We can communicate with your suppliers and improve your supply chain to make it more profitable. We’ll make sure your inventory levels are always optimal, your warehouse is well-organized, and your orders are always fulfilled on time. At Elite OPS, we have spent 25 years refining our supply chain management solutions. Now that you know the dangers of backorders in your supply chain, what can you do to ensure you’re not late to deliver products? Use a Warehouse Management System: Install a software suite and other technologies that track your inventory and accurately predict the number of products you need.In order to avoid unnecessary production changes, they need as much data about your operations as possible, while you also need to see their inventory and production numbers. Ask for More Data Sharing: Build trust with your suppliers, and share information between your firm and theirs as much as possible.Warn Your Supply Chain about the Ripple Effect: Explain to your suppliers that a change of just a few percent in order numbers doesn’t have to lead to a 30–40% change in production.There are a lot of reasons to always send orders on time and build a list of loyal, satisfied customers. How to Limit the Negative Impact of Backordersīackorders can lead to a cascade of problems for a company. They might end up producing, say, 40% fewer products, which could lead to even more supply problems, backorders, and cancellations. But supply chains tend to overreact to such changes. This could lead to a decrease of, say, 6% in demand for products. It can be visualized as a small splash in a pond turning into a large wavefront by the time it reaches the shore.įor example, if your logistics team has fallen behind and built up backorders, some customers might cancel their orders. We’ve noticed that small changes in your customers’ buying patterns can be magnified in your supply chain. The Impact Backorders Can Have on Your Business or Supply Chain Company They’ll probably switch to a new supplier and might not come back to you in the future. Customers might even cancel an order once they see it will be late. When you have products that should have been shipped by a certain date but were not, it usually leads to dissatisfied customers. Delivering in a timely fashion will improve your reputation, and your customers would be interested in ordering from you again. When you have earned a list of orders and are able to fulfill them on time, you have revenue flowing in and activity for your employees. In contrast, backorders are almost never good for you. ![]() (Note that these backorder products will still be included on your backlog too.) Are Both Backlogs and Backorders Bad?Ī backlog is fine or even great for your company. If you promised to ship by February 1 but didn’t ship until February 2, those late products are your backorders. ![]() ![]() Your list of backorders includes every product that is shipping late. For example, if your customers order teddy bears on January 1 to be shipped by February 1, they will be on your backlog. Your backlog is all the products your customers have ordered which have not been shipped out yet. What do these terms really mean? Backlog in Supply Chains Many supply chain experts say that a backlog in a supply chain is good for your business but that a backorder is bad. That’s why we need to define and contrast the terms “backlog” and “backorder.” What’s the Difference Between Backlog and Backorder? Any business owner can be interested in that.įor example, if you really understand the difference between a backlog and a backorder in supply chains, it can alter your business decisions-and make your company stronger. You’re brilliant at thinking up products and new strategic approaches, and reviewing the details of your supply chain may not be at the top of your to-do list.īut understanding and mastering certain aspects of your fulfillment process can improve your reputation and profitability. It’s not always easy to pay attention to your supply chain or your third-party logistics provider.
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