What is a backorder?

A backorder refers to a retailer's order for a product that is temporarily out of stock with the supplier. It represents a situation where customer demand for a product exceeds the current supply available in inventory. When an item is backordered, it indicates that the retailer is still taking orders for the product, even though it cannot be shipped immediately due to its unavailability. This allows the retailer to manage customer expectations and maintain sales despite inventory limitations.

This concept is crucial in supply chain management because it highlights the importance of inventory planning and customer relationship management. Proper handling of backorders can help businesses maintain customer satisfaction by ensuring that customers receive their desired products as soon as they become available, thereby fostering loyalty and repeat business. Understanding backorders is essential for optimizing supply chain operations and maintaining a balance between supply and demand.