What does the term backorder mean?
A lot of jargon gets thrown about in the fulfilment industry, and some of it can be hard to understand. One common term that is used is backorder. If you work in the fulfilment or ecommerce industry, you have probably stumbled across this word at some point but maybe you didn’t understand what it meant.
To put it simply, backorder is a term commonly used in the fulfilment industry, and refers to the inability to fulfil a customer’s order due to stock un-availability. This means that the order will not be fulfilled until stock is made available, therefore going on ‘backorder’.
What is the difference between backorder vs out of stock?
Based on that definition, you may be thinking that out of stock and backorder are the same thing. Not necessarily.
Out of stock means that the company does not have any inventory available for the product the customer is attempting to purchase, and the company does not have a date for resupply. Therefore, this results in the product being made unavailable until there is a restock. On the other hand, backorder means that the customer can still purchase the desired product but it may take some extra time to reach the customer because the company does not physically have the item in stock at their warehouse.
What causes a backorder?
Generally speaking, there aren’t many benefits to backorders. If not handled correctly, backorders could negatively impact your business, your business reputation, and customer loyalty. Later, we will discuss how to manage and reduce backorders, but firstly it’s important to look at what actually causes them so you can try and minimise them.
A number of things can result in a backorder, such as:
- An unusually high demand for the product – if an item suddenly grows in popularity, this may result in a high demand for the product and the company may not be able to keep up with the demand, therefore resulting in a backorder.
- Low ‘safety stock’- Usually companies will put aside stock in the case of an emergency
- Backorders can also occur if there is a problem with the manufacturer or supplier
Backorders are not always 100% avoidable, but here are some tips to help reduce them that you may find useful.
Tips for reducing backorders
Remember, you don’t want to lose customers or damage the reputation of your business by not handling backorders properly.
There is nothing worse than ordering something from an online store and having little to no communication or updates on the status of your order. Customers value good communication. Therefore, communication is key here. Poor communication during the backorder process could result in you losing customers and damaging your businesses’ reputation, here are a few ways to avoid losing customers during the backorder process.
How TSP Deals with Backorders
A fulfilment centre like The Storage Place has stringent processes in place to help negate the impact backorders can have on your e-commerce business. We deploy the following tactics, so that your order fulfilment remains exceptional.
- We can send daily, weekly, or monthly reports so you can see what stock levels are like.
- We can send a notification to you to inform you every time we get a backorder.
- Clients can set up rules for multiple item orders (such as having the ability to hold the whole order or send out the other items in the order in the meantime).
- We can also take care of the customer service side of things to help keep the customer updated and informed on the status of their order.
For all your fulfilment needs, contact us today to obtain a quote. We’re the experts at keeping your stock levels replenished and fulfilling your orders.
