• Inventory/Warehouse
  • Retail

Keeping Back Orders to a Bare Minimum

Written by Elias Schoelmann
November 10, 2015

Customers expect fast and accurate delivery of their orders.

Customers expect fast and accurate delivery of their orders.

One of the last things modern consumers want to hear is “we don’t have that product in stock.” In the past, it was not uncommon for businesses to put merchandise on backorder and customers would wait without much in the way of complaint. Modern industry studies suggest, however, if a company doesn’t have the item the consumer wants ready to go, they will not hesitate to move on to a competitor.

An e-commerce world provides consumers with options. eConsultancy reported 68 percent of retailers selling products online offer next-day shipping. About 25 percent of consumers expect delivery this fast and one-third of online shoppers demand a fixed date of delivery. If customers learn they can’t get products when they expect, they will abandon a purchase. Half of consumers give up on purchases when the organization doesn’t provide the delivery options they want.

If a company doesn’t have inventory available, it may not meet a customer’s delivery demands. A lack of visibility means businesses can’t communicate when products will be available. Businesses need new solutions to fight obstacles associated with back orders. Automated data collection solutions provide information to speed up inventory cycles and give shoppers the details they need.

Prioritizing Inventory Speed and Visibility

Even if a business doesn’t offer its products online, it still faces competition from companies that do. Many manufacturers and retailers emulate e-commerce success to appeal to modern markets.

The Wall Street Journal shared the story of an auto parts manufacturer, Federal-Mogul Holdings Corp., that based its new inventory management system on Amazon’s model. Federal-Mogul assembles, packages and ships its products to a national client list. In a given year the manufacturer handles 400 million parts and must track orders, distribution paths and deliveries.

Federal-Holdings implemented robotic warehouse tools and new SAP ERP software into its warehouse to speed up picking and order preparation. The new automated data collection solutions were designed to give managers a 360-degree view of product movements and provide customers with the same standard of service they’ve come to expect from retailers like Amazon. Federal-Holdings hopes it can stay competitive in the current market by adopting e-commerce routines and meeting consumer needs.

The Problem With Back Orders

A lack of inventory visibility means a company can’t share information with its clients. Consumers need to stay informed about the products they have paid for and a failure to provide them with the data they demand will cost a business sales. Consumer loyalty is much more profitable than consistently attracting new clients.

MultiChannel Merchant said backorders will frustrate customers. One of the most common complaints lodged by consumer care centers is a lack of delivery detail availability. Customers could stop pursuing a transaction when products are not immediately available, or they could go forward with one purchase but refrain from returning to that manufacturer or retailer.

Backorders can cost organizations profit in other ways. The inability to fill orders as they come in means an organization puts time between processes. Delays increase the odds of something going wrong or information being miscommunicated. Companies could operate expecting income from a sale the customer cancels due to frustration with waiting.

Manufacturers have a lot of data to juggle in warehouse management. To make sure inventory is ready, companies must have real-time information from suppliers, production lines, customer orders, warehouse employees and delivery drivers. Chicago Consulting, a supply chain expert, suggested supplier delays or other problems could create a back-order black hole where expected product timelines must be continually lengthened to accommodate unforeseen surprises.

Getting New Solutions to Work Together

Backorders are a necessary evil. There’s probably no way to fill every single order instantly, but if manufacturers or retailers have complete visibility of their suppliers, production processes and warehouse operations, they can tell customers exactly when to expect delivery. Real-time data collection solutions create accurate projections and make mistakes instantly noticeable so businesses can keep customers informed.

New technology is incredibly helpful in speeding up processes and creating visibility. If an organization employs ERP software like SAP, robotic equipment or mobile devices, it needs an integrated system that gets the solutions working together. An RFgen fact sheet said automated data collection devices that work in conjunction with SAP ERP software, provide companies with a solution that trims resource allocation, improves accuracy, speeds up daily tasks and improves customer satisfaction.