What is a backorder? Find answers to all your inventory questions and learn how backordering fits into your retail strategy.
A backorder is when a customer purchases a product that is currently out of stock, with the understanding it will be shipped once inventory is replenished. The sale goes through. Fulfillment is deferred. The business keeps revenue it would otherwise lose to a competitor.
Backordering is a key part of modern inventory management strategies, helping retailers balance stock levels, meet customer demand, and maintain sales momentum. Mismanaged inventory is one of the fastest ways to lose customers and profitability. Overstocking ties up capital in products that may sit unsold, while frequent stockouts can drive shoppers to competitors. Strategic backorder management allows businesses to keep selling in-demand products, even when supply chain disruptions occur, without over-investing in storage space.
This guide covers what backorders mean, why they happen, how they differ from being out of stock, and best practices for managing them to protect both customer satisfaction and your bottom line.
What Does Backordered Mean?
When an item is backordered, it has sold through current inventory but the retailer or supplier expects more to arrive. The customer can still place the order and receive an estimated delivery date. The product is reserved for them.
This is the key distinction from out of stock. An out-of-stock item has no confirmed restock date and cannot be purchased. A backordered item has a restock timeline and is actively being sold, just not yet fulfilled.
For businesses, that difference matters because backordering keeps demand visible and revenue flowing during a temporary supply gap. An item that flips to out of stock disappears from the purchase path entirely.
What Causes Backorders?
Backorders happen when product demand exceeds available inventory. Common causes include:
- Sudden spikes in demand
- Supplier or manufacturing delays
- Low safety stock levels
- Inaccurate demand forecasting
- Transportation or customs delays
Incorrect sales predictions. Sales forecasts built only on historical data miss unexpected demand surges. Using a combination of past trends, real-time sales data, and market insights improves demand planning and reduces backorder risk.
Inaccurate tracking and data analysis. Manual inventory tracking increases the risk of errors. A modern inventory management system lets businesses monitor stock in real time, preventing shortages from going unnoticed until it is too late.
Supply chain disruptions. Delays from suppliers, shipping carriers, or manufacturing facilities can push products into backorder status even when forecasts are accurate. Building relationships with multiple suppliers reduces this risk.
Backorder vs. Out of Stock vs. Pre-Order
These three terms are often used interchangeably but they mean different things for customers and businesses:
Status | Definition | Can the Customer Buy? |
|---|---|---|
Backorder | Temporarily out of stock but expected to be replenished | Yes |
Out of Stock | No inventory available; no confirmed restock date | No |
Pre-Order | Not yet released or received for the first time | Yes |
A backorder and a pre-order both allow customers to purchase before the item is physically available, but they describe different situations. A backorder is for a product that already exists in your catalog and sold through. A pre-order is for something new that has never shipped.
Advantages of Backorders
Increased sales. Instead of turning customers away, backorders allow you to keep selling high-demand products while awaiting restock. This keeps revenue flowing and maintains customer loyalty.
Improved customer satisfaction. Customers appreciate the ability to secure an item rather than repeatedly checking for availability. Communicating accurate timelines builds trust.
Streamlined inventory management. Marking items as backordered keeps them in your inventory system with assigned SKUs, making fulfillment faster when stock arrives.
Optimized storage space. Running lean inventory reduces warehousing costs. Backordering lets you operate with lower on-hand quantities without losing sales opportunities.
Better demand insights. Tracking which items go into backorder most frequently guides purchasing decisions and helps you adjust safety stock levels. Monitoring your inventory turnover ratio alongside backorder frequency gives you a clearer picture of where to increase buffer stock.
Challenges of Backorders
Risk of cancellation. If customers experience long delays, they may cancel and purchase elsewhere.
Increased operational workload. Managing backorders requires supplier communication, updated purchase orders, and customer notifications, all of which increase labor costs.
Payment complications. If payment is only processed at shipping, expired credit card information can create fulfillment delays when inventory finally arrives.
How to Manage Backorders Effectively
Maintain accurate, real-time inventory visibility. If your system does not reflect actual stock levels immediately, you will oversell, undersell, and make poor reorder decisions. Integrating your inventory system with your order management and EDI platform through Orderful's order-to-cash automation keeps data synchronized automatically across every channel.
Communicate clearly with customers about expected fulfillment dates. The moment an item goes into backorder, customers who have already purchased it need to know. Provide an estimated ship date, keep it updated if it changes, and give them a clear path to cancel if the wait does not work. Most customers will accept a delay if they are kept informed.
Diversify your supplier base to reduce dependency on a single source. Qualifying at least one backup supplier for your highest-volume SKUs gives you options when a primary source has delays.
Set reorder points based on both sales data and supplier lead times. A reorder point built on average daily sales multiplied by supplier lead time, plus a safety stock buffer, prevents you from hitting zero before the next shipment arrives. Adjust those points before peak seasons, not after demand has already arrived.
Offer partial shipments when possible. If a customer ordered five items and three are in stock, ship the three. Customers who receive part of their order are less likely to cancel the remainder.
Use technology to automate updates and order tracking. One of the most consistent drivers of backorder problems is slow information flow between trading partners. When a supplier's inventory update takes days to reach your system, you lose time you cannot afford during a supply crunch. EDI eliminates this lag.
How EDI Helps Prevent and Manage Backorders
Backorders are fundamentally an information problem. They happen when demand data, inventory data, and supplier data are not synchronized in real time. EDI is the infrastructure that keeps those data streams aligned.
The EDI 846 inventory inquiry document gives suppliers a live view into your stock levels so they can anticipate replenishment before a stockout occurs. This is the foundation of vendor-managed inventory, where the supplier proactively manages reorders based on your actual inventory data rather than waiting for you to place a purchase order.
The EDI 856 advance ship notice tells you exactly what is in transit and when it will arrive, so you can give customers accurate delivery estimates rather than guesses. When the 856 flows automatically into your systems, you know the status of inbound inventory in real time rather than waiting for a phone call or email from your supplier.
The EDI 855 purchase order acknowledgment confirms your reorder has been received and accepted by the supplier. Without it, a purchase order sent during a backorder event can sit unacknowledged for days, creating uncertainty about whether restocking is actually in motion.
When these documents flow automatically through a platform like Orderful rather than through email and manual data entry, the time between a demand signal and a supplier response compresses significantly. Orderful's EDI platform validates every transaction in real time and routes updates directly to your systems, so backorder-related errors are caught before they become chargebacks or customer complaints. You can review our plans to see what that looks like for your trading partner setup.
Ready to Reduce Backorders With Better Inventory Visibility?
Orderful's cloud-based EDI solutions help businesses integrate inventory data, automate order processing, and maintain smooth operations even during supply chain disruptions. Check out our plans or book a demo to see how it works.
Common Questions About Backorders
What Does Backorder Mean?
A backorder means a product is temporarily out of stock but still available for purchase. The business processes the order and fulfills it once inventory is replenished. It differs from out of stock because a restock is expected and the item can still be bought.
What Is a Backorder in Business?
In business, a backorder is an order placed for a product that is currently unavailable but expected to be replenished. It allows companies to keep generating sales during temporary stockouts rather than losing the transaction entirely.
How Long Do Backorders Take?
Backorder timelines vary. Some resolve within days, while others take weeks or months depending on supplier lead times and the nature of the supply disruption. The best practice is to give customers a realistic estimate and update it proactively if the timeline changes.
How Does Backorder Management Work?
Backorder management involves tracking sold-out items, coordinating with suppliers for restocks, and updating customers on delivery timelines. Effective management also includes setting reorder points, monitoring inbound shipments via EDI documents like the 856 advance ship notice, and offering partial fulfillment where possible.
What Is the Difference Between Backorder and Out of Stock?
A backordered item has a confirmed restock date and can still be purchased. An out-of-stock item has no confirmed restock date and cannot be purchased. Backordered means a customer can still get the product. Out of stock means they need to look elsewhere.
What Is the Difference Between Backorder and Pre-Order?
A backorder is for a product that was previously in stock and sold out. A pre-order is for a product that has not yet been released or received. Both allow customers to purchase before the item is available, but they represent different inventory situations.
Can a Backorder Be Canceled?
Yes. Customers can usually cancel before the item ships, particularly if the delay is longer than originally expected. Clear cancellation policies and proactive delay notifications help reduce disputes and maintain customer trust.
What Does It Mean for an Item to Be Backordered?
When an item is backordered, it is sold out but expected to be restocked within a certain timeframe. Customers can purchase it now and receive it once inventory is replenished. Retailers typically communicate an estimated ship date at the time of purchase.
