As a retailer, what action do you take when your store goes out of stock? What do you do when the demand for your product surges? How do you meet the demand when you have limited stocks? What if there is a sudden surge in your backlog? If you can provide relevant answers to the questions above, then you know how to control your inventory. However, what if the demand increases beyond what your stock has?
Once you can’t fulfill your customers’ demand, they will shift their focus to your competitors. It means you will lose sales, and it will affect your overall revenue. In this situation, you need backorder features when faced with an increase in demand. It requires careful planning to ensure the orders are fulfilled in a timely fashion.
What is Backorder?
The meaning of backorder is a process where a supplier or retailer takes orders for a particular order that is not available in your inventory. Businesses must deal with backorders when out-of-stock issues arise. However, what causes backorders? Understanding what causes backorders is a key to dealing with the issues of backorders.
Causes of backorders
Inventory miscount can happen when there is a stock inwarding. Most times, it is because of human error why we experience inventory miscount. For instance, a store owner might mistakenly miscount an available product only to discover it is beyond the estimated amount.
Delayed inventory sync
Delayed inventory sync also contributes to backorders. For instance, you sell products through several channels while keeping a central inventory through channels.
Expired and damaged products not updated
Damaged or expired products can cause backorders; when a product with an expired shelf life with the information not updated in the system, it causes backorders or shortage. Furthermore, it inflates the inventory count in your store.
System outage or error
Another significant reason why you might experience backorder is due to system outages or errors. It occurs when the inventory doesn’t get updated frequently as required. Once the inventory doesn’t show currently available stocks, it causes extra orders to show in the store.
Other causes of backorders
Besides these, damaged products cannot be counted in inventory, and once the system doesn’t update such information, it affects the number of items in-store. Furthermore, offline product billings might not be updated in the inventory on time.
Another reason for backorder is the issue of employee theft. When an employee illegally takes an item out of the inventory, they hardly update such information on the system because it can be noticeable. In such a situation, you might have a shortage from what you can see in your system.
Inventory misplacement is another common cause of backorders. For instance, when an order comes into the warehouse, once the staff cannot find the complete item in the warehouse, it creates a backorder situation. Additionally, an increase in order velocity during the festive and holiday period can cause a backorder once the system isn’t updated regularly.