What is a backorder? Meaning, causes and examples

The definition

A backorder is an order, from a customer or from your own production, that cannot be filled because the item is out of stock, and that stays open until new supply arrives. The demand is not lost: it is recorded and filled later. That is the difference with a stockout, which describes the state of having no usable stock.

Suppliers use the word too. When a supplier tells you a line is on backorder, your purchase order is open but they do not have the goods to ship it, and the promised date often moves.

Backorder vs stockout vs past-due order

• Stockout: no usable stock of an item while there is demand for it.
• Backorder: the demand that waits because of the stockout, recorded and filled later.
• [Past-due purchase order](/resources/glossary/past-due-purchase-order): a supplier order whose promised date has passed. A supplier backorder usually shows up in your ERP as a past-due line, or as a line with a date that keeps moving.

The usual causes

• A late supplier order for a part with little stock behind it.
• A lead time that grew while the reorder point stayed the same (lead-time drift).
• [Components on allocation](/resources/insights/components-on-allocation): the supplier rations what it ships across customers.
• Demand above the average the stock levels were set on.
• Stock that is in the system but not usable: on hold, damaged or in the wrong place.

What a backorder costs

For a customer backorder, the cost is the delay, sometimes a penalty, and the risk that the customer buys elsewhere next time. For an internal backorder, a production order waiting for a component, the cost is idle time, resequencing and premium freight. A backorder on one purchased part can hold back finished goods worth many times its price.

How to see backorders coming

Most backorders are visible before they happen, in data you already have.

• Compute days of cover for every active part: stock divided by average daily usage.
• Compare cover with the date the next open purchase order really arrives, not only the date in the ERP.
• When cover runs out before the order arrives, the part is a shortage risk. Chase that order first, ask for a partial shipment, or look for stock elsewhere.
• When a supplier announces a backorder, ask for a new confirmed date and update the line, so the next review uses the real date. See our guide on supplier order confirmations.

Illustrative example, not a customer result

A distributor holds 200 units of a valve and ships 40 a day: 5 days of cover. The supplier tells the buyer the replenishment order is on backorder and will arrive in 12 days instead of 4. From day 6, every customer order for that valve becomes a backorder for about a week. Seen on day 1, the buyer can ask for a partial shipment, offer customers an alternative valve, or reserve the remaining stock for the largest orders.

How WERISCO helps

WERISCO shows parts that will run short, ranked by days of cover, and flags late or undated supplier orders by severity, with each part's days of cover shown as evidence, from your ERP or your exports. It does not predict supplier delays and does not manage customer orders; your team decides what to do. Nothing is written back to your ERP.