Smart Warehousing Feb 28, 2023 10:58:44 AM 7 min read

Backorder vs. Out of Stock: Stock Shortages Explained

Have you ever found the perfect item on a website, only to discover that it's out of stock? Or perhaps you've placed an order for a product, only to receive an email later saying it's on backorder and won't be available for several weeks? Chances are, you've experienced both of these scenarios — and you may not have realized there was a difference between the two. 


Understanding the distinction between backorder vs. out-of-stock is crucial not only for customers, but also for businesses. When managing product availability, it can often feel like you're walking a tightrope: you need enough stock to meet customer demand, but not so much that you're left with a warehouse full of unsold goods. And when explaining why a product is out of stock or on backorder, things can get even trickier. But never fear! Let’s explore the differences between "backorder vs. out of stock," shed some light on these often-misunderstood terms and leave you feeling confident in your business’s ability to navigate the tricky waters of product availability.


What is a Backorder?

Backordering is a simple, yet powerful tool for managing inventory. It occurs when a customer orders a product that is currently out of stock. Despite the product's unavailability, the customer is still allowed to place an order, which will then be fulfilled as soon as the product becomes available. This process not only helps you, as a business, keep track of demand for out-of-stock items, but it also allows you to make informed decisions about future inventory purchases.

The Benefits of Backordering

As a business, you're always looking for ways to improve your customer experience and increase your bottom line. So, why consider accepting backorders? It’s a simple solution, but the benefits are far-reaching.

When you allow your customers to place backorders, you're providing them with a level of customer service that they won't soon forget. Your customers will appreciate the transparency and honesty, and they'll be more likely to continue doing business with you. 

The Customer Experience with Backorders

Backorders can be a double-edged sword for any business. On the one hand, they can signify high demand for a product. On the other hand, they can result in frustrated customers who feel left in the dark about the status of their order. But with a bit of finesse and attention to detail, backorders can offer an opportunity to impress your customers and keep them coming back!

The keys to ensuring a positive customer experience with backorders are transparency and communication. The moment a customer's order is placed on backorder, let them know. Offer them the choice to wait for the product to become available or to cancel their order. If they choose to wait, keep them in the loop with regular updates on the expected delivery date. And when the product finally arrives, ensure it's delivered promptly.

On the flip side, neglecting to inform customers about their back-ordered item or failing to meet the delivery date can quickly lead to a negative experience. This can result in lost customers, negative reviews, etc. Navigating backorders easily is all about putting yourself in your customers' shoes and delivering exceptional customer service. 


What is Out of Stock?

When a product becomes temporarily inaccessible, it’s frustrating for both businesses and customers. But what precisely does the term "out-of-stock" signify? Simply put, an out-of-stock product is unavailable for purchase due to factors such as high demand, limited supply, dead stock, or unexpected circumstances. For success in an out-of-stock scenario, it’s all about effective management and minimizing the impact on both your business and customers. 


Tackling Out-of-Stock Challenges

Managing out-of-stock situations is a delicate balance between keeping your customers informed and maintaining the right inventory levels for your business. By keeping your customers in the loop with updates on when a product will be available, offering alternative options, or even sending notifications when the product is restocked, you can demonstrate that you value their patronage and strive to meet their needs. This not only minimizes the negative impact of an out-of-stock situation on your business, but also fosters a loyal customer base that will return time and time again.


Backorders vs. Out-of-Stock: Navigating Both Situations with Confidence

When managing backorders and out-of-stock situations, clear and transparent communication is essential. This is the foundation of building trust and credibility with your customers, while avoiding confusion and frustration. By providing clear information about expected delivery dates and alternative products, you can effectively manage customer expectations and minimize the impact of the out-of-stock situation on your business.

But on a strategic level, it's important to monitor the impact of backorders and out-of-stock situations on your inventory levels and supply chain. By accepting backorders, you can effectively track demand for out-of-stock items, helping you better manage your inventory levels. 

To minimize the impact of backorders and out-of-stock situations, it is important to have a solid inventory management strategy. This can include regularly monitoring your inventory levels, predicting demand, and planning for potential out-of-stock situations. Additionally, it is important to have a reliable and efficient supply chain, so you can respond to changes in demand and supply, and minimize the impact of out-of-stock situations on your business.

By accepting backorders, you can provide good customer service and keep track of demand for out-of-stock items. Out-of-stock situations can be managed effectively, by keeping your customers informed, and by providing alternative products or notifications. With an excellent inventory management strategy in place, and by having clear and transparent communication with your customers, you can minimize the impact of backorders and out-of-stock situations, and you can provide the best possible customer experience.