Master managing backorders in 2024 with effective strategies to reduce wait times, keep customers happy, and maintain a strong brand reputation.
When a customer orders something that won't arrive right away because it's temporarily out of stock, that item is on backorder.
In 2024, this could happen because the item sold out faster than expected (lucky you!) or because there wasn’t enough supply to meet the demand.
The product might still be in the manufacturing process or just low in stock—in that case, you’ll need to place an order to get more.
Imagine a small electronics store running low on their popular wireless earbuds due to a delay in the supply chain.
A customer tries to order the earbuds, but the website says they’re out of stock.
The store allows the customer to place an order anyway, promising to ship the earbuds once they’re back in stock.
In this case, the wireless earbuds are on backorder.
When the supply issues are resolved and the inventory is restocked, the earbuds will be sent to the customer (and hopefully, they haven’t gone crazy without their music!).
It’s surprising they managed without their favorite tunes in 2024!
Knowing how to deal with backorders is crucial if you own a business, especially in 2024 when supply chain challenges continue to be a concern.
We’ll go over some strategies to help you manage backorders effectively.
In this article:
Before learning how to manage backorders in 2024, it's important to understand why they happen.
Backorders can occur for various reasons, like the kind of product, the speed of production, and shifts in demand.
When demand for a product suddenly jumps in 2024, backorders are likely to occur.
This unexpected sales boost can happen for several reasons.
Maybe your marketing campaign worked better than expected, or a celebrity like Kim Kardashian endorsed your product.
It could also be due to a sudden increase in the product’s popularity or a seasonal trend that influenced demand.
Demand for toilet paper skyrocketed by 845% during the COVID-19 pandemic as people began panic buying, a trend that still influences stock management strategies in 2024.
Similarly, during the 2023 wildfire season, the surge in demand for air purifiers caused backorders as people rushed to buy them for protection against poor air quality.
These lead to backorders, pushing companies to find new ways to meet the overwhelming demand.
Safety stock is the extra amount of an item kept in inventory just in case it sells out quicker than expected.
In simple terms, it’s the backup stock that helps prevent disruptions in sales.
If your business runs out of regular inventory and the safety stock isn’t enough to meet customer demand, backorders will happen.
Using better inventory management systems and maintaining the right amount of safety stock can help avoid this issue in 2024.
Each business has its own safety stock level. You can calculate your safety stock with this formula:
Safety Stock=(Peak Daily Usage×Maximum Supply Time)−(Average Daily Usage×Average Supply Time)
For example, let’s say a small bakery sells fresh bread.
The maximum number of loaves sold in one day is 200, while the average is 150.
It takes 20 days to receive a new batch of ingredients after placing an order, while the average lead time is 10 days.
Using the formula:
[200 x 20] - [150 x 10] = 2,500
In this case, the average safety stock for the bakery would be 2,500 loaves of bread.
If your manufacturer or supplier can’t deliver your order on time, you might run out of stock.
This break in the supply chain can lead to backorders.
Problems with manufacturers or suppliers can happen for various reasons.
For instance, if they run out of the raw materials or equipment needed to make your order, they might need more time to deliver.
Or, if the manufacturer or supplier temporarily shuts down due to an accident or disaster, it could slow down production in 2024.
The time a backorder takes depends on several factors, like the type of business, the products being sold, the production process, and the reasons for the delay.
On average, a backorder takes about 14 days.
Even with high demand, you’ll want to speed up the process since the customer has already paid for the item.
You might need to ramp up production and ship the items as soon as they’re back in stock.
Backorders can’t always be avoided, but as a business owner in 2024, it's important to keep the wait time as short as possible.
When backorders occur, it’s important to manage them wisely.
If you handle your backorders well, customers might stick with you despite the longer wait times instead of going to your competitors.
Managing backorders can be tough. But by staying in touch with your customers, predicting product demand, working with multiple suppliers or distributors, and offering incentives on backorders, you can make the order management process smoother.
When you realize that certain items are on backorder, your first step should be to reach out to the customers who purchased those items.
Send an email or text message right away to let them know about the delay.
Make sure to give them the option to reply to your message.
If you don’t hear back from the customer in a few days, have a salesperson follow up with a phone call.
Assume that the customer might have missed your message—it’s better to inform them twice than not at all.
Update the product page to reflect that these items are on backorder so new customers are aware of the shipping delay.
As soon as your manufacturer or supplier provides a timeline, update your customers on when they can expect their orders.
Accurately predicting when backordered items will arrive helps you keep customers informed.
It also allows you to update new customers who might want to buy out-of-stock products.
However, inventory forecasting can be tricky.
You don’t want to risk disappointing customers with another shipping delay.
That’s why it’s best to estimate arrival times only after you have all the necessary information.
For instance, if your products come from a manufacturer or supplier, wait until they provide details on the cause of the backorder and real-time updates on production.
If your business handles the production, meet with your team to figure out the reasons for the delay and determine when the items will be ready to ship.
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If you face backorder issues more than twice in 2024, think about partnering with two or three suppliers or distributors who offer similar products.
This way, if one supplier can’t fulfill your orders, you can rely on the others to help with both regular and backordered items, reducing wait times for your customers.
For example, imagine you run a store that sells electronic gadgets and rely on a single supplier for your inventory.
If that supplier experiences delays, it can hold up your orders and lead to backorders.
But if you work with two or more suppliers, you can turn to the others to keep your stock moving when one supplier falls behind.
Having multiple sources can help you manage backorders better and fulfill orders more quickly and efficiently.
Anticipating product demand can help you manage backorders more effectively in 2024.
Sometimes, it’s easy to predict high demand.
For example, demand for gardening tools usually spikes in the spring when people start planting their gardens.
Or, demand for outdoor furniture increases during the summer months.
Other times, you might need to do a detailed market analysis to gauge overall demand.
In either case, predicting product demand helps you keep extra stock on hand.
You can use metrics like sales trends to help forecast demand.
This way, you can reduce backorders by having more inventory available, so you can fulfill more orders without delays.
When items are on backorder, customers have to wait longer to get their orders.
If they can find the same products readily available at other stores or websites, they might choose to shop elsewhere.
To encourage customers to stick with you despite the longer wait, offer incentives for backordered items.
Even if the delay is just five or ten days, giving incentives in 2024 can make customers feel that waiting for your products is worth it.
Incentives can be things like free shipping or small gifts.
Free shipping can sway customers' decisions, making it a great incentive for backordered items.
Similarly, offering small gifts can boost customer satisfaction and engagement.
Gift-giving helps build trust and can improve customer loyalty.
If a customer orders both in-stock and backordered items, send the in-stock items right away.
Don’t hold off on shipping until everything is in stock.
Although it might cost a bit more to ship two packages instead of one, it can enhance the customer experience in 2024.
This way, they’ll get at least part of their order within the promised time.
To manage costs, use different shipping methods.
For example, you could use economy shipping for the in-stock items and a faster shipping option for the backordered items.
How you manage backorders in 2024 can impact your brand’s reputation.
A high backorder rate means customers might not get their orders on time.
If you don’t find a way to handle backorders, you might struggle to fulfill orders and meet customer expectations.
This could result in unhappy customers and unfavorable feedback.
By managing backorders well, you can keep your customers happy and maintain cash flow even when items are out of stock.
If you’re handling shipping yourself, eLogii can make the process easier.
eLogii helps you plan delivery routes for multiple drivers, saving you time and money.
It also sends automatic delivery updates to customers and provides proof of delivery once the order is completed.
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