Having a solid understanding of backorders is essential to avoiding major customer service issues.
With the right information and attention to detail, you can minimize the impact of backorders on your business or avoid them entirely.
Learn what causes backorders and how to prevent them from happening in your eCommerce business.
What Are Backorders?
Backorders are any order that cannot be fulfilled right away due to inventory availability.
Business owners use backorders when demand for a product exceeds its supply. This can occur for a variety of reasons, such as high demand or manufacturing delays. Sellers can continue to fulfill orders even if inventory levels are low or nonexistent, preventing any potential losses in sales.
Backorders date back centuries when merchants kept records of orders that could not be fulfilled at the time and offered to provide these goods once supplies became available. This practice grew in popularity over the years and is an integral part of inventory management today.
Managing backorders efficiently can be a great way to maintain customer satisfaction while addressing inventory shortages, but it’s essential that businesses have an efficient system in place for order fulfillment and inventory management.
This will ensure that backordered items can be fulfilled in a timely manner and ultimately reduce backorders with more effective inventory forecasting and replenishment.
6 Causes of Backorders
Backorders are common in supply chain management and frequently caused by one or more of the following scenarios:
1. Demand exceeding supply
Backorders occur when demand for a product is higher than what is available in stock. To avoid backorders, businesses should be aware of market trends and consumer demand so they can accurately forecast the necessary inventory.
2. Human errors in inventory management
Backordered inventory can also occur due to human errors in inventory management. For instance, staff may be unfamiliar with discontinued inventory or out-of-stock items. This is why it’s important to make sure your inventory is regularly monitored and that backorder expectations are clearly communicated between your supplier and your customer base.
3. Unanticipated changes in customer behavior and demands
Unexpected shifts in consumer orders, behavior, and demand patterns can also cause backorders. Businesses should continuously monitor the market and their customer orders to ensure their backorder expectations remain up to date.
4. Poor communication between supplier and customer
Backorders can also be caused by poor communication between the two parties. It’s essential that clear backorder expectations are communicated, so your customer knows what to expect and when their product should arrive.
5. Delay in backorder shipping time
Finally, backorders happen when there is a delay in shipping time due to unexpected circumstances. Businesses should provide realistic shipping times and keep customers informed about any delays or changes.
Ultimately, businesses can take proactive steps to ensure backorders are kept to a minimum.
Understanding the root cause of backorders is critical to avoiding them in the future. Taking time to review backorder scenarios on a regular basis helps identify potential issues and the necessary steps to prevent backorders. Proactive steps like this ensure customer service and satisfaction remain high even when backorders happen.
Backorder Prevention Strategies
From inventory shortages to customer dissatisfaction, the costs of backorders quickly add up.
Businesses should consider implementing a few key strategies to prevent backorders from becoming a recurring issue.
Create backorder notifications and alerts
One way to minimize confusion and facilitate better communication between suppliers and customers is by creating backorder notifications and alerts. Keeping customers informed about inventory delays not only helps manage their expectations but also helps the supplier maintain customer satisfaction.
Set appropriate backorder limits
Another key strategy is to set appropriate backorder limits. This ensures inventory levels remain balanced and that customers don’t get bogged down with a partial backorder — waiting for a single part of a larger order to arrive in stock.
Use automated backorder scheduling systems
Automated backorder scheduling systems can come in handy here, as they help streamline inventory management and take the guesswork out of inventory control with automatic reordering when your inventory management system alerts you that you’ve reached your safety stock point.
Establish standardized backorder procedures and protocols
eCommerce businesses should also establish standardized backorder procedures and protocols so everyone involved is on the same page.
Streamline backorder processes with inventory software
Inventory tracking software can help streamline backorder processes, making it easier to track items and flag any potential issues before they arise.
Regularly review backorder data and trends
Businesses should regularly review backorder data and trends to gain insight into inventory management, customer satisfaction levels, supply chain issues, excess stock, and more. This helps identify any weak links in the chain, so you can make adjustments or changes as needed and cover unusual demand.
With these backorder prevention strategies, eCommerce businesses can reduce inventory shortages and keep customers satisfied.
Frequently Asked Questions
Looking for more information on backorders?
Below you’ll find some of the most commonly asked questions about backorders and managing stock levels.
What causes backorders?
Backordered items can occur for a variety of reasons, including an unexpected surge in demand for a particular product, inaccurate sales forecasts, stock shortages (due to supplier disruptions or production delays), and poor inventory tracking.
How can backorders be prevented?
You can prevent backorders by following good inventory management practices. This includes maintaining accurate and up-to-date records of stock levels, regularly monitoring demand for certain items, and ensuring suppliers can meet the anticipated demand for products.
Businesses should also consider introducing backorder policies, such as backordering only when necessary or limiting backorders to specific amounts. Additionally, businesses may want to look into backorder management software, which can help automate backorder tracking and control.
What are the negative consequences of backordering?
Backorders can have a variety of negative impacts on businesses, including delayed customer deliveries, increased costs due to additional handling and shipping fees, decreased customer satisfaction levels, and missed sales opportunities if the backordered item is no longer in stock.
Additionally, backorders can lead to frustration with customers if their orders are not fulfilled in a timely manner.
What is the best way to handle backorders?
The best way to handle backorders is to create a backorder policy and ensure that it is followed. This should include setting realistic delivery dates, providing estimated backorder times, and alerting customers when their order has been backordered so they can make an informed decision.
Additionally, businesses should focus on preventing backorders by investing in backorder management software and following good inventory management practices. Finally, customer service representatives should be prepared to handle backorder inquiries in a timely manner.
Backordering can be a daunting prospect for eCommerce businesses, but with careful planning and an understanding of backorder causes, prevention, and best practices, you can ensure that your customers’ orders are fulfilled efficiently and accurately.
By staying up-to-date on backorder trends and investing in the right inventory management tools, you can avoid costly backorders and keep your business running smoothly.
What is an alternative to backordering?
An alternative to backordering is drop shipping, which allows businesses to fulfill orders without having the inventory on-site.
In drop shipping, a supplier or manufacturer ships an item directly to the customer from their warehouse or location. This eliminates the need for backorders and avoids any delays associated with them.
However, it is important to note that drop shipping can be more expensive than backordering, and businesses may not have the same control over order fulfillment as they would with backorders.
Additionally, businesses should be aware of any potential legal or tax issues associated with drop shipping in their region.
The bottom line is that backordering is one of many options for eCommerce businesses. With the right policies and tools in place, businesses can choose the option that works best for them and their customers.
Is backordering always a bad thing?
While there are certainly drawbacks to backordering, it can be a beneficial tool if used properly. Backorders can be used strategically to manage inventory levels, as well as provide customers with a sense of security and trust in an eCommerce business.
Additionally, backordering can be used to increase customer loyalty and satisfaction by providing timely notifications about order status or estimated delivery dates. It’s important to weigh the pros and cons before deciding whether backordering is the right choice for your business.
Ultimately, backordering is not inherently a bad thing. With careful planning and the right strategies in place, businesses can use backorders to their advantage and ensure that customer orders are fulfilled accurately and efficiently.
However, it’s important that businesses understand the risks associated with backorders and take steps to mitigate them. By doing so, businesses can avoid any costly missteps and keep their customers satisfied.
What are some strategies to mitigate backorder risks?
There are several strategies businesses can use to mitigate backorder risks, such as creating a backorder policy, investing in backorder management software, and following good inventory management practices. Additionally, businesses should provide customers with estimated backorder times and keep them informed of any delays.
Finally, businesses should consider investing in an order management system that can help them track orders and inventory in real time. This will allow businesses to quickly identify backorders and take action to fulfill them before they become costly problems.
By following these strategies and investing in the right tools, eCommerce businesses can ensure that their backorders are managed efficiently and accurately. With careful planning and an understanding of backorder causes, prevention, and best practices, businesses can avoid costly backorders and keep their customers satisfied.
What should customer service representatives do when dealing with backorders?
Customer service representatives should provide clear, timely updates about backordered items to customers. This includes estimated delivery dates, if available.
Additionally, customer service representatives should be prepared to answer any questions customers may have about the backorder process and offer potential solutions or alternatives.
Above all else, customer service representatives should be understanding and empathetic when dealing with customers who have backordered items. It is important to remember that customer satisfaction is paramount, and backorders can be a cause of frustration for customers.
By being patient and understanding, customer service representatives can help to alleviate any potential issues and ensure that the customer’s experience remains positive.
By following these strategies, customer service representatives can help to ensure that customers remain satisfied with the backorder process. With clear communication and understanding, businesses can mitigate any potential issues before they become costly problems.
Ultimately, backorders are a reality for many eCommerce businesses, but if handled correctly, they don’t have to be an issue. By understanding backorder causes, prevention, and solutions, businesses can effectively manage the process and provide quality customer service.
With the right tools and best practices, businesses can ensure that their orders are fulfilled accurately and efficiently – while keeping their customers happy.
Backorders can be a tricky and frustrating thing to manage, but understanding what they are, why they happen, and how to prevent them is essential for businesses that want to succeed.
Organizations must evaluate their backorder policies and strive to understand the triggers that cause them.
Being proactive with backorder prevention strategies such as optimal inventory management and creating robust contingency plans will significantly reduce the impact of backorders when they do occur, allowing businesses to provide customers with a consistent supply of products and services.
Taking these steps today can help save your eCommerce business time, money, and customer frustration in the future.