![]() Again, depending on visibility into availability of additional stock, accepting backorders allows the retailer to make those sales and keep customers happy. Sometimes, companies see an unexpected surge in demand for a product. Retailers with limited warehouse capacity may not be able to hold a large amount of stock, but if they can confidently track availability of items from suppliers, they can avoid overcrowding and incurring excess storage costs while confidently accepting backorders. What Is the Purpose of Backorders?īackorders may benefit companies in a few ways. Problems mount, however, when the number or quantity of backordered products multiply or when retailers have a lot of manual order processes and must match each purchase order with a current sales order when completing the fulfillment process. Retailers may choose to have the supplier drop ship items direct to customers, or the retailer may take delivery of the items, translate the backorders to sales orders and ship the items to customers after charging the customer’s account, if applicable.įor a limited number of SKUs at a manageable volume, this is not an overly complex process. Customer service teams should provide buyers with an estimate of when they can expect their orders and how payment will be handled. Once backorders are accepted, the inventory management system converts them to purchase orders and sends them to the appropriate internal department, vendor or distributor. When a company takes orders - and potentially payments - for products that are not in stock, it is accepting backorders. Backordered items are expected to be available in a reasonable timeframe. ![]() Out of StockĪn item is out of stock when the seller doesn’t have the item in inventory and has no sure date to restock, or the item is seasonal or a limited run. Marketplace rules: Retailers selling on Amazon, Ebay or another marketplace may choose not to accept backorders because of selling terms, such as strict rules on fulfillment times generally, the restock date must be within 30 days of the sale. Companies with automated order management and exception handling, or that use 3PL providers, can more quickly and efficiently manage reorders and fulfillment.ĭropship capabilities: If feasible, cutting out steps and dropshipping backordered items direct from the maker or distributor speeds fulfillment. Your supply chain: The longer and more complex the supply chain for a backordered item, the longer it will take to acquire enough to meet demand, and the more likely it is that the item will go out of stock before backorders are filled.Ĭustomer service capacity: Backorders add extra steps and exceptions. The amount of time it takes to get a backordered item to the customer depends on several factors: Where backorders are offered, make sure the profit margin makes the extra logistical effort worthwhile and that you can fill those requests promptly. Should your business offer backorders?Īvoid allowing backorders on inexpensive or commodity products that customers can readily purchase elsewhere. That could be a function of poor planning, supply chain issues, overly strict policies on safety stock or an unforeseeable spike in demand for an item. However, the item is still in production or available from the distributor.Īlso known as a backlog, a backorder indicates that demand for a given product exceeds what the seller produced or ordered. What Is a Backorder?Ī backorder is generated when an order can’t be fulfilled at the time of purchase because the item is not in the seller’s current inventory. So are backorders right for your business? Maybe. And, managing backorders can be a headache for finance and logistics teams. ![]() If you end up being unable to fulfill the order, the customer may be more irritated than if you had just marked the item as out of stock. ![]() Win/win.īackorders can be tricky, though. The customer gets the item, the retailer makes the sale. For some retailers, the answer is to use backorders, where a desired item that is still in production but currently out of stock is promised to ship in a set timeframe. East, Nordics and Other Regions (opens in new tab)įaced with an out-of-stock notification, many consumers will simply click over to a competitor’s site. ![]()
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