What is a backorder? Backorder definition and meaning

What is Backorder?

First of all, let’s establish a backorder definition – what does back order mean? Assume your business is doing well. Actually, it’s doing fantastic! The sales are so great you start struggling to keep up with the demand. How do you address this? Obviously, you can’t just stop selling – that would drive your customers straight into the arms of a competitor. This is where you introduce back orders!

Allowing to backorder means giving your customers an option to still purchase your products even when you don’t have enough in stock – creating backordered items. Backorders are really common in retail.

The challenge of back orders and how to address it

So, you’ve got a backorder meaning you now have a problem (which is a good one to have by the way). To define backorder most precisely just think of having more orders than you have products in stock – this is what it ultimately comes down to when we ask a question of “what does backordered mean?” It’s definitely a dream come true for any retail business! However, it can also become a big challenge if you don’t know how to deal with it.

Here is a fairly common situation: You get a sales order, but there are one or two items in it that are out of stock. Not a big deal, right? You simply make a purchase order for the missing items and let your customer know when the backordered items are going to be available.

Now, imagine you’re managing hundreds of different orders per day, a number of which has back ordered items. Spread across several sales orders you get a multitude of products backordered meaning you need to consolidate all the out of stock products from multiple sales orders into a purchase order. If the items that fall under that out of stock definition have to be purchased from different suppliers – now what does backorder mean for your business? Here is where things get truly interesting…

The logistics of dealing with backorders can be extremely challenging for retailers. In order to fulfill back orders efficiently a retail business needs to

1. make sure all the sale orders with items on backorder are accurately recorded

2. place a purchase order for these items with the supplier

3. upon re-stocking, go through all the recorded sales orders to match these to the correct purchase order

Once you reach a point of having too many backorders to effectively fulfill them, using spreadsheets won’t be enough anymore. At this stage, you might want to consider getting a proper inventory management system that will automatically consolidate and track back orders for you.

The best customer service practices when dealing with backorders

What is a back order supposed to accomplish?

Offering to get products backordered means increased sales and more customers. However, it is important to remember what backorder is - you are essentially asking your customers to pay for a product in advance. Naturally, they’ll be worried and expecting regular updates. So, timely communication is absolutely essential!

Customers waiting for their backordered products will be expecting to receive shipping notifications on the shipping date they’ve been provided. So always keeping your customers in the loop in case of any delays or changes will help avoid a storm of complaints and help maintain your company’s good reputation. Send out regular emails, update the buyers on the current state of events, provide estimated times of arrival, and you’ll save yourself from customers’ rage.

A good inventory tracking system will help you can keep track of backorders and make sure your customers aren’t left waiting for too long.