Any organization that distributes products has had to wrestle with the issue of backorders at some point and whether to allow or not allow backorders to customers. With the global economy becoming more competitive every day, many organizations are willing to risk backorders and the challenges they present in order to maintain lower inventory levels and free up valuable cash flow. If you’ve ever ordered something from a website or online catalog, chances are you’ve experienced this first hand and understand the customer impact. So what are some best practices to effectively manage backorders and maintain highly satisfied customers? Below are some recommendations to consider:
Have your inventory system work for you!
Assign reorder points – This helps take the guess work out of when it’s time to reorder inventory. Use your historical data to determine an optimal reorder point that allow you the time needed to reorder your product before going out of stock.
Auto-schedule your inventory reorders – Many of today’s modern inventory management systems allow you to receive automatic reorder notifications and some systems even have the ability to place an order with your external vendor or internal manufacturing. Having this automation in place saves you valuable time and is an extremely effective method to ensure you maintain proper levels of inventory at all times.
Review your inventory level reports – Whether or not your current inventory system is capable of auto-scheduling reorder points, the use of stock level reports is another way to monitor inventory and help reduce backorders. Review running your stock reports on a schedule, which may be run daily, weekly or monthly based on your inventory management needs. Monitoring your product usage and how fast it moves is helpful in forecasting product reorders, controlling stock levels and managing backorders.
Keep your customers happy...Communication is key!
Communicate where your customers shop – Okay, so you’ve assigned reorder points, auto-scheduled them and yet an unexpected delay in manufacturing or production has resulted in the dreaded backorder! First and foremost, communicate this to customers on the front end by noting this on your website and include the estimated date it will be available. That way, as customers are viewing an item and considering placing an order, they’re already aware of the backorder. Some companies hesitate to do this fearing it may reduce orders, and in some instances that might be true. However, if a customer decides not to order an item due a backorder, chances are they probably would have cancelled their order upon learning that it was on backorder anyway!
Feed your Customer Service team information– Maybe you operate a call center where many of you orders are received by phone. Nothing is more frustrating to customers than calling in, placing an order with a customer service rep and then finding out later, via email, that the product or item they ordered is on backorder. To avoid this, make sure that your customer service team is armed with current and accurate information on the backorder status of your products, so they are able to communicate this when an order is placed.
Create a backup plan – Unfortunately, even with all the above planning, there may occasionally be a time where a backorder date gets pushed back even further from the original estimated availability. In this situation, it is important to over-communicate wherever possible. Make the update on your website and in your printed catalogs. Better yet, proactively reach out to your customers waiting on an item via phone or email to make them aware of the further delay, and express your desire to resolve the backorder and ship the item. Some organizations go as far as including a strategic offer such as a free sample of another item – a great and subtle way to cross promote products! While there’s no way to ensure you’ll never have an unhappy customer in this scenario, at least you have communicated every step of the way, so there no surprises for your customers.
Backorders can create challenges for organizations and their customers, but with some added planning, processes and communication, you can ensure the best possible outcome for managing inventory and the customer experience.