ensure an efficient inventory system.

1. Communicate with Your Fulfillment Partners

Effective communication with your suppliers is key to avoiding backorders. Regularly share your inventory levels, sales trends, and upcoming demand with them. This ensures a consistent product supply and prevents over-ordering or under-ordering.

  • Share sales velocity and stock levels with multiple suppliers.
  • Maintain transparency to align your supply needs.

2. Use a Modern Warehouse Management System

A warehouse management system (WMS) can help automate inventory tracking, making it easier to manage backorders, stock levels, and reorder points. With real-time updates, you’ll always know when to replenish stock to avoid shortages.

  • Track inventory in real-time.
  • Automate reordering based on demand.

3. Leverage Real-Time Data

Real-time data helps you stay ahead of potential inventory issues. By tracking stock levels and sales trends, you can quickly address any fluctuations and prevent it.

  • Update stock quantities instantly.
  • Quickly adjust to demand changes.

4. Utilize Sales Forecasting

Sales forecasting tools integrated with your WMS can predict future demand and help you plan for restocks. Setting up automated alerts when inventory is low can ensure you reorder products in time to avoid it.

  • Set automated alerts for low stock.
  • Plan ahead for restocking based on demand patterns.

5. Invest in Proper Training for Your Team

Your warehouse team should be properly trained to handle inventory and fulfill orders accurately. Training on your WMS and best practices in an inventory management system can help reduce errors and ensure smooth operations. 

  • Train employees on inventory systems.
  • Reduce errors in order fulfillment.

6. Keep All Order Channels Updated

Ensure that all your order channels reflect real-time inventory data. Keeping your product listings up-to-date helps prevent customers from attempting to purchase items that are out of stock.

  • Update product availability on all platforms.
  • Create urgency by showing limited stock levels.

Will Customers Accept Longer Wait Times for Backordered Products

When dealing with backorders, it’s essential to understand how much wait time your customers are willing to tolerate. While some customers may be understanding and accept the delay, others might look for alternatives if the wait is too long. 

Key Approaches to Managing Wait Times

  1. Communicate Transparently:
    • Provide accurate timelines when the purchase order is placed and keep customers informed of any changes.
    • Use automated notifications to share updates on order status and expected restock dates.
  2. Offer Flexible Alternatives:
    • Allow customers to pre-order backordered items with clear delivery expectations.
    • Suggest in-stock alternatives or related products to fulfill immediate needs.
  3. Set and Manage Realistic Expectations:
    • Avoid overpromising delivery times, especially if supply chain disruptions are unpredictable.
    • Include clear backorder policies in customer-facing platforms, such as websites and confirmation emails.

Retention Strategies During Backorders

  • Incentivize Patience:
    • Discounts of 10-15% or perks like free shipping can soften the inconvenience of waiting.
    • Consider adding bonus loyalty points or future purchase credits to encourage repeat business.
  • Provide Priority Handling:
  • Show Empathy:
    • Acknowledge delays in a professional yet empathetic tone, apologizing for any inconvenience and expressing gratitude for the customer’s understanding.

By proactively managing the process, from the purchase order stage to final delivery, businesses can retain customer loyalty and even enhance their reputation for excellent service. 

Never Lose a Sale: Prevent Backorders with Fulfyld

Fulfyld can revolutionize how you manage your supply chain, ensuring products are always available when customers need them. Here’s how:

1. Advanced Inventory Management

One of the most crucial elements in avoiding backorders is maintaining accurate, real-time inventory.  

  • Real-time tracking allows you to see exactly what’s in stock and what’s on order.
  • Automated low-stock alerts help you reorder products before they run out.
  • Demand forecasting helps predict future sales trends, allowing you to plan ahead for popular items.

This proactive approach ensures that your inventory is always aligned with customer demand, significantly reducing the risk.

2. Optimized Order Fulfillment

Efficient order fulfillment is essential to ensuring your products reach customers quickly, preventing the backlog of orders that leads to backorders. This process includes:

  • Faster processing times for quicker order turnaround.
  • Expertise in handling high-order volumes, especially during peak seasons.
  • Streamlined restocking processes, ensuring that products are replenished swiftly.

With these systems in place, your inventory flows smoothly, reducing wait times for customers and preventing order delays.

3. Proactive Supply Chain Coordination

Effective coordination between different parts of the supply chain—such as warehousing, transportation, and supplier relationships—is key to avoiding stockouts. Fulfyld helps you stay ahead by:

  • Working closely with suppliers and carriers to anticipate any potential delays.
  • Resolving issues before they lead to supply chain disruptions.
  • Maintaining a seamless flow from warehouse to customer to minimize bottlenecks.

By proactively managing all these elements, you can prevent the common causes, ensuring that products stay available when your customers need them most.

Take Charge of Backorders Today

Backorders can be managed effectively with proactive measures. Strengthen communication with suppliers, implement a warehouse management system, and set up automated low-stock alerts to stay ahead of demand fluctuations. 

Whether it’s improving forecasting or updating the fulfillment process, taking immediate steps will not only reduce delays but also strengthen customer trust and loyalty.

FAQs
Have more questions? Check out these FAQs below!

A backorder item is a product that is temporarily unavailable in stock but can still be purchased, with the promise of delivery once it is restocked. It allows businesses to secure sales even when inventory is depleted.

A partial backorder occurs when only some items in your order are out of stock and delayed, while the rest of your order is fulfilled and shipped on time.

Yes, you will receive your order once the item is restocked, provided the retailer has not canceled the backorder due to unforeseen issues.

It means that a product is currently out of stock but can still be ordered, and the business intends to fulfill the order as soon as the item is back in inventory. Customers are notified that there may be a delay in delivery, but the product will be shipped once it becomes available again. 

It typically takes 1 to 4 weeks to fulfill, but the exact time can vary depending on the supplier, production schedules, or shipping delays.

Yes, backorder dates can change due to delays in restocking, production, or shipping, so it’s a good idea to check for updates from the retailer.

When you buy something on backorder, your order is placed and reserved, and the item will be shipped to you once it becomes available.

No, backorder does not mean discontinued. It indicates the item is temporarily out of stock and will be restocked, whereas discontinued products are no longer produced or sold.

Your order is on backorder because the product is temporarily out of stock, likely due to high demand, supply chain delays, or production issues.

It refers to the practice of accepting orders for products or materials that are temporarily out of stock but will be fulfilled when they are restocked or produced. It involves the process of tracking and managing these orders, ensuring they are shipped once the item becomes available. 

We hope you enjoy reading our blog!

Looking for the latest e-commerce news or an amazing 3PL partner? Fulfyld has you covered!

Ready to Upgrade Your Brand’s Order Fulfillment?

At Fulfyld, we provide your brand with Dedicated Account Management, Competitive Pricing, and simple, easy-to-understand billing.

Your success is our highest priority – after all, the more you grow, the more we grow together.

Blog Sidebar Form
*By providing my phone number, I wish to receive SMS messages at the number provided. Standard message/data rates apply.
Use Shift+Tab to go back

  • Home
  • Company
  • Solutions
  • Integrations
  • Pricing
  • Blog