What is a Back Order?
A back order is an order that cannot be filled in the usual time expected.
How Does a Back Order Work?
For instance, let’s assume John Doe purchases 10 tractors from a tractor dealer. The retailer has four on hand to ship; it has to wait for the factory to make the rest, which could take three or four months. The six missing tractors are on "back order," and John Doe will receive them later.
Why Does a Back Order Matter?
Many companies cannot perfectly predict how quickly products will sell. Though back orders can be an occasional side-effect of just-in-time inventory and other efforts at efficient operations, back orders are usually not great for customer relations -- particularly during the holidays or for products that are big sellers. Some companies measure their back order activity as part of their efforts to analyze inventory and purchasing. After all, a back order might indicate that a company has a product that is selling extremely well, but too many back orders can send customers into the arms of competitors.
In most cases, companies alert customers when products are out of stock and back ordered. Customers then usually have a choice of canceling the order or waiting.
Personalized Financial Plans for an Uncertain Market
In today’s uncertain market, investors are looking for answers to help them grow and protect their savings. So we partnered with Vanguard Advisers -- one of the most trusted names in finance -- to offer you a financial plan built to withstand a variety of market and economic conditions. A Vanguard advisor will craft your customized plan and then manage your savings, giving you more confidence to help you meet your goals. Click here to get started.
Read This Next
Most people would be thrilled to collect a healthy 18% dividend every year. Use your nest-egg to buy $500,000 worth...Read More →
You probably should have read this article before you took your first job out of college. And you definitely should have read it before you walked into your company's HR office and signed on the...Read More →