Has this happened to you?
Customer A orders a product that isn't in stock, so you tell him that the product will be back in stock in a few days. He agrees to wait for you to ship. The product comes in and, instead of turning the product right around to your waiting customer, your receiving person puts the product away on the warehouse shelf where it sits for a few days until either (A) someone finally realizes that the customer is waiting, or (B) Customer A calls you asking why he hasn't received his product yet. Or worse yet, another customer's order was fulfilled and shipped even though he placed a brand new order today, so now you're out of the product AGAIN! If you've ever experienced this first-hand as a customer, then you know the customer impact - it absolutely frustrates them and could easily send them packing to another vendor.
Without a doubt, backorder management can be tricky business. Obviously you'd like to minimize out of stock situations by making wise purchasing decisions. However, backorders are a part of doing business for distributors and some retailers. There is an upsideThe magic is this: If you can effectively manage backorders, you can build and maintain a highly-satisfied, loyal customer base. The question is how. How can you win the backorder battle?
Here are 5 ways to master backorder control:
Closely track your backorders. We're not talking about little post-it notes slapped to the side of your computer monitor. No clipboards full of printed orders with blue lines through the already-shipped items and a hand-written red "B" for backorder next to the pending items. And certainly not the manual list or the Excel spreadsheet someone is maintaining. No, no, no! Instead, use an inventory and sales order management system that automatically tracks your backorders for you and provides you with strong backorder reporting.
Be pro-active by keeping your customer informed from the get-go. For example, if your customer is on the phone with one of your sales reps, does your rep immediately know if the item is available or not? And, if it isn't available, can the rep immediately see if the item is on order from the supplier? And what the expected delivery date is? Empowering your staff with this type of information can help them proactively nurture the customer relationship by providing the customer with accurate, detailed information. If the item is out of stock today but expected for receiving tomorrow, well, wouldn't that be a great detail to share with the customer? It sure beats the "we're out of that" response, or worse yet, taking the order and keeping the customer in the dark about the situation.
Eliminate the "You should have shipped that as soon as it came in!" drama. Okay, so out-of-stock situations can't be completely avoided. So let's say that you have products on backorder and customers waiting for those products. The products arrive. Your Receiving Department processes the receiving and then what? Please don't say that someone looks over the Post-It notes, or the manual Excel sheet, or the infamous clipboards. Wrong answer. The right one? Use a system that automatically alerts you to those customers that are waiting for the products that you just received. We repeat, automatically alerts you. No matching up orders with products and products with people. Let your system do the thinking for you. Ok, well almost. See Point #4.
Don't give up all your control to your software. For most small to mid-size companies, there needs to be some human intervention, some thought process, that takes place in certain backorder fulfillment situations. For instance, there might be 3 customers waiting for a particular product. If product is received and the quantity received doesn't cover all 3 orders, who is going to get the products? Logic would say that it's whoever ordered first. However, that's not always the case. We don't live in a strictly "first come, first served" world. Sometimes order fulfillment is driven by other factors such as the level of customer relationship. If your best customer is waiting for a product that is critical for him, you may just bump him up the ladder and ship him first. Now don't say this doesn't happen because you know it does. So use a system that can provide you with the right information, but that allows you to make the final decisions.
Do not be "penny wise, pound foolish". In other words, invest in technology that will do the heavy lifting for you. It's surprising to see how many companies scrimp on their software choice and are then forced to "handle" their backorders by canceling a partially-shipped order and then re-entering a brand new order for the backordered items. And, if another partial shipment takes place? It's just a vicious cycle that goes on and on. Not only is it unnecessary effort, it creates a huge margin for error and inaccuracy.
Contrast that with efficient companies that use software that not only tracks backorders and produces backorder reports, but also alerts you when the awaited products are received. No wasted staff resources putting away product on a shelf when it belongs on a delivery truck on its way to a customer who is expecting the product.
There's no doubt that intelligent backorder management is a key factor to the quickest delivery cycle for your customers and this is critical to the success of your business. In other words, it pays to do it well. With these few simple steps, you can surely beat the backorder blues and drive your company to further success.
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