Backorder

A backorder is an order accepted for a product that is currently out of stock, with a commitment to ship once inventory becomes available. It allows businesses to capture sales for temporarily unavailable items rather than losing customers to competitors.

How Backorders Work

Basic Process

Customer orders item
        ↓
Item out of stock
        ↓
Order placed on backorder
        ↓
Customer notified of delay
        ↓
Inventory received
        ↓
Backorder fulfilled
        ↓
Item shipped to customer

Backorder vs. Out of Stock

Value of Backorders

Without backorder:
Product OOS for 2 weeks
10 orders/day lost = 140 lost sales

With backorder:
Same period, accept backorders
100 of 140 customers place backorder
71% of sales saved

Backorder Policies

Key Decisions

Payment Options

Option 1: Charge at order
- Immediate revenue
- Risk of cancellation/refund
- Customer commitment

Option 2: Charge at ship
- No refund hassle
- Delayed revenue
- Easier cancellation

Managing Backorders

Best Practices

1. Set realistic expectations
2. Communicate proactively
3. Allow easy cancellation
4. Prioritize by order date (FIFO)
5. Track and report metrics

Communication Timeline

Day 0:  Order confirmed, backorder status clear
Day 7:  Update: "Still awaiting inventory"
Day 14: Update: "Stock arriving Feb 20"
Day 20: "Your order has shipped!"

Backorder Email Templates

Initial Confirmation

Subject: Order Confirmed - Item on Backorder

Thank you for your order!

Item: Widget Pro - Blue
Status: On Backorder
Expected ship date: February 15, 2026

We'll email you when it ships.
You can cancel anytime before shipment.

[View Order] [Cancel Order]

Shipment Notification

Subject: Great News - Your Backordered Item Has Shipped!

Your wait is over!

Item: Widget Pro - Blue
Status: Shipped
Tracking: 1Z999AA1012345678
Estimated delivery: February 18, 2026

Thank you for your patience!

Backorder Fulfillment Priority

FIFO Approach

Backorders received:
1. Order 100 (Jan 5)
2. Order 101 (Jan 6)
3. Order 102 (Jan 8)

Inventory received: 50 units

Fulfill in order:
1. Order 100 ✓
2. Order 101 ✓
3. Order 102 (partial or next shipment)

Priority Exceptions

• VIP customers
• Paid expedited shipping
• Wholesale/large orders
• Time-sensitive needs

Backorder Metrics

Key Performance Indicators

Tracking Dashboard

Current Backorders: 47 orders
Oldest: 12 days
Expected fulfillment: 80% within 7 days
Total value: $4,750

Partial Fulfillment

Split Shipment Option

Order: 5 units of Widget
In stock: 3 units

Options:
A) Ship 3 now, backorder 2
B) Wait and ship all 5 together
C) Customer chooses

Factors:
- Customer preference
- Shipping cost impact
- Product type

Technology for Backorders

System Requirements

• Backorder flag in OMS
• Available-to-promise (ATP) logic
• Customer notification triggers
• Fulfillment queue management
• Reporting and analytics

Automated Workflows

When inventory received:
1. System checks backorder queue
2. Allocates to oldest orders first
3. Triggers fulfillment
4. Sends customer notifications
5. Updates backorder metrics

Backorder Challenges

Common Issues

When to Accept Backorders

Good Candidates

• Popular items with predictable restock
• Known restocking date
• Customer-requested items
• Pre-orders for new products
• Seasonal items

Avoid Backorders When

• No idea when stock arriving
• Product being discontinued
• Very long lead times
• High likelihood of cancellation
• Poor supplier reliability

Backorder Best Practices

For Customers

1. Clear backorder status at checkout
2. Estimated ship date shown
3. Easy cancellation process
4. Regular status updates
5. Shipping when ready

For Operations

1. Accurate inventory forecasting
2. Regular backorder review
3. Supplier communication
4. Priority system in place
5. Cancel stale backorders