Backorder Rate

What is Backorder Rate?

Percentage of orders that cannot be fulfilled immediately due to stock unavailability.

How do we calculate Backorder Rate?

(Total Backorders / Total Orders) * 100 where Total backorders is the distinct count of all orders that cannot be fulfilled due to unavailability of inventory.

What is the business impact of Backorder Rate?

• High Backorder Rate hampers the overall customer experience
• It may lead to customer churn and lost sales
• Backorders may also cause order cancellations leading to higher cost

Industry benchmark for Backorder Rate

• Industry Benchmark: Below 2%

How to improve Backorder Rate?

• Improved Demand forecasting for different sales channels and product categories.
• Strengthen relationships with suppliers to navigate low-stock and stock-outs to minimize the Backorder Rate
• Improve the visibility into supplier lead times
• Improved visibility into inventory consumption and movement patterns
• Implement automatic replenishment for certain products to avoid back-orders.