What Is Backorder In Shipping and Retail?
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What Is Backorder In Shipping and Retail?
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What Is Backorder In Shipping and Retail?

When your products are flying off the shelves, that’s usually a sign that your business is doing better than expected. However, what happens when you can no longer keep up with customer demand?

If you announce an out-of-stock situation, you’re practically telling your customers to switch over to your competitors. So not only do you lose sales, you lose loyal customers too.

While backorders can be tricky, offering this option to your customers is the first step to expanding your business.

What is backorder in shipping and retail?

Retailers offer backorders when an order can’t be fulfilled as of the moment because the product is currently out of stock. 

Backorders (or backlogs) are a promise to customers that you’ll send out their orders as soon as you replenish your inventory. Generally, the said item is still in production, or it’s still with the warehouse or distributor.

Generating backorders is an indicator that orders (demand) are far beyond what the store expected. But do stores really allow this to happen? Now, let’s get into the leading causes of backorders.

What are the causes of backorders?

Backorders may be an effect of poor planning, inaccurate forecasting, or maybe an unforeseeable rise in demand. Here are the main causes of backorders:

Poor planning. It leads to insufficient safety stock and a higher chance of generating backlogs.

Unforeseen spike in demand. Holidays and unforeseen circumstances (such as pandemics or extreme weather) can cause unexpected spikes in demand.

Manufacturer or supplier issue. Shortage of materials or factory shutdowns can cause products to suddenly become unavailable.

Warehouse management issue. Problems with inventory or warehouse management can be confusing.

Delays. When inventory or safety stock isn’t delivered on time, businesses have no choice but to generate backorders.

What factors affect backorder fulfillment?

If you’re wondering how much effort and time backorder fulfillment actually requires, you’ll have to consider these factors:

  • Supply chain complexity: depending on the structure of your supply chain, it may take longer to make up for backorder demand.
  • Drop-shipping: getting your items directly from the manufacturer or distributor speeds up backorder fulfillment.
  • Customer service: backorders require additional customer service handling, so businesses with automated supply chain management will fulfill backlogs faster.

How to prevent backorders?

It’s possible to minimize backorders by finding a careful combination of planning and technology. There are many ways for you to minimize the likelihood of having to put up a backorder or out-of-stock sign on your store:

Gauge customer demand

By identifying what your customers want and need, you can start organizing your inventory items by priority. From there, it’ll be easier to note which items should have more safety stock.

High safety stock point and inventory tracking

Set a safety stock point that’s high enough to cover unexpected demand. Coupled with inventory tracking and regular replenishment of inventory, you won’t find a need to generate backorders.

Set reorder points

Reorder points indicate when it’s time to reorder more stocks from the manufacturer or distributor. When calculating for the right reorder point, remember to consider lead time demand and how long safety stock will last.

Consider having more suppliers

Suppliers and manufacturers can also run into their own backorder woes. Consider diversifying your suppliers or sourcing locally in case of backorder.

Increase shipping efficiency with GoShip.com

Thanks to the GoShop.com freight marketplace, you can find the most reliable carriers to fulfill your backorders in the nick of time.

GoShip.com also offers real-time automated tracking to ensure that your backorders are fulfilled immediately. Rest assured that GoShip.com offers all the resources you need to ship your items in a safe and timely manner. 

Start fulfilling your backorders and expanding your business by getting a free freight quote from GoShipcom.

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