What is Backorder and How Businesses Can Resolve it?

With the increase in the usage of the internet and technology like smartphones, laptops, tablets, etc. The e-commerce industry and other product and service based industries are seeing a surge in sales. It’s a very good sign for every industry.

But, there are many instances where customers are witnessing unavailability of the products. It happens when a long awaited product comes into the market, or increase in the popularity of any product, etc.

This kind of problem could affect the sales of the companies because customer’s eagerness for the product may turn into frustration. That could lead customers to look elsewhere to purchase the products. This will give a chance to your competitors and the sales will be affected highly.

In this type of situation, companies allow customers with a backorder option from their future inventory.

Backorder – Definition

Backorder means a product or any item is unavailable at that moment to place an order, but there is a date for restocking the products in the near future. Giving a backorder option to the customers helps them to order the product in advance and the customer should wait till the product becomes available and get delivered.

But most of the people often confuse backorder with out of stock. In both cases, the product is not available at that moment, but the two concepts differ a lot in actuality. Out of stock means the product does not have inventory currently and also there is no exact date when the product will be restocked. While in backorder, the date of restocking is made available.

In "out of stock", the product may become available after a long time or in some cases it may permanently become unavailable.

Reasons for Backorder

There are many reasons for backorder situations, here we have tried to list some of the top reasons.

Increase in Demand of the Product

One of the most common reasons for unavailability of the stock is because of its popularity and increasing demand for the product. Some time because of the seasonal demand, change in the people's interests, effective marketing campaigns, etc. will increase the demand of products, and in such cases being unable to meet customer’s requirements could result in a backorder situation.

Whatever the reason might be for the increase in demand for the product, managing the increasing demand is very crucial and in such cases backorder is the best option to retain the customers trust.

Poor Inventory Management

Sometimes, lack of effective strategy and management can affect inventory. If the inventory does not have enough stock, and your company is not prepared for an unpredicted surge in the orders, then you may go for a backorder option.

Most of the time, small companies cannot store excess products because of lack of proper space. In such situations, they can take the help of logistic companies for bonded warehouses to store the goods safely for any longer period of time.

Manufacturers and Suppliers Problems

Problems from the manufacturer’s end or any trouble with the suppliers could stop the movement of product, and hence results in backorder condition. It may be due to errors in the manufacturing unit, or delay in the transportation to the suppliers, etc. are also some of the reasons for backorder.

These are the top three causes of backorder. Industries must reflect faster to such situations to retain their position in the market, otherwise it could affect a lot in the long run. Sometimes trust from the customer’s end will decrease and they may find a new industry to buy the products.

How Industries Can Deal with Backorders?

Industries can manage backorder using some best practices. Below are some of the methods to avoid backorders.

  • To avoid backorders, the businesses should diversify and foster flexible connections with all the vendors and distributors.
  • Hype the product, in other words, use that time to create excitement in the customers by effective advertisement, till the products are restocked.
  • Manage the inventory and transportation effectively. Make your supply chain more agile and safe.
  • Analyze the market condition and customer behavior and forecast the demand.

These are some of the best ways to avoid and manage backorders. If you want to make your supply chain more effective, IAP Logistics could help you.

IAP Logistics is one of the popular and leading global logistics companies in Jeddah, and we provide a wide range of logistic services. Our services include bonded warehouses, LCL & FCL consolidation services, distribution, etc.

We can help you with the best logistic services and support you to manage goods around the world. We provide logistic services to many top industries across the world. We have equipped our logistics services with the best technology to manage every aspect more effectively and provide quality service. Reach us, for the best logistics services for your industries.