Back Order

A back order occurs when a customer places an order for a product that is currently unavailable or out of stock. A customer can place a back order with the understanding that the ordered product will be shipped to them as soon as it becomes available.

Back orders are usually created because demand for a certain product outweighs the supply. If a company has only 10 units of a certain product, and 30 customers place an order, then 20 customers must wait until additional products become available to ship those items.

In addition, placing too many backs orders can lead to difficulty tracking inventory levels across suppliers and carriers, causing excess costs in managing those items. In this case it may be required to split up your purchases into smaller quantities from each supplier or carrier as to not infringe on their capacity.

Back orders can be an inconvenience to customers, but companies risk losing business if they do not keep track of all back ordered items. A customer could possibly choose another manufacturer that has the product in stock rather than wait for the original order to go through.

The majority of retailers try to avoid back ordering whenever possible. However, sometimes it is necessary due to lack of supply or the fact that some products are made specifically for each individual customer (made-to-order) and cannot be held in inventory like other products. It is important for manufacturers and retailers to communicate openly with customers when placing a back order so there are no misunderstandings about when their product will ship out.

What is backorder?
Supply Chain Options: Back Order vs. Backlog
Back Order Definition – Operations & Supply Chain Dictionary