What Is A Backorder?

No matter what store opens, the backorder will have a great impact on their stores. So how to avoid this problem has become a question for many managers. This article mainly discusses what is back order, and how to avoid backorder. By reading this article, I believe you will get a lot of inspiration in inventory management and store operations so it will contribute to driving your business and unlocking the code of wealth for you.

What does Backorder Mean?

Backorder usually occurs when consumers buy products due to products being out of stock. At this time, merchants generally promise that once the goods are replenished, they will ship the goods before a specific date. Another situation is that if there are other items in inventory in the unified order, the order may be split and shipped at different times, and the delayed products will be shipped at a later date.

1. Advantages

  • Satisfy Customers

When you shop happily online, if you can’t buy because of the shortage of goods, it will bring you a bad shopping experience. You may even lose some customers. At this time, if you can set late delivery, customers will think that they can finally buy their favorite goods, and will not have a particularly big shopping gap.

  • Maintain Company Operation

A backorder may maintain the normal operation of the company, such as temporarily out-of-stock customers can deposit in advance, such as replenishment of goods after delivery. In this way, cash flow shortages due to stock shortages can be avoided.

2. Disadvantages

  • Loss of Customers

A Backorder may result in the loss of some customers. When shopping, ordinary people usually prefer to buy the goods that are in stock and ignore the goods that are not in stock.

  • Reduce Store Reputation

A backorder may reduce the reputation of the store, and backorder usually faces the problem of timely delivery, which is usually affected by multiple factors, such as the production efficiency of the manufacturer. So once the merchant fails to deliver the goods on time, the customer will refund, which not only loses a number of customers but also reduces the store’s reputation.

What causes Backorders?

1. Supplier Side

  • Blindly Place an order

Orders received exceed the supplier’s capacity. In order to get more orders, suppliers ignore their own capacity and supply cycle and blindly make promises to customers which makes the purchasing side face the risk of shortage or leads to a shortage.

  • Insufficient Technical Ability

The technical and technological capabilities of suppliers are insufficient. Because the supplier does not have the production technology and supply level that meet the needs of customers, the purchaser cannot put the purchased materials into normal production due to quality, process, and other problems after supply, resulting in a stock shortage.

  • Cost of Production

Supplier’s production materials appear supply crisis. Due to rising raw material prices or resource demand, some raw materials are out of stock, resulting in the production plan cannot be completed.

2. Purchasing Side

  • Choose the Wrong Supplier

Wrong supplier selection. Failure to strictly evaluate suppliers in accordance with regulations, including certification of supplier capacity, technology, quality and delivery capabilities, etc., and found problems with suppliers only when delivery delays occur.  

  • Too Many Orders

The order quantity exceeds the supplier’s capacity. The order is not placed according to the supplier’s certification and the supply capacity and supply cycle stipulated in the contract.

  • Lack of Execution

The business procedures are cumbersome or the approval is not timely. From purchase requisition, and approval to order placement, the operating environment of each business is not timely enough, the execution is not strong, and the procurement timing is delayed.

3. Other Department Side

  • Insufficient Procurement Cycle

The requisition lead time is insufficient. The planning department or the user department did not plan and requisition in advance according to the relevant provisions of the procurement cycle, resulting in an insufficient procurement cycle and delayed arrival.

  • The product description is incomplete

The product description is incomplete and the technical information is incomplete. Due to the incomplete description of the required material requirements by the user department, after the arrival of the goods, the user department has doubts about the technical process and quality requirements, and cannot be put into use normally.

  • Handling Issues Too Slowly

The problem material is not processed in time. Because the relevant departments did not judge the technical process and quality problems in a timely manner, the problem materials were not dealt with in a timely manner, resulting in shutdown and waiting for materials.

5 Tips to Get a Handle on Inventory Backorders

1. Allow Plenty of Time

Allow for flexible time and give yourself some margin to deal with unexpected problems. In this way, when problems arise again, you will not be caught off guard, and you will be able to better handle the problem.

2. Determine the Delivery Time Summarize

The product habits of the factory determine the normal delivery deadline, if you are on good terms with the factory, give suggestions to the factory to improve management.

3. Choose the Right Supplier

Supplier Selection is important. Don’t look for a big, overbearing factory. Look for one that’s medium or small, good quality, good cooperation, and good management. The Honest Fulphilment can help you find professional and reliable suppliers, and you needn’t worry about inventory backorders.

4. Make a Production Plan

Ask the factory to give the order production start date, daily routine output, and estimated end date. In some factories, if you are their main customer, you can even ask them to make a table and send you the production schedule every few days, so that you can understand the production situation more clearly.

5. Communicate Regularly

It is also necessary to communicate with suppliers frequently so that you can know the recent orders and production situation of suppliers so that you can make plans in time. A time to receive goods, and will not cause inventory backlog.

Conclusion

When it comes to inventory backorder, I believe that after reading this article, it will be clear how to avoid and solve it. Backorder of goods brings positive and negative effects to stores, but most of them are negative. So you should try to avoid it when running your store. If you want to know more, please feel free to contact us, and we will answer all your questions.

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