Backorders are an inconvenience in a world that demands to have everything right now.
If you’re wondering, “what is a back order?” Backorders happen when a product is sold out but can still be purchased, with delivery promised once it becomes available again. Sometimes, a business will choose to have backorders, because it helps maintain sales momentum and it’s a signal to customers that restocks are on the way.
In fulfilment centres, backorders play an important role in balancing inventory flow and meeting customer demand.
When an item is backordered, the fulfilment centre holds the order until the missing stock arrives. It’s a process that involves coordinating with suppliers, tracking inbound shipments, and updating the system to reflect new inventory levels as soon as they land.
When the stock arrives, fulfilment teams prioritise backorders. They pick, pack, and ship them to waiting customers immediately. Many centres automate this process and it enables backorders to move through the pipeline without additional manual input.
Backorders vs Out of Stock: What’s the Difference?
In both cases, the items are unavailable, but there are a few differences.
Customers can order items that are marked “backorder,” while out-of-stock items can’t be ordered.
Backorder items are guaranteed to come back in stock, and will be delivered at a later date. They will also have longer shipping times, but they will still be delivered once the items aren’t on backorder anymore. On the other hand, items that are out-of-stock are not guaranteed to come back. Customers can’t place an order for that item.
7 Common Causes of Backorders
Backorders often occur because of supply chain disruptions, inventory mismanagement, and unpredictable demand. We’ll break down some common causes to help you understand how fulfilment centres adopt proactive measures to reduce their frequency.
1. Inaccurate Demand Forecasting
Underestimating customer demand is one of the main reasons for backorders. When sales outpace inventory levels, stockouts happen. This often happens during product launches, promotions, or seasonal peaks when demand spikes unexpectedly. We’ll break them down even further. Without accurate forecasting models, businesses risk running out of stock faster than anticipated.
2. Supplier Delays and Production Issues
Suppliers may face delays in manufacturing or shipping, and it can cause disruptions in the supply chain. Raw material shortages, factory shutdowns, or logistical bottlenecks can all contribute to late deliveries. Even a minor delay at the supplier’s end can result in backorders if the fulfilment centre doesn’t have enough stock.
3. Limited Safety Stock
Many businesses operate with minimal safety stock to reduce storage costs. And while this optimises warehouse space, it leaves little room to handle sudden demand surges or supply chain delays. Without a buffer, fulfilment centres quickly exhaust their available stock and it leads to backorders.
4. Supply Chain Disruptions
Global events, such as natural disasters, political instability, or transportation strikes, can significantly impact supply chains. These disruptions affect the timely delivery of goods, often resulting in backorders across multiple product lines.
5. Inventory Tracking Errors
Manual errors or outdated inventory tracking systems can lead to discrepancies between actual stock and recorded levels. Fulfilment centres may unknowingly oversell products, causing backorders when the system fails to reflect real-time stock availability.
6. High Demand for Trending Products
Sometimes, there are products that experience sudden popularity driven by trends, social media, or viral marketing. Fulfilment centres can struggle to keep up with the influx of orders, resulting in widespread backorders until production scales up.
7. Vendor Reliability Issues
Unreliable vendors who consistently miss deadlines or under-deliver can become a recurring source of backorders. Fulfilment centres who rely on a single vendor are particularly vulnerable to disruptions in their supply chain.
Strategies for Minimising Backorders in Fulfilment Centres
Backorders can disrupt operations, frustrate customers, and impact revenue. However, there is a way for fulfilment centres to significantly reduce their occurrence by implementing proactive strategies. The most effective ways to minimise backorders and keep operations running smoothly involve:
Accurately forecasting demand and planning inventory
Preventing backorders starts with proper demand forecasting. This involves analysing past sales data, market trends, and seasonal patterns, fulfilment centres can predict which products will be in high demand and stock accordingly.
Managing inventory and planning for it also uses historical data and predictive analytics to estimate future demand. This ensures warehouses maintain appropriate stock levels, even during sales surges.
For instance, if data shows that a particular product sells out quickly during the holidays, fulfilment centres can adjust stock levels ahead of time to meet increased demand. Fulfilment centres also use software tools that aggregate data from multiple channels (e-commerce platforms, retail locations, etc.) to gather a more comprehensive demand overview.
Automating stock management
Manual inventory management is prone to errors. It leads to overselling or miscounted stock. By automating the process, you can maintain accuracy and efficiency. Automated systems track inventory levels in real time and update stock counts as soon as products are sold, returned, or restocked.
If an e-commerce fulfilment centre uses automated replenishment systems, low-stock items are flagged immediately and triggers the reorder process before the product sells out.
Building strong relationships with vendors
Reliable vendors are important for maintaining consistent supply. Working closely with them and regularly communicating with them can prevent delays and ensure steady stock replenishment. They help fulfilment centres stay informed about production timelines, potential delays, and inventory availability. This allows for adjustments in case of supply chain disruptions.
A strong relationship with vendors can lead to priority service, faster restocking, and more flexible order volumes. Some fulfilment centres work with backup vendors to make sure they have alternative sources of supply if the primary vendor falls behind.
It’s a good idea to negotiate contracts with vendors that include service level agreements (SLAs) for delivery times and quality standards to minimise risk.
Tracking and updating inventory in real-time
You’ll want to avoid overselling but ensure accurate stock counts. This level of transparency allows fulfilment centres to make informed decisions quickly.
A real-time inventory system syncs across all platforms, and updates as soon as products are sold, returned, or restocked. This reduces the chances of miscounts or out-of-stock errors. By having up-to-date insights into inventory levels, fulfilment centres can avoid backorders and improve overall efficiency.
For instance, if a product is running low, the system triggers an alert for restocking and it prevents stockouts. Additionally, fulfilment centres can display accurate stock counts on e-commerce platforms and reduce overselling.
How Fulfilment Centres Manage Backorders During Peak Seasons
Peak seasons like Black Friday, Christmas, and other major sales events are critical for e-commerce businesses. These periods also bring the highest risk of backorders because of sudden spikes in demand.
Effective backorder management during these times requires careful planning, scalability, and efficient communication. Let’s break down some strategies that fulfilment centres implement stay ahead during peak seasons.
1. Preparing for seasonal demand
To manage the influx of orders that comes with peak seasons, preparation is key. Early demand forecasting and increasing stock helps reduce the likelihood of products going on backorder.
Fulfilment centres start early by analysing historical data from previous peak seasons to anticipate which products will see the most demand. This allows for early reordering and increased inventory levels.
Some fulfilment centres also expand their warehouse space temporarily or hire seasonal staff to manage increased inventory and speed up picking and packing processes. Staff members are trained in multiple areas of the order fulfilment process. This flexibility helps manage bottlenecks in different sections of the warehouse during high-demand periods.
For instance, a fulfilment centre anticipating high sales of electronics during Black Friday might stock up on the top-selling models two months in advance, while also training staff to handle faster order processing.
2. Handling backorders during Black Friday, Christmas, and other sales periods
Even with the best preparation, some products may still go on backorder during peak seasons. Managing these situations effectively can help minimise disruption and keep customers satisfied.
- Prioritise high-demand products. Fulfilment centres make sure that the most popular items are stocked in greater quantities than usual. If certain products consistently go on backorder, consider increasing order volumes with suppliers well in advance.
- Group similar orders together to streamline picking and packing and reduce processing times. It also frees up staff to manage incoming stock.
- Automate backorder management. Keep the customers updated on estimated delivery times and notify them when items are restocked. This reduces manual work and improves accuracy.
3. Scaling operations to meet high-order volumes
As order volumes surge, fulfilment centres scale their operations to avoid overwhelming staff and infrastructure. Scaling is achievable through optimising current processes and leveraging external resources.
- Temporary Warehousing: Additional warehouse and storage space can be rented to accommodate extra stock and create overflow zones for high-demand products. This helps prevent congestion in primary fulfilment centres.
- Flexible Staffing Models: Fulfilment centres also hire temporary workers and implement flexible shifts to cover extended working hours. This ensures that orders are processed around the clock if necessary.
Throughout peak seasons, clear communication with suppliers and customers is also very important. Suppliers should be notified early on about expected increases in orders, and it’s best to keep customers informed about potential delays. Transparency builds trust and helps manage expectations. It reduces frustration if backorders do occur.
How Backorders Affect Customer Experience
Backorders aren’t just a supply chain issue; they affect the customer experience directly. Some customers are willing to wait for high-demand products, but that will not always be the case. When customers have to deal with something they don’t like during their buying journey (expensive shipping, stockouts, long lead times, delayed deliveries, etc), you risk turning away your customers completely.
The way you handle backorder fulfilment shapes your customers’ perceptions, influence their loyalty, and determine whether they come back to purchase from your store again.
Customers are more likely to trust brands that communicate openly about stock issues. Even if a backorder occurs, handling it professionally can reinforce reliability. Poorly managed backorders, on the other hand, can lead to negative reviews and harm the company’s reputation. Dissatisfied customers are bound to share their experiences online and it will impact future sales.
Customers who feel valued and respected during the backorder process are more likely to remain loyal. In fact, turning a backorder situation into a positive experience can enhance long-term customer retention.
So how do you manage customer expectations and communicate backorders to customers effectively?
- Set clear expectations early. From the product page to the checkout process, indicate if an item is on backorder. Transparency upfront minimises surprises and gives customers the choice to proceed or look for alternatives.
- Offer realistic timeframes. Your customers need to know when the item will be available. Even if the timeline is longer than the customer would like, clear communication can help set expectations and avoid frustration.
- Give your customers options. Provide alternatives, like similar products or similar quantities, and give customers a choice so they can feel more in control of the situation.
- Automate updates. Use automated SMS messages or emails to keep customers informed about the status of their backordered items.
- Provide customer support. Make sure that customer service teams are prepared to handle enquiries about backorders. A helpful and empathetic customer service response can make a significant difference in how the situation is perceived.
- Do partial order fulfilment. If certain parts of the order are available, ship the in-stock items first and backorder the rest. This helps keep customers satisfied with at least part of their purchase.
- Set up an easy refund process. If customers don’t like to wait, make refunds simple and hassle-free. Offering refunds upfront can prevent frustration and improve customer perception.
- Offer incentives for waiting. For high-value or exclusive products, consider offering a small discount or gift for customers who choose to wait for their backordered items.
Final Thoughts
Backorders are a regular part of modern fulfilment, but with the right approach, they do not have to disrupt operations or harm customer relationships. While backorders can lead to temporary delays, they also provide opportunities to refine inventory management, strengthen supplier connections, and improve overall efficiency.
Actively managing backorders during busy periods is key to maintaining customer trust and satisfaction.
The way a business responds to backorders can leave a lasting impression. A well-handled process reflects reliability and a genuine commitment to customer care. By prioritising clear communication, flexibility, and a customer-focused approach, businesses can continue to thrive even when supply chain issues arise.
Green Fulfilment’s services and technology support businesses in managing inventory, tracking orders in real time, setting reorder points, and using data to make informed decisions.
If backorders happen, Green Fulfilment will be there to help ensure a smooth and positive experience for your customers.