Let’s discuss how to solve or avoid each of these issues, using an example from ERPLY regarding a special feature in the system.
Extra compensation for shipping: In many cases, it may be company policy to cover expedited shipping to the customer when they’ve had to wait for a backordered item. Lost time: The time it takes to manage the inventory, and solve backorder issues, can be a serious concern if you aren’t using an inventory management system that offers you up-to-the-minute data. Lost business: If a client sees that you cannot deliver a products before a competitor, he most likely scenario is that they’ll cancel the order and go to a competitor. Usually, there are three main financial risks related to backorders: The Risks of BackordersĮven if you follow this rule, there are likely going to be times when you have backorders come in. That may sound straightforward now, but with the constant flow of orders from multiple store locations always coming in, and stock always leaving from different warehouse locations, it can get a little bit hard to manage without a good system like ERPLY. It only makes sense to keep as many of your best-sellers on hand as possible, especially right before big shopping rushes. If having excess stock around costs money, consider that the smart thing to do is to have more of your best-selling stock, and fewer of the products that don’t sell as well. This is particularly true for your best-selling items that see frequent spikes at unpredictable times. In other words, somewhere around three-quarters of your inventory should be extra, on top of what you think you’ll be selling in a given ordering period. 
The rule states that 80% of your sales should be covered by 20% of your available inventory. Most companies use an 80/20 rule when it comes to ordering inventory. Unfortunately, even when you have the experience and the system necessary, the only way to ever truly eliminate the possibility of backorders is to have impossibly high levels of inventory, which cost you money in the long run. Managing the flow of product so that you never have too little or too much, and anticipating large spikes in orders, is a serious balancing act that takes time to learn, and a good inventory system to perfect. While no business ever wants to face the problem of backorders, it may be impossible at times to always have all the product you need in stock and ready to ship.
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