What is Backorder?
A backorder is a customer order, or order line, that cannot be filled immediately and is held to be fulfilled when stock becomes available.
Definition
A backorder occurs when demand exceeds available inventory, and rather than canceling the order, the seller commits to fulfill it once replenishment arrives. It preserves the sale and customer relationship but introduces delay and requires tracking the open demand until it can be satisfied. High backorder volumes signal supply or planning problems and can hurt customer satisfaction. Backorders are closely related to fill rate, a key service metric measuring how much demand is met from stock on hand.
How Backorder Works in ERP
When an order cannot be fully allocated, the ERP marks the shortfall as a backorder and links it to expected incoming supply so it can be released automatically when stock is received. The system tracks backorder aging, can prioritize allocation when limited supply arrives, and may trigger replenishment or alternate sourcing. Reporting on backorders and fill rate helps measure service performance and diagnose supply gaps.
ERP Vendors with Strong Backorder
Frequently Asked Questions
How does an ERP fulfill backorders when stock arrives?
The ERP links backordered demand to expected supply such as open purchase or production orders. When the inventory is received, the system can automatically allocate it to the waiting backorders, often by priority or order date, and release them for picking. This automation ensures held orders are filled promptly without manual re-checking.
Are backorders always bad?
Not necessarily. A managed backorder retains a sale that would otherwise be lost and can be acceptable for make-to-order or long-lead items where customers expect a wait. The problem arises when backorders are frequent, ageing, or unexpected on stocked items, which signals planning or supply issues and frustrates customers.