Backorder

Backorder is a distribution term that refers to the status of items on a purchase order in the event that some or all of the inventory required to fulfill the order is insufficient to satisfy demand. This differs from a forward order where stock is available but delivery is postponed for another reason.

Backorder Cost is a cost incurred by a business when it is unable to fill an order and must complete it later. A backorder cost can be discrete, as in the cost to replace a specific piece of inventory, or intangible, such as the effects of poor customer service. Backorder costs are usually computed and displayed on a per-unit basis.

Backorder costs include: costs of expediting, loss of customer goodwill and loss of sales revenues.

Many vendors and retail businesses run into the problem of having backordered items, when they are waiting for the Manufacturer of a certain product(s) to deliver the expected goods. The manufacturer will give the vendor an expected date as to when the backordered item should be received. This date then becomes the backorder date for that specific item(s).