Entrepreneurship comes with a whole new language and it can be rather confusing for those new to the eCommerce space. There are so many terms, it’s no wonder newbies often have a hard time. While there are too many to go over all at once, we can go a little more in-depth on one very important term: backordering. Unsure of what it really means? Keep reading to find out.
Backorder: Definition, Difference with Out of Stock, and 5 tips for Limiting Backorders
A backorder is an item that is currently out of stock but is still available on the item page. Instead of processing and shipping out immediately, delivery is guaranteed once accessible and an estimated date is usually supplied. This date is generally rather close, as permitting backorders implies that it will be back in stock within the relatively near future.
What exactly is the point of allowing these orders? For starters, it increases customer satisfaction (at least, if you ship out within a reasonable time) and it allows you to keep sales going, even if stock is a little slow. However, there are also a variety of other benefits that can pop up depending on how your store is run, your company goals, customer experience, etcetera.
Backorder Vs. Out of Stock
One of the biggest questions usually asked about backorders is “What’s the difference between that and out of stock?” The answer is actually pretty simple. “Out of stock” means an item has no stock available for purchase and also has no current date for resupply, while 'back ordered' means an item is currently unavailable but already has a resupply date on the horizon. Unlike stock items, back-ordered items will eventually come back. It may take some time but they will eventually show up, whereas, with the other, there’s never any certainty about when or if they will.
5 Tips to Limit Backorders
While backorders are irritating and sometimes unavoidable, there are ways to help you decrease their probability of happening. Here are a few:
1. Set security stock
Give a valiant effort to fulfill requests and orders by setting a stock point that is sufficiently high to cover any provider issues or demand increases that come your way. Keep an abundance of stock available and be proactive in restocking, and you should run into far less backordering.
2. Figure and set reorder focus
A reorder point is the base amount of any SKU that a business ought to have close by before they have to reorder more items. The reorder point recipe is just including your lead time request and well-being stock in days.
3. Keep an eye on popular items
Not all products sell at the same rate. Watch out for those with greater demand since they’ll sell out more rapidly. Keeping close tabs will allow you to reorder before stock ever even becomes an issue.
4. Have several providers
Working with various suppliers has its upsides and that includes not having to worry should one run into stocking or quality problems. Expand your network out and pull from multiple places. As the old saying goes, don’t keep all your eggs in one basket.
Next article: 4 Easy Ways to Pick and Pack Orders