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Backordering: Keeping Pace with Demand

businesses often face the challenge of balancing supply and demand

  • Written by Alex Dolce
  • Published on December 27, 2023
  • Time to read 9 minutes

Introduction

Commerce is constantly moving, and so is demand for different products. That’s why businesses often face the challenge of balancing supply and demand. When a popular product flies off the shelves faster than expected, companies are in the sticky situation of deciding whether to halt sales temporarily. Luckily, they have another option to help solve this issue of stopping revenue, which is backordering. This process allows your business to deal with products that are out of stock and the customers that want them and keep revenue flowing. 

So, in today’s blog, we go over what backordering is, its benefits, how to navigate the challenges, and how to make the most of the backordering process. That way, you can know more about it if it happens to you and your business. 

Let’s get into it!

What is Backordering?

Backordering, as we mentioned, is a strategy for when products go out of stock. So, it involves accepting orders for products currently out of stock, with the promise of fulfilling those orders when products become available again. Simply put, it’s a promise to the customer that they will get the product right when it returns to warehouse shelves. This practice allows businesses to continue sales even when their inventory is temporarily gone. Therefore, it helps maintain customer interest and loyalty. Even if the product doesn’t immediately go out to the customer, it still helps them know they will get it eventually, rather than simply turning them away with nothing else to offer. 

So, what are the other benefits that backordering has to offer? Let’s check it out.

Backordering Bonuses

Some of the benefits of putting back ordering into practice include:

1. Keeping Customers Happy

When a product is in high demand, the last thing a business wants is to turn away potential customers, especially when they’re very willing to buy that popular product. So, backordering allows companies to accept orders on the product even if it’s not in stock yet. Therefore, despite temporary shortages, the business demonstrates a commitment to customers and their needs. The customer knows the product they want will get to them eventually.

2. Not Losing Money

Rather than stopping sales for certain products, backordering allows businesses to keep revenue flowing. So, customers are willing to wait for a popular item and be promised that item in return for a benefit to the company with their payment for that product.

3. Managing Your Inventory

Backordering is also a helpful tool for managing inventory effectively. It gives an inside look into demand trends, as you know which product is doing the best when it runs out the quickest. Therefore, businesses can ensure they produce or order more stock to meet future demand and avoid the need for future backorders.

Now that we’ve gone over the benefits of backorder, we’ll give you tips on handling problems if and when they arise.

Figuring Out the Challenges

If you ever run into issues with backordering, such as unpredictable delays, or problems with suppliers or customers, here are some tips to help:

1. Keep Communication Clear

Communicating well and clearly with customers is crucial for any business. So, especially if things go out of stock, you should communicate with your customers if doing backorders. It’s beneficial to ensure customers know about the expected delivery timeframe and update them on any changes or delays. Therefore, they can know their order and your commitment to them. Plus, you’re building further trust between you and the customer when communicating this way.

2. Keep Expectations at Bay

Setting realistic expectations is critical to managing customer satisfaction. So, you should give accurate estimates of delivery times. Therefore, you can prevent disappointment and make sure the customer has a better experience overall.

3. Realize Supply Chain Risks

While backordering can be beneficial, it’s not without risks. External factors such as supplier delays or production issues can hurt fulfillment timelines. Therefore, businesses need contingency plans to address such challenges. These plans (to name a few) can include diversifying suppliers (or having two or three different options), having communication protocols put in place for customers, and warehouse automation.

So, now that you know how to handle better challenges that might come up with backorders let’s go over how to make the most of using backordering. 

Implementing Backordering Successfully

To use this practice to benefit you and your business to the highest ability, here are some things you can do:

1. Tech Up!

Using different technology can help make backordering easy and stress-free. The remarkable technology you can use includes inventory management systems and customer relationship management (CRM) tools. Automation gadgets like these can help businesses track orders, update customers, and manage inventory more efficiently. To take it a step further, you could use a 3PL with all these technologies in place! Either way, the tech will help smooth out backordering and make both you and your customer happier. 

As mentioned before, customers want them when things go out of stock. So, regularly looking at sales data and customer behavior like this helps accurately identify patterns and forecast demand. This proactive approach allows businesses to adjust their backordering strategy in real-time.

3. Seek Customer Feedback

As a final tip, encouraging customer feedback on the backordering experience can give you great insights into how well it’s working out on the customer side of your business. Then, you can use this information to clean up the process, figure out any issues, and enhance overall customer satisfaction.

Wrapping Things Up

In the ever-evolving landscape of commerce, backordering is a helpful solution to supply and demand challenges. Not only does it allow you to gain control if you’re out of stock on products, but it also helps keep customers and revenue up. If you practice using backorders in your business, you can use the tips in this blog to help. That way, you can use backordering to navigate temporary shortages and maintain customer trust, ensuring a steady revenue flow and optimizing inventory management. So, hopefully, with the help of this blog, your business can crush it (especially this holiday season).

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