Wait Time

TermiKnowledge - Supply Chain, Procurement and Inventory Terminologies
View All

A backorder is a request for an item which is no longer in inventory. If a particular product is temporarily out of inventory but yet still accessible to customer order, it's still on backorder. Customers buying back ordered goods will usually have to wait longer than normal to get the item. The customer's wait time usually depends greatly on the cause of the backorder. Sometimes the problem is as simple as a manufacturing error, but other times it's more complicated.

In some cases the cause of backorders could be that there are too many of a particular product in inventory and the manufacturer no longer has the ability to create more. When this happens, the supply chain is cut off, and the manufacturer must stop production or restart production at a later date, at which point they'll have to contact their suppliers again to see if they have any unsold items left. If they don't have any, they may ask their suppliers to send them additional inventory, but then they have to finish the process from start to finish, which means the end result is another backorder on the same products, multiplied by the number of units that were produced. Backorders can also occur because of delays in shipment or poor packaging by the company, both of which add to the overall lead time required to produce finished goods. If the lead time required to produce enough finished goods to meet demand is too long, the company will likely experience a "production lag", meaning that their merchandise won't be available when they need it.

Managing back orders manually involves looking at warehouse records, determining the reason for the delay in shipment, and then setting aside time during the day when the goods will be available to be placed into inventory. But sometimes warehouses run out of space or equipment, which makes it difficult to move goods. In those cases, automated equipment or robotics systems may be utilized to physically move goods from one location to another. This type of movement is called warehousing automation and is used to help reduce the time required to move goods, as well as improve the accuracy and speed with which products are stocked. Many companies are starting to use robotics systems, such as palletizing equipment, to speed up the warehouse move-in process.

CIOP Webinar Series

Learn the Global Best Practices in Supply Chain Management, Procurement, and Inventory Management.

60 Minutes of Learning + PDU Letter

Register Now

Do Do you want more information on Certified Inventory Optimization Professional?

Fill in the form to download the quote.