So, let’s directly start with the Backorder or Backordered Definition
What does backorder or back order mean?
It’s an order that cannot be shipped or fulfilled currently. It is the process where you allow your customers to shop for the product even though you don’t have sufficient stock in hand. Also, the order is requested by the buyer even though he knows that the order would be fulfilled after a few days, thus backorder defines..
Still not clear? Let me explain you with an example!!!!
Imagine you have a product that is fast selling. In fact, the demand is higher for the product than the supply. Your product is just flying off the shelves that you are unable to manage the supply. So, at that time what will you do? Will you stop selling? Will you just let go of your customers into your competitors’ arms? No, you cannot and so this concept got invented.
When the customer would order the product in your store, at that moment you will display a message of the date, the order would be shipped. The date would be obviously late and so the customer would be aware of the shipping date. At that time, he might either cancel it or wait for the product.
Backorders – Is good or bad?
Obviously, every business wants to have that image what Apple and OnePlus company has. People order the product and are willing to wait for the product to arrive at their doorstep. These companies are very reliable as they ship the product on the day they have promised. Same with your business, if you are not able to fulfill your commitments on time then it affects the brand image.
The backordering concept might create a lot of confusion while handling the purchase orders, placing the order with the supplier and shipping to the right customers. To make these processes easy you need to adopt an automated order management system.
Backorder or Backordered items Major Problems:
- There is no guarantee that the customer will keep the order with you.
Ok, let me explain you with an example: Imagine your customer wants to buy 20 dolls and you have 15 dolls available. You promise the customer to deliver the rest of the dolls after 5 days. But the customer wants it within 2 days to gift the students finishing the year.
- If orders not fulfilled on time, it can leave a bad impression on your customer’s mind.
Example: So here the customer has agreed to wait for 5 days for the rest of the 5 dolls. But something goes wrong and your supplier is late and you are unable to deliver on time. Here, the customer might lose his temper and right wrong things about you on review section.
Why you should care about Backorders?
Because the Backorder concept works. As you again go through the backorder definition above you will find that it:
- Frees you of storage costs
- Saves your lot of carrying costs
- Make your business run faster
- Make your customer happy
With growing competition in every business, you should look for ways that can make you competitive and at the same time save your money.
How to manage Stock out with Backorders or Back orders?
If you are already a start-up or small business, then simply being out of stock doesn’t just put a dent in your finances. There are many more adverse effects like customer dissatisfaction, negative word of mouth, and loss of patronage.
You might have already encountered such effects. These consequences are the result of conflicting pressures. On one hand, your company doesn’t have that much space and money to stock up more products, in the hope that someone will buy the product. On the other hand, you want the sales to flourish by fulfilling the instant needs of your customer. Also, the customer wants the product at a lower price. Would you be able to provide your products at lower prices by adding your storage costs, inventory costs, and others? So, here you can opt for two things either back down from the opportunity by declining the order or be smart by using the backorder concept.
Which companies are using the Backordered technique?
Every Successful retailer and manufacturers like Apple, Amazon, Massdrop, Huawei, Samsung, OnePlus, Lenovo are using this. They use this to maximize their profit without the need for stocking up and increasing inventory management costs.
There are few of the professional advisors in the below list who would provide you some tips on backorder:
Backordered Best Practices
There is no such concrete solution for backorder that may fit every business, but we can offer you some professional advice on it. There are two major ways of handling backorders:
- To honestly inform your customer that you are out of stock and the product will be backordered that will reach you within the date of your product availability. This way your customers will not lose faith in you. Connect with your customer through mail and calls to confirm the order. Also, make sure that the supplier will deliver the product on time.
- Secondly is to run your business mostly on backorders. This method will fit for the business that deals with inexpensive items, handmade products or hard to store products. You just have to inform the customer that delivery time will vary depending on the product. After getting orders, you can inform your supplier about the order and delivery date. This will save you storage costs, carrying costs and inventory hiccups.
How to avoid failures with backorders?
If you are in the eCommerce then you have to be prepared for the worse, at that time keep your head cool. The factors that you need to focus on while dealing with back ordering are:
Planning
- Keep a note on the changes in the selling trend right from when you introduce the product until the last minute of selling during the month. Investigate minutely so that to know when the demand will grow.
- If you are selling the product from one of the suppliers then is, he far away or nearby? Try to sell the product from that supplier who is located nearby.
- If you are a manufacturer, then you can find ways to get the raw material within a short time from the supplier so that you can manufacture and deliver the product within time.
- Try to analyze the changes in the demand so that the backordering then helps you to minimize storage costs by ordering only fewer items.
- Be prepared for the rising demand always.
Supply Chain
Provide your customers with the product they want at a less possible time and spending little money as possible. To fulfill your customers and not to disappoint them you need to adjust your chain in a way that it is flexible with the changing demand.
- If you are a manufacturer, buy more raw materials so that your end product can be made within less time and shipped quickly. This may increase your storage expenses, but it will help you to fulfill your backorders within less time.
- If your suppliers are located overseas or some other state then try some other method to get the product delivered to you within less time.
- Get an ETA – ETA full form is “Estimated Time of Arrival” that we see in most of the eCommerce sites. When the customer orders the product, they can automatically view the date at which they will get the product with the help of ETA dates built on the seller’s website.
Also, take advantage of the best inventory management software that helps to make your processes easy and automated. The product management software also notifies you about the backordering delivery dates.