When managing inventory, two terms often crop up: backorder and out of stock. While they may seem similar, they have distinct meanings and implications for both businesses and customers. This post will explain the distinctions between backorder vs out of stock, examine how each impacts your company, and offer advice on how to handle and steer clear of both scenarios for a better client experience and higher revenue.
I. Definitions: Backorder vs Out of Stock
What Is a Backorder?
A backorder refers to a product that is temporarily unavailable for immediate delivery but can still be ordered by customers. When an item is on backorder, it indicates that the business expects to restock it soon, allowing customers to place orders with the understanding that the product will be shipped once it is replenished. In this case, the customer is essentially reserving the item, and the business fulfills the order as soon as stock becomes available.
It’s important to understand the difference between backorder vs out of stock. While backordered items are expected to be restocked and available for future fulfillment, an out-of-stock product usually means there is no current timeline for restocking, and customers cannot place an order until inventory is replenished. This distinction is crucial for businesses to effectively manage customer expectations and maintain trust.
Backorders are a common practice for businesses dealing with high-demand products or items that may experience supply chain delays. While backorders can be frustrating for customers who want immediate gratification, they offer a way for businesses to retain potential sales rather than lose out entirely.
What Does Out of Stock Mean?
Out of stock, on the other hand, indicates that a product is completely unavailable for purchase. Customers cannot add it to their carts, and businesses have no timeline for restocking. Out-of-stock items are often marked as unavailable or removed entirely from online listings.
An out-of-stock situation typically occurs when inventory depletes faster than expected or due to disruptions in the supply chain. For businesses, being out of stock translates to lost sales opportunities, and for customers, it means waiting for the product to be restocked or seeking alternatives elsewhere.
Implementing order management automation can help prevent these situations by providing real-time inventory tracking and alerting businesses to low stock levels before they run out. Automation ensures smoother inventory replenishment processes and helps businesses maintain optimal stock levels, reducing the risk of losing customers due to out-of-stock scenarios. Additionally, automated systems can streamline backorders, ensuring that customer expectations are managed effectively while maintaining operational efficiency.
See more: How Long Do Backorders Take? And Tips to Elevate The Efficiency
III. Tips for Managing Backorders
While backorders can be beneficial in retaining sales, they require careful management to avoid customer dissatisfaction and confusion. Here are some tips for handling backorders effectively:
1. Clear Communication
Transparency is crucial when managing backorders. Ensure that customers are well-informed about the backorder process, including:
- Expected shipping dates: Let customers know when they can expect the product to ship, whether it’s a few days or weeks.
- Order confirmation emails: Include backorder details in the order confirmation email to avoid misunderstandings.
- Status updates: Provide customers with regular updates on their backorder status, including any changes in delivery timelines.
Clear communication fosters trust and helps prevent frustration, especially if there are delays.
2. Automation Tools
Using automation tools can significantly improve the management of backorders. Automating notifications, order tracking, and status updates can save time and reduce manual errors. For example:
- Automated email alerts: Set up automated emails to notify customers when their backorder is shipped or if there are further delays.
- Inventory management tools: Use tools that track inventory levels in real-time so you know when to reorder items before they run out.
These tools streamline the process and enhance the customer experience by providing real-time information.
GritGlobal’s BigCommerce BackOrder is a powerful tool designed for automating backorder management. This feature simplifies the process of managing and notifying customers about backordered items. It automatically sends updates on order statuses and enhances inventory control. With this tool, customers are promptly informed about backordered products, given expected restock dates, and provided with a clear path for fulfillment once the items become available again.
3. Flexible Fulfillment Strategies
Sometimes, the backorder situation can be avoided or managed more efficiently by employing flexible fulfillment strategies, such as:
- Split shipments: If part of an order is available and the rest is backordered, consider shipping the in-stock items immediately and sending the backordered items once available.
- Dropshipping: If a supplier has the item in stock, consider dropshipping the backordered product directly to avoid delays.
By adopting flexible fulfillment strategies, businesses can minimize the negative effects of backorders and maintain customer satisfaction. Understanding the distinction between backorder vs out of stock is key to make automated inventory management effectively. Backorders allow customers to reserve items that will be restocked soon, while out-of-stock situations may result in lost sales due to unavailable products. With adaptable fulfillment processes, businesses can better handle backorders, prevent stockouts, and meet customer expectations more effectively.
4. Transparency
Transparency is key in managing backorders. Always keep your customers in the loop regarding:
- Restocking timelines
- Potential delays
- Options for canceling or modifying the order if the wait is too long.
Being upfront with your customers builds trust and can prevent negative reviews or complaints.
Watch more: What Does Backorder Mean? – Everything to Know About This Key Solution
IV. Tips for Avoiding Out of Stock Situations
Out of stock situations can significantly harm your business, but there are several strategies you can employ to minimize their occurrence.
Accurate Demand Forecasting
Accurate demand forecasting is one of the most effective strategies to avoid stockouts. By analyzing historical sales data, market trends, and seasonal patterns, businesses can predict which products will experience high demand and plan their orders accordingly. Advanced forecasting tools can also help identify potential supply chain disruptions, enabling you to adjust inventory levels proactively and avoid gaps in stock availability.
Understanding the difference between backorder vs out of stock is critical in inventory planning. While backorders allow customers to place orders for items that are temporarily unavailable but expected to be restocked, out-of-stock items indicate no current availability and no immediate plan for replenishment. By leveraging precise forecasting and supply chain insights, businesses can minimize both scenarios, ensuring better customer satisfaction and improved operational efficiency.
Safety Stock Levels
Maintaining safety stock means that you have extra inventory on hand to cover unexpected spikes in demand. Safety stock is a buffer that helps protect your business against supply chain delays or forecasting errors. However, be mindful of striking the right balance, excessive stock ties up capital, while insufficient stock risks stockouts.
Supplier Relationships
Collaborate closely with your suppliers to secure timely replenishments. Negotiate terms like shorter delivery times or flexible ordering options to make restocking smoother when demand increases.
Real-Time Inventory Updates
Stay updated on stock levels across all sales channels with inventory tracking systems. Real-time updates help you make quick decisions to reorder fast-moving items and prevent overselling.
Conclusion
When comparing backorder vs out of stock, it’s important to understand the key differences and the impact each situation has on your business. Managing backorders and avoiding stockouts, you can ensure a seamless shopping experience for your customers, minimize lost sales, and keep your business running smoothly.
Curious about how GritGlobal’s BigCommerce BackOrder can optimize your inventory processes? Contact us today to learn more!
