Backorders vs Out Of Stock: Explanation & Key Differences
No one likes seeing an “unavailable” item at checkout. But supply chains aren’t perfect. Weather events, production delays, demand spikes, they all happen.
So, what’s the next step when inventory hits zero? You have two main options: mark it “out of stock” or offer it on backorder.
Backorders aren’t ideal. Customers don’t exactly love waiting. E-commerce brands don’t love juggling delayed shipments and payment timing either. And if your back order rate is climbing, that’s usually a signal that something in your inventory planning needs attention.
At jam-n, we believe your shipment matters, and clarity prevents costly surprises. So, let’s break it all down and keep you in control.
What Is A Backorder?
A backorder (or back order, both spellings work) means a product is temporarily unavailable but already scheduled for replenishment. In plain English, the items are not sitting on the shelf right now, but more units are in production or on the way. Customers can still place an order, and the shipment goes out as soon as inventory arrives.
Backorders typically happen when demand outpaces forecasts, safety stock runs out, supplier lead times stretch longer than expected, or a sudden spike catches everyone off guard.
What Is A Partial Backorder?
A partial backorder happens when only part of an order is unavailable.
For example:
A customer orders five SKUs,
Three are in stock,
Two are temporarily unavailable.
At that point, you have options:
Split the shipment and send the available items immediately.
Hold the order until all items are available.
Each approach has implications for shipping cost, customer satisfaction, and operational complexity.
What Is A Rolling Backorder?
A rolling backorder is a backorder without a fixed ship date. Instead of “Ships in 10 days,” you provide a flexible delivery window. This usually happens when supplier lead times shift, production schedules aren’t locked in, or international freight timelines fluctuate. Clear communication is everything here. Customers will wait if you set expectations honestly.
What Does Backordered Mean?
When a product is backordered, customers are buying it even though it isn’t physically in your warehouse yet, but has a confirmed replenishment plan. You accept the order, inventory is pending, and fulfillment happens as soon as stock arrives. If other items are available, you may split shipments to keep things moving. So, how does backorder work? Customers order now, you ship later, and clear communication keeps everyone aligned.
How Backorders Work
When you accept backorders, your systems should do the heavy lifting. The order is captured, flagged as backordered, and tied to a purchase order to replenish stock. Expected arrival dates are tracked, and once inventory is received, the backorder automatically converts into a sales order ready for fulfillment.
With the right software integrations, this flow is seamless. But when backorders multiply, manual processes creep in, forecasts miss the mark, or data lags, complexity grows fast. Without visibility, small delays snowball. That’s why tight inventory management and coordinated fulfillment matter.
Backorder vs Out Of Stock
The difference between backorder vs. out of stock comes down to certainty and commitment. An item is out of stock when it’s unavailable, and there’s no confirmed restock date. It may be seasonal, discontinued, or simply uncertain. Customers can’t place an order. A backordered item, on the other hand, has a replenishment plan. It won’t ship today, but it will ship within a defined timeframe. Think of it as the difference between “currently unavailable” and “shipping in two weeks.” The right choice depends on your systems, forecasting accuracy, and whether your customers are willing to wait.
Backorder vs Out Of Stock Comparison Table
| Backorder | Out of Stock |
|---|---|
| Product temporarily unavailable | Product unavailable with no confirmed restock date |
| Customers can place orders | Customers cannot place orders |
| Replenishment expected | Restock uncertain or discontinued |
| Delayed shipment | No shipment commitment |
Out Of Stock Meaning
Out of stock means inventory is depleted, and there’s no confirmed restock date. Customers can’t place orders, and fulfillment pauses until supply is secured and inventory levels are restored.
Back In Stock Meaning
Back in stock means replenished inventory has arrived, and orders can ship immediately. It indicates products are available again and shipping resumes without delays.
What Causes Backorders?
Backorders don’t happen by accident. They’re usually signals that something upstream needs attention. Here’s what typically causes backorders:
Unusual demand: Viral exposure, seasonal surges, or emergency-driven buying can spike demand overnight. When orders outpace supply, products move to backorder quickly.
Low safety stock: Safety stock acts as your buffer. If it’s set too low or calculated incorrectly, even steady demand can create shortages.
Supplier or manufacturer issues: Raw material shortages, production delays, or global disruptions impact availability fast, and retailers feel it immediately.
Human error: Miscounts, delayed reorders, or incorrect system entries can oversell inventory without anyone realizing it.
Warehouse discrepancies: Damaged goods, misplaced pallets, or data sync issues create gaps between what’s recorded and what’s actually on hand.
Long lead times: Extended or unpredictable transit times can burn through safety stock before replenishment arrives.
Some of these are preventable. Others aren’t. The difference is how proactively you manage them.
Why Would A Business Accept Backorders?
Sometimes, backorders make strategic sense. They may:
Preserve sales during temporary shortages,
Reduce warehouse carrying costs,
Capture demand insights,
Maintain customer relationships.
Retailers with limited warehouse space may not want to hold excess inventory. Accepting backorders allows them to avoid overcrowding while still meeting demand. For small businesses or drop-ship models, backorders can be part of the standard operating model.
💡 The key is control. If you can forecast accurately and communicate clearly, backorders can support growth instead of hindering it.
Pros & Cons Of Backorders
Pros
Backorders allow you to secure the sale and fulfill it once stock arrives, preserving revenue that might otherwise go to competitors.
Backorders improve cash flow timing because you can generate revenue earlier and better align incoming payments with production and replenishment cycles.
Backorders provide clear visibility into which products are outperforming forecasts, helping you identify high-demand SKUs and adjust purchasing strategies accordingly.
Backorders reduce excess inventory carrying costs, insurance, and capital costs while still giving you flexibility to meet demand.
Backorders free up warehouse space. With fewer units sitting on shelves, you create room for faster-moving products and optimize overall warehouse efficiency.
Cons
Lost sales from buyers who will abandon their carts and purchase from competitors who can ship immediately.
Increased customer service workload because backorders often generate more inquiries about delivery dates, payment timing, and order status, placing additional pressure on your support team.
Greater operational complexity due to delayed inventory, split shipments, and purchase order coordination, adding layers of administrative and fulfillment challenges to your operation.
Risk of payment expiration if payments are processed close to shipment dates. Credit cards may expire or fail authorization, requiring follow-up and increasing cancellation risk.
Frequent backorders can erode trust over time, causing customers to question reliability and reconsider future purchases.
Backorder Processing Done Right
Backorders act as a test of operational discipline. When they happen, precision matters. Measuring your backorder cost gives you clarity. A rising percentage offers insight into forecasting gaps, safety stock miscalculations, or supplier instability.
Communication is just as important. Customers don’t expect perfection; they do expect transparency, though. Clear delivery windows, defined payment timing, and consistent shipment updates turn potential frustration into trust.
When inventory arrives, speed becomes the differentiator. Prioritizing backordered items and leveraging cross-docking to move products directly from receiving to outbound shipping keeps fulfillment lean and responsive.
How Fulfillment Systems Support Backorders
Strong systems make all the difference. ERP and order management platforms streamline demand planning, automate purchase orders, and provide real-time inventory visibility. That coordination reduces friction, limits manual errors, and prevents small delays from snowballing into operational disruption.
Even payment handling plays a role. Verifying methods upfront while authorizing charges closer to shipment protects both cash flow and customer experience.
The goal, of course, is to prevent backorders whenever possible. But in reality, supply chains fluctuate. Demand shifts. Lead times stretch. What separates resilient brands from reactive ones is how they shield their operations against these fluctuations.
With the right processes, technology, and a 3PL partner in place, backorders can be managed smoothly, professionally, and without compromising customer confidence. Because all of your shipments matter. Even the backordered ones!