Backorder management takes care of goods that the company cannot fulfill because the demand is beyond the supply. Today, we use different complex terms to describe how companies keep goods flowing to their customers—for instance, LIFT, FIFO, MRP, ERP, and supply chain and demand. Yet there is one important term most people overlook and misunderstand, which is backorders.
Unlike preorder, which is to order a product that has never been on the market, backorder referred to a currently running out item that can be fulfilled later. Backorder involves a process where goods are about to be reproduced, meaning that they can always be delivered in the future.
Causes of Backorders
Backorders can do you well given a thorough understanding of the concept. In the later part of this article, you will learn the simple process to address your backorder issues. Before we start, let’s go through different reasons for backorders to happen.
An unusual demand might occur during the holiday or festive time. It might also be due to natural events such as hurricanes and disasters where a large number of goods are required in a short period of time. A lot of factors can contribute to a product getting an unusual demand from the public.
We live in a supply chain that is stretched throughout the world, and at times there will be supplier issues. While it might not be intentional, nature can have its cause. Additionally, regulatory compliance, strikes, or shipping can cause suppliers to delay products.
The disparity in order patterns
Natural disasters, weather events, and holiday seasons can cause variations in order patterns. Companies might depend on demand planning models to foresee the total orders and customers. However, a sudden change in people’s demands can disrupt or throw manufacturers off-balance.
Steps of Backorder Management process
To avoid disappointing your customers because of your inability to fulfill their expectations, you need to follow a good backorder management process. Here are the steps of the backorder management process to implement for your business.
Be transparent about product availability and shipment date
In dealing with backorders, you need to indicate product availability and shipment date. With this, customers can decide if they want to wait for the product or not. Furthermore, it helps build trust with your customers that you value their time.
Fulfill available items if possible
Peradventure you have a limited amount of the product, you can perform partial fulfillment. For instance, you have three mobile phones in stock while there are two customers, each of whom wants two phones. Here, you can decide to fulfill half of the order while backordering the other. In other words, customers will receive a partial shipment of the product with an estimated time for the remaining to arrive.
Place order for unavailable items
In case of dropshipping, you can order the unavailable product from your supplier or manufacturer. It is essential to keep the customers informed about the current state of the product.
Update customer on order status
After a customer has ordered an item, they have the right to know the current delivery status. You need to provide an update about the items as soon as possible. Peradventure, there is no more manufacturing of such product, you need to let them know and place a refund.
Receive restocked items and fulfill
Once you receive the items, you can restock and fulfill the backorders. Remember to stick to the estimated time you indicated in your first message.
Managing backorder with automation
As you’ve seen, backorder management is a complicated process. If not done correctly, it would cost you revenue loss and even brand credibility. That’s why an automation platform is highly in need to manage it effectively. With automation integrated into your website, you no longer have to pay attention to the inventory level every time. Instead, you’ll be alerted whenever the stock reaches a low threshold. Less time spent on this repetitive task means more time for impactful business decisions.
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