Dealing with backorders can cause significant disruption to your workflow. It can be challenging to incorporate back-ordered items into your picking strategy, and it may cause delays in the packing process.
Backorders are caused by various factors, but the result is the same: you and your customers have to wait for the orders. However, taking the right steps can help minimize the time between inventory receipt and customer order fulfillment.
Regardless of the size of your business, backorders are inevitable. The key is how you manage them. Prioritizing customer satisfaction is crucial, and being transparent with them about any delays and providing timely updates is essential. Additionally, shipping out any other items they may have ordered can help alleviate their concerns.
A well-executed fulfillment strategy can help you segment out items that are ready to be shipped and those that are not. These are some effective ways to manage backorders, reduce their occurrence, and deliver an exceptional shipping experience.
Backorder Defined
When a customer orders an existing item that is currently out of stock, it’s referred to as a backorder. This can happen when demand exceeds supply or due to supply chain and logistics issues.
Backorders became a prevalent issue during the COVID-19 pandemic as many essential items were frequently out of stock, leading to concerns about when they would become available again.
However, backorders can also serve as a backup plan, to conserve cash flow while retaining the sale. By informing customers that more inventory is on its way, retailers can reassure them that their desired product will be available in the near future, thus retaining their trust and loyalty.
A common notification for customers would be something along these lines: “We are currently out of stock, but more inventory is on its way.” Stores may experience backorders on various products, such as toilet paper, baby formula, and lumber to name a few.
When properly managed, backorders can benefit retailers by allowing them to capture sales that might have otherwise been lost due to stockouts. It also gives them an opportunity to communicate with customers and provide updates on the expected availability of products, which can help to maintain customer satisfaction and prevent them from seeking alternatives elsewhere.
How Does a Pre-order Compare?
A pre-order is an item that is available for purchase but has never had any previous stock available. This contrasts with a backorder, which is for an item whose stock has been depleted. However, in both cases, the stock is anticipated to become available again in the future.
What About Out-of-Stock?
Out-of-stock items are products that were previously available but are no longer in stock. The crucial difference between out-of-stock items and back-ordered items is that there is currently no plan or timeframe for when the former will become available again.
Therefore, if a customer places an order for an out-of-stock item, it is more likely to warrant a refund compared to a back-ordered item. In contrast, a back-ordered item is expected to return to the shelves in the future.
How are Backorders Caused Anyway?
There are several causes of backorders, including manufacturing or supply chain delays and surges in demand. Here are some ways to recognize when backorders occur and how to resolve them.
Manufacturing and Supply-chain Delays
One of the main reasons for the increased occurrence of backorders in recent years is supply chain delays. While products may not be available at the time customers place their orders, the delays in manufacturing are expected to be resolved eventually. In many cases, high-demand items are back-ordered, and customers place orders to secure their place in line.
Demand Surge
Frequently, surges in demand can lead to items becoming back-ordered. As a result, stocks may be depleted, and additional products may need to be manufactured.
For business owners, this can be a “double-edged sword”, as you may be grateful for the interest in your products, but stressed over being able to meet demand.
However, in such cases, providing customers with an estimated time of arrival (ETA) for their back-ordered items can be challenging.
Are There Any Benefits to Backorders?
Backorders are not indicative of a poorly managed warehouse. Even the most successful companies with advanced technology face backorders at times. In fact, backorders can be a sign of a popular and highly efficient business.
Furthermore, backorders offer a few benefits. They create more space within the warehouse, which can help streamline the picking and packing process for available items.
Additionally, fulfilling backorders can be a straightforward process if you plan accordingly. The key to effectively managing backorders is to stay on top of your inventory and replenishment processes.
How Can Backorders Be Minimized?
Although backorders are inevitable, there are methods to decrease their occurrence. This is particularly true for orders that are not a result of manufacturing or supply chain delays. Keeping track of your inventory levels and maintaining regular communication with suppliers is crucial in minimizing backorders.
The Need to Communicate with Manufacturers and Suppliers
To decrease backorders, the initial step is to ensure frequent restocking of your inventory. In this regard, maintaining consistent communication with your suppliers and manufacturers is crucial.
Although supply chain delays may still occur, having a reliable contact can help to expedite the process. Moreover, establishing relationships with multiple suppliers can broaden your network and provide backup options in case of unexpected events.
For the savvy business owner, this is an “Ace” you may want to have up your sleeve.
Practice Setting Reorder Thresholds
To minimize backorders, it is crucial to restock your inventory adequately. One effective method is to establish a reordering threshold. This involves understanding the demand for your products and the duration required to receive new stock (not un-similar to knowing how far your vehicle can go on one tank of gas).
While this can be done manually, an automated solution through a complete shipping solution platform, such as ShipKey, is preferable. Setting reorder thresholds within such a system can effectively avoid back-ordered items and take the guesswork out of the equation.
A Shipping Solution Software Can Do the Heavy Lifting
One effective method to stay updated on stock levels is to make use of effective shipping software, which informs you when you reach your reorder threshold(sticking with the previous analogy, think of the low gas warning light in your vehicle).
A shipping solution software can prove to be particularly advantageous for businesses that sell products across multiple selling channels.
How Should You Manage and Accept Backorders?
When it comes to accepting backorders, it can be challenging to provide customers with a definite ETA. To mitigate this, it is helpful to clearly indicate whether a product listing is back-ordered, pre-ordered, or out of stock.
In the case of back-ordered items, it is essential to provide a specific date or date range when the item is expected to become available again. Without such information, customers may be hesitant to place their orders.
The old adage “it’s better to underpromise and overdeliver than it is to overpromise and underdeliver” holds true in this case.
How to Handle Customer Complaints and Questions About Backorders
Having a back-ordered item can increase the likelihood of customers contacting the seller to verify the status. Therefore, it’s important to offer clear lines of communication from the customer to you, as well as with the supplier.
Providing a chatbot or phone number on your website can facilitate faster turnaround times compared to email communication alone.
Thank Customers for Being Patient
When an item is on backorder, there’s a higher likelihood of cancellation than with an in-stock item. Therefore, it’s important to cater to the customers’ needs.
Adding a human touch to the notification on the screen can be very helpful. Some companies offer coupon codes for future purchases or include a gift item in the order. However, another way to express gratitude to your customers is to ship any other items they ordered.
How ShipKey Helps with Backorders
Fulfillment requirements are critical for all orders, regardless of where customers place them. Managing and fulfilling orders from different sources can be challenging, especially when it comes to backorders.
However, with the right tools, you can streamline the entire process of picking, packing, and shipping orders. This is where ShipKey can assist you. Along with the inventory management solutions mentioned earlier, ShipKey provides various features to help you efficiently navigate, organize, and ship your orders.
Place Orders on Hold Automatically
ShipKey’s automation rules enable you to set shipping parameters for orders as soon as they enter the system. Besides assigning shipping services and pickers, you can also automatically put orders on hold if they contain a back-ordered item. This helps you prioritize orders that are ready to ship without wasting time on those that cannot be fulfilled at the moment.
Split up Shipments
If an order is almost ready for shipment but has one item that is not available, you can put the entire order on hold and ship the parts of the shipment that are ready to go. This feature works seamlessly with other order management actions such as placing orders on hold and moving the relevant parts of an order into the correct status.
Moreover, ShipKey automatically updates the tracking data for each part of these split orders, ensuring accurate tracking information for your shipments.
Overcome Backorder Concerns with Shipkey
Shipping backorders can be challenging, but not to worry, there are options to handle them effectively. One approach is to split the shipments and send out the available items immediately while holding the back-ordered items until they arrive.
Alternatively, you can choose to wait and ship the entire order together. Whichever method you choose, it’s important to find the best way to fulfill and ship your orders to provide an exceptional customer experience. Affordable and expedited shipping can create a positive impression, leading to customer loyalty and repeat business.
ShipKey can help your business overcome common backorder concerns, and help to provide an efficient and exceptional customer experience.