In your business, there are a few words that your customers should never have to hear from you. Backorder is one of them. In the mind of the customer, it never means anything good.
I recently ordered some materials for a project that I have been working on. When I initially placed the order for the materials, I didn’t order enough, so I had to go back to get more. That’s when I found out there were no more in stock. As a result of the product that I need being on backorder, completion of my project is now delayed 2 months. As you can imagine, I am not a happy camper. As a customer, backorder means:
- You don’t care about the inconvenience that this causes me
- You don’t manage your business well - I want to buy something that you sell, and you don’t have any to sell me. It seems counterintuitive.
I know. It’s important for companies to closely manage inventories to keep costs low. Business owners don’t want to keep too much inventory for fear of getting stuck with excess product they can’t sell, risk of damage while storing it, or inventory carrying costs on the books. I get that. But your customers should not have to suffer because of any issues you have with managing your business. Effective inventory management requires the following:
- A good understanding of the usage rates of the products that you offer
- The lead time that your suppliers need to get you more product
- Additional product on hand (also known as safety stock) to allow for large orders that deplete your stock or other unexpected events that impact your current inventory levels
Managing your inventory levels is a task that requires careful planning and a solid knowledge of your business. When done effectively, you should be able to avoid having to ever utter that dreaded bad word to your customer. Backorder is not your friend.