Definition
A backorder occurs when a customer places an order for an item that is currently out of stock, with the expectation that the item will ship when inventory is replenished. Backorders are distinct from stockouts: a stockout means demand is lost, while a backorder means demand is captured but fulfillment is delayed. Backorders indicate that demand exists but inventory planning failed to anticipate it. High backorder rates signal inadequate safety stock, poor demand forecasting, or long supplier lead times that are not buffered correctly. Tracking backorder fill rate — the percentage of backorders fulfilled within the promised window — is a key service level metric.
Why It Matters
Each backorder carries hidden costs: expedite freight, customer service labor, and customer attrition risk. Studies show 30–40% of customers who experience a backorder do not reorder from that supplier. Reducing backorder rates by 10 percentage points typically improves customer retention meaningfully and cuts expediting spend. Safety Stock Calculator →
Frequently Asked Questions
What is the difference between a backorder and a stockout?
A stockout means demand arrives when there is no inventory and no fulfillment commitment — demand is lost. A backorder means the order is accepted with a future ship date when inventory is replenished. Backorders retain the sale; stockouts lose it.
How do you calculate backorder rate?
Backorder rate = (number of order lines placed on backorder / total order lines received) × 100. A rate above 2–3% for a distributor with normal lead times signals an inventory planning problem.
How can I reduce backorders?
Reduce backorders by increasing safety stock on high-velocity items, improving demand forecast accuracy, shortening supplier lead times through supplier development, or qualifying alternate suppliers for critical SKUs.