● All About Backorder in Inventory Management
- What is Backorder?
- Difference between Backorder and Out of Stock
- Causes of Backorders
- Tips to Minimise Backorders
- Effective Tips to Handle Backorders
- Say No to Backorders with Fulﬁllment Hub USA
- FAQs about Backorders
Customers are supreme in today’s linked environment. They find the things they want by searching, selecting, and swiping. People despise seeing out-of-stock notices in this age of just-in-time, rapid satisfaction. Despite this, an item may become out of stock owing to supply chain difficulties.
Now you’re probably wondering what to do if any of your goods are out of stock. It’s as easy as that — backorder. Backorder is a method for sellers to deal with out-of-stock situations. It is, however, not perfect. Consumers dislike having to wait for things they want.
If you’re an e-commerce store with a high backorder rate, it’s a sign that your inventory management isn’t up to par.
This article will teach you all you need to know about backorders, including what they are, why they happen, and how to cope with them.
All About Backorder In Inventory Management
Purchasing items through the internet has grown commonplace in recent years. Every day, the number of digital buyers increases. According to a Statista analysis, there were 1.66 billion digital purchasers worldwide, with this figure predicted to significantly climb. The graph depicts the importance of properly managing inventory to avoid problems such as “backorder” or “out of stock.”
You have two choices if you’re having trouble refilling items onto warehouse shelves or managing inventory replenishment. Backorders might be accepted or things can be marked as out of stock. In this essay, we’ll go through backorders in detail.
BACKORDER IN DETAIL.
When an item is on backorder, it indicates it is now out of stock but will be delivered as soon as it returns to stock by a certain date. Businesses offer back-ordered items and guarantee that they will be delivered to customers.
Backordering a product implies that the customer can order it now and have it delivered at a later date when it becomes available. Backordering occurs when an item cannot be packaged and dispatched at the time of ordering owing to a shortage of physical items in stock. It distinguishes them from just-in-time and discounted inventories.
Difference Between Backorder And Out Of Stock.
When a product is out of stock, it means that it is currently unavailable in the inventory and that there is no set date for resupply. Backordered, on the other hand, refers to a product that is now out of stock but will be delivered on a speciﬁc date.
It’s the difference between “This item is out of stock” and “This item cannot be sent until a certain date,” to put it simply.
Backordering may take some time, but you will almost certainly receive the merchandise. In the situation of ‘out of stock,’ however, there is a chance that the goods may be permanently unavailable. There are also instances where the vendor has no clue when the item will be returned.
COMMON Causes Of Backorders.
There are various causes of backorder. Some of them are out of control, while others are preventable. Below mentioned are some of the common causes of backorders.
- LOW SAFETY STOCK
The additional quantity of products you retain in inventory for supply failures or emergencies that might result in inventory unavailability is referred to as safety stock. You may experience out-of-stock or backorder problems if there is a shortage of a product’s safety stock.
- Unusual Demand
When there is an irregular high demand for a product on an online store; there are higher chances of backorders. In many cases, it is quite diﬃcult to predict the unprecedented surge in demand despite decent sales forecasting
. There could be various reasons for unusually high demands like seasonality, inﬂuencer marketing, or aﬃliate marketing. Moreover, the introduction of a new sales channel can also boost the product demand.
3) Lack of Inventory Control
Backorders are more likely when a company lacks acceptable stock levels or is unable to maintain a good track of inventory movement. Trends change quickly in today’s environment, and the number of SKUs available in any online business is growing. To guarantee a smooth ﬂow of activities in such scenarios, it is critical to employ the appropriate inventory management system.
The need for an accurate inventory management system for a ﬁrm has increased in today’s competitive period. A decent or advanced inventory management software can assist you in keeping track of your goods. It can help you avoid running out of goods inventory.
- Issues with a Supplier or Manufacturer
If your factory runs out of the raw materials needed to make the items, you’ll have to shut down operations for an extended length of time. It might also prevent you from meeting your production targets for an extended length of time. Backorders may be a concern for your online shop in this circumstance.
Tips To Minimise Backorders
Although backorders are unavoidable in some situations, there are several steps you may do to lessen the likelihood of them happening. Here are some suggestions for reducing backorders.
Points for reordering
A reorder point is the minimal number of items that a company should retain on hand before needing to purchase more from the manufacturer. Adding available safety stock and lead time demand is a simple calculation for calculating reorder. We offer 5-in-1 cloud-based software at Fulﬁllment Hub USA that allows you to calculate reorder points for each product. Furthermore, it notiﬁes you when inventory has to be replenished.
Increasing the reorder quantity for impending promotions, product launches, and ﬂash sales is always a smart idea. Furthermore, you should pay attention to your previous data since it may assist you to predict when sales will be strong and you will require additional inventory.
Monitor the Inventory Levels of Popular Products
When compared to other things, popular or high-demand items may sell out rapidly. As a result, it’s a good idea to keep a check on these items’ supply levels. Nothing goes precisely according to plan in the e-commerce sector, so keep track of your inventory on a frequent basis to eﬃciently manage inventory replenishment.
Keep Safety Stock
In order to run an e-commerce business successfully, it is better to have a technically advanced inventory management system. It can help you to keep a track of the products available in stock in real-time.
Setting a safety stock point is one of the best ways to handle supplier problems and unusual demands. It is always a good idea to keep extra stocks in hand, have real-time inventory tracking, and replenish inventory proactively to prevent backorders.
Get Products from Multiple Suppliers
The advantages of having several suppliers for your products are numerous. Backorders are frequently the result of a supplier or manufacturer’s inability to produce adequate items in a timely manner. Working with a variety of vendors can help you avoid this issue.
Purchase Additional Products
The easiest way to minimize stockouts and backorders is to keep enough safety stock on hand. However, it can clutter up your available storage space, raise backorder and inventory prices, and have a negative inﬂuence on your entire budget.
Customers who cancel orders due to backorders might cost your company a lot of money. Customers can obtain the things they desire by going to your competitor’s website. When clients can’t discover what they’re looking for and are dissatisﬁed with your services, you risk losing customers as well as damaging your brand’s image.
Notify Your Clients
Notifying your consumers that there is a stockout but that you will deliver the goods to them by a certain date is one of the ﬁnest strategies to handle backorders. Customer communication should always be open and honest, and your product page is the greatest location to do it.
Create a mailing list
Obtain the email addresses of consumers who wish to be alerted when a certain product returns to stock. To increase client enthusiasm, use the scarcity principle. The greatest method to keep consumers is to create a sense of urgency and excitement among potential clients.
When a product is restocked, notify customers.
One of the most valuable benefits of having an email list is being able to notify consumers as soon as a product is back in stock. Send an email to all interested customers informing them that the paid backordered orders have been sent. Using emails to keep clients engaged is the most effective strategy to retain customers and urge them to return to your website for more.
We employ the best-in-class inventory management solution at Fulfillment Hub USA to enable you to monitor real-time stock levels, set safety stock and reorder thresholds, gain insights into your best-selling goods, and more.
With us, you’ll be able to flawlessly manage your inventory and order fulfillment while also dispatching goods on time to increase client satisfaction. To put it another way, we can assist you in avoiding the scenario of backordered items. If you still have backorders, we may assist you in filling them as soon as your inventory is replenished.
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