1) The act of retaining a quantity to ship against an order when other order lines have already been shipped. Backorders are usually caused by stock shortages. 2) The quantity remaining to be shipped if an initial shipment(s) has been processed. Note: In some cases, backorders are not allowed. This results in a lost sale when sufficient quantities are not available to completely ship an order or order line. Also See Balance to Ship.
What is Backorder?
In the world of logistics, backorder refers to the act of retaining a certain quantity of goods to be shipped against an order, even when other order lines have already been shipped. This situation typically arises when there is a shortage of stock.
To understand backorders better, let's consider an example. Imagine you run an online store that sells smartphones. A customer places an order for two smartphones, but you only have one in stock at the moment. In this case, you would ship the available smartphone to the customer and retain the second smartphone as a backorder. This means that as soon as you restock the smartphones, you will ship the remaining one to fulfill the customer's order.
Backorders can occur for various reasons, such as delays in production, transportation issues, or unexpected spikes in demand. It is important for businesses to manage backorders effectively to ensure customer satisfaction and maintain a good reputation.
The quantity of goods that remains to be shipped after an initial shipment(s) has been processed is also referred to as a backorder. It is crucial for businesses to keep track of backorders and communicate with customers regarding the estimated delivery dates. This helps manage customer expectations and allows them to make informed decisions.
It is worth noting that in some cases, backorders are not allowed. This means that if sufficient quantities are not available to completely ship an order or order line, the business will lose the sale. This highlights the importance of maintaining adequate stock levels and having efficient inventory management systems in place.
In conclusion, backorders are a common occurrence in logistics when there is a shortage of stock to fulfill an order completely. It is essential for businesses to effectively manage backorders, communicate with customers, and strive to minimize their occurrence. By doing so, businesses can ensure customer satisfaction and avoid lost sales due to unfulfilled orders.