What is a back order?
A back order occurs when a retailer has no more of an item left in stock, but an order for that item was allowed to be placed by the customer. Back orders guarantee the customer will eventually get their order when the item is back in stock.
The main causes of back orders are:
- Unusual demand due to marketing, seasonality, and other external factors
- Supply chain delays affecting materials getting to manufacturers and products getting to you
- Incorrect lead time calculations or poor procurement planning
- Slow shipping due to things like weather or congested delivery channels
- Use a system that gives you integrated, real-time data
- Make use of reports to gain an understanding of consumer trends
- Ensure that you have procurement tools that allow you to track lead times and source from multiple vendors
- Implement a full scale supply chain management system to prevent products from being stuck at border crossings
But what does the back order process look like? Let’s use the unusual demand example. Often after a famous public figure wears or uses an item, consumers flock to purchase that item. This could cause items to be placed on back order, since the extra publicity and the resulting demand were unexpected. To manage a high volume of back orders, you will need to be able to create product reservations. This will allow you to keep orders open. This way, when you receive the item from your supplier it will be immediately used to fulfill the expecting customer’s order.
Helpful resources:
The better way to run your business
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