What it means
A backorder arises when a customer's requested item is not available for the agreed shipment, but the seller expects more stock and keeps the order open, so the customer may wait, accept a substitute or cancel. The numerator counts orders affected by backordered stock and the denominator counts all relevant customer orders in the same period.
For example, if 60 of 1,200 placed orders are delayed for this reason, the order-based backorder rate is 5%, and an order with several items counts once in this version. Definitions need to be stated before results are compared.
QAD notes that when orders contain multiple delivery schedules, order lines may be more useful than whole orders, and it cautions that a partial shipment can still leave the customer waiting, while NetSuite describes a backorder rate using delayed orders divided by total orders placed. Choose one convention and document it, since some businesses define the trigger at order entry and others at the promised delivery date, and these are not identical.
Distinguish backorders from related events. A stockout means goods are not available at a point in time, whereas a backorder is an accepted demand commitment awaiting later fulfilment, and if a shop refuses the order entirely, a backorder report alone may miss the lost demand.
Likewise, a late delivery due to a carrier delay is not automatically a backorder, so separate inventory unavailability from transport failure. Look for causes by product, location and supplier.
A company-wide average may hide one high-demand item causing most customer pain, because a small number of frequently requested parts can drive the bulk of delayed orders. Supplier lead times matter, since if restock usually takes ten days a reorder placed after inventory reaches zero is likely too late, and demand forecasting also matters, especially for seasonal or promotional items where a sales campaign can create a spike that the replenishment plan did not anticipate.
Balance availability against cost. Safety stock can reduce backorders for critical items, but holding more of everything ties up cash and creates obsolete inventory risk, so compare fill rate, stock turns, cancellations and customer complaints alongside the rate.
Communicate promptly with affected customers by giving an honest estimated ship date and updating it if the supplier slips, because silent backorders can damage trust more than a transparent delay. Count carefully and act on the cause.
Measure aged backorders as well as new ones, since a rate that falls because fewer orders are accepted can look good while old customers still wait, and decide whether a cancelled backorder stays in the original period's numerator, because removing it retrospectively can hide the fact that the customer encountered a shortage. If an order contains both available and unavailable items, record the remaining line and its promised date, avoid counting one order as multiple failures merely because it stayed open across several reporting dates, and investigate root causes such as forecast error, supplier reliability, poor inventory accuracy or an overly ambitious promise before setting a target; there is no universal good percentage, because a made-to-order business and an emergency-parts distributor have different customer expectations.
In practice
Real-world examples.
Example
Sixty of 1,200 customer orders cannot ship when promised because of unavailable stock; the order-based backorder rate is 5%.
Example
A parts distributor separates backorders by supplier and tracks days beyond each promised delivery date.
Example
A retailer ships available lines but keeps one item on backorder and tells the customer its revised expected date.
Formula
Calculation
Order-based backorder rate = orders delayed by backordered stock / total relevant orders x 100
For line-based reporting, use affected lines and all lines consistently.
Worked example: a store takes 1,200 orders in a month, and 60 of them cannot ship when promised because stock is unavailable.
Order-based backorder rate = 60 / 1,200 x 100 = 5%.
Those 1,200 orders contain 3,000 lines, and 90 lines are backordered.
Line-based backorder rate = 90 / 3,000 x 100 = 3%.
The two figures differ because several orders had only one delayed line, so the chosen convention must be stated before results are compared.Case study
Seen in the real world.
This entirely fictional case follows Harbor Parts, an invented distributor whose backorder report rose after a promotion. Analysis found three fast-moving items accounted for most late lines. Managers changed reorder timing and gave customers clearer dates, then checked the rate and inventory cost together. The case claims no measured improvement. Before the promotion Harbor Parts reported a backorder rate of 4%, and during it the rate rose to 7%.
The planner traced the rise to the three items, whose supplier lead time was ten days while the reorder trigger assumed six. She raised the reorder point on those items only, rather than on the whole catalogue, to avoid tying up cash. The distributor also began sending each affected customer a dated update and tracked how many backorders were older than 14 days. The team reviewed the rate, aged backorders and stock value together every month, so that fewer backorders could not be achieved simply by overbuying.
Watch out
Common mistakes.
- Changing between order and line denominators without saying so.
- Deleting cancelled backorders from history and hiding original shortages.
- Lowering the rate by overbuying every item without checking cash and obsolescence.
Questions
People also ask.
Is backorder rate the same as stockout rate?
No. A stockout is unavailable inventory; a backorder is accepted customer demand waiting for later supply.
Should partial orders count?
Usually yes if any promised part is delayed. Define order versus line measurement clearly.
What rate is acceptable?
It depends on the promise and product. Compare consistent history with customer impact and inventory cost.
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