When your warehouse retail business is low on inventory and saddled with backorders, your company is at significant risk of losing loyal customers to your competitors who don’t have these problems. While stockouts aren’t out of the ordinary, especially given the ongoing issues with the global supply chain, many business owners are still under the false impression that there is no solution for their back-ordered inventory. Most retailers still believe that when an item runs out, all they can do is wait.
While this might be true for merchandise still in the early stages of production, consumers get impatient when you’re selling through stock that they expect you have on hand. There is no question that healthy sales on a single product are always a good sign. But an inefficient backorder process can swiftly reverse these positive results and drive an established eCommerce business back into obscurity.
However, most stock shortages are simply unavoidable, like those instigated by the COVID-19 pandemic. One of the most effective ways to handle future supply chain shocks like this is to find a proven and reliable 3PL partner like WiSys to help you manage unexpected shortages more efficiently.
In this post, we’ll cover a few best practices for backorder management before explaining how automated warehouse management systems help warehouse distributors and retailers keep pace with growing consumer demands.
What is back-ordered stock?
Businesses create backorders for merchandise that can’t be fulfilled at the time of purchase because the manufacturer is experiencing delayed distribution or they, as sellers have sold out of the item entirely. For a product to be on backorder and not just “out-of-stock,” it must be currently in production and available from the manufacturer.
When orders start backlogging, the demand for that particular product has exceeded the seller’s available stock. Backordered merchandise could be attributable to an unusual spike in demand, poor warehouse inventory management, supply chain disruptions, or lack of an adequate internal policy covering how much safety stock you should retain.
Why offer back-ordered stock?
If backlogged orders threaten your business’s brand reputation, why offer them as a solution in the first place? This is a question that most distributors eventually come to ask. The best answer is that it always comes down to the specific product. For instance, processing backorders for inexpensive commodities which are easily found elsewhere is almost always ill-advised. This approach is counterproductive because the small profit margins on these items rarely justify the additional effort it takes to process them.
There are a few important factors to consider that always impact the time and resources it takes to get a back-ordered piece of merchandise to your customer in a timely manner. Estimating your backlogged fulfillment times requires accurate and immediate insight into your supply chain that only a well-implemented warehouse management system can provide.
In today’s warehousing and distribution environment, long, overly complex supply chains are never easy to predict. When your backorders start piling up, it is primarily because businesses lack the appropriate insight into their supply chains that tell them how long it will take to acquire a given product to meet current demands. Lack of real-time supply chain visibility and traceability is just one of the main reasons warehouses stock out of popular items before their backorders can be filled.
Companies that don’t use 3PL providers like WiSys to manage their backorders should expect to incur more labor overhead and increase their customer service capacity. Retailers that deploy dropshipping methods, however, can leverage WMS solutions to automate shipments and eliminate additional expenses by delivering their backorder merchandise directly from the manufacturers.
Ultimately, the decision to accept backorders depends on whether or not you need to add resources to process these items and how much the extra time and effort cut into the product’s expected profit margins. Automating your distribution with a WMS is one way to process more back orders without bringing on more manual operators and customer service support. These systems go a long way in helping you capture additional sales and drive more revenue.
Managing your backorders with an AI WMS
Processing backorders can advantage companies in several ways, especially for retailers restricted by warehouse storage capacity. When you can accurately track your supply chain in live time with an automated WMS solution, you can confidently take the steps required to avoid hitting your maximum warehousing capacity and the excess storage fees associated with the additional containers and warehouse space.
Whenever you encounter an unexpected spike in demand, the extra insight and traceability a warehouse management system provide let you streamline your backorder fulfillment process and eliminate the prolonged wait times that drive valuable customers to the competition. Dropshipping your backlogged merchandise directly from the manufacturer, if you have the capacity, will allow you to eliminate inventory-carrying expenses entirely.
Best practices for processing your backlogged orders
Implementing the right inventory management software is always a step in the right direction for expediting your back-ordered merchandise, but you’ll still need to develop unique customer service and accounting processes to ensure that your buyers understand how much they’re paying and when to expect the requested out-of-stock item.
Requests for backlogged items don’t represent completed sales, so you’ll have to identify an effective means of getting the order on your books without logging it as a final purchase. WMS software gives you a concise tool for reconciling these accounting records, so you’re not counting canceled orders as finished transactions.
The advanced order management systems included with WMS will help you deliver your backlogged goods on time and process requests for shipping upgrades more efficiently. These inventory management systems streamline customer communications by providing an accurate delivery date range and periodic status updates until the item ships to the final destination as a completed sales order.
Trace and manage your inventory with WMS software from WiSys
Our team of skilled automation technicians and software engineers help small to medium-sized organizations improve their backorder fulfillment processes through leading-edge warehouse management software solutions.
For more on how we can help increase your warehouse productivity with a best-in-class 3PL provider, complete our online request for contact form or contact us now at 770-955-3550.