BackorderRate

Backorder rate is an inventory management metric that measures the share of customer demand that cannot be fulfilled at the point of order due to stockouts. It reflects the frequency with which products are requested but not immediately available, resulting in backorders or delayed shipments. The metric helps assess product availability, forecasting accuracy, and supplier reliability in retail, e-commerce, and manufacturing.

Calculation: Backorder rate can be expressed in different ways depending on context. The most common form is backordered orders divided by total orders over a period. Alternatively, backordered quantity divided by total demand gives a rate at the item level. Expressing rate as a percentage makes it easy to compare across products, categories, or time periods.

Data and timing: Backorder rate relies on order management systems, ERP, or WMS data. It is typically computed for a defined period (daily, weekly, or monthly) and may be calculated for all SKUs or for a subset such as top-selling items.

Significance: A high backorder rate indicates frequent stockouts, which can drive lost sales, reduced customer satisfaction, and longer lead times. While some backorders are unavoidable for highly dynamic assortments, persistent rates above industry norms suggest opportunities to improve forecasting, safety stock, replenishment policies, or supplier performance. The metric is often used alongside fill rate and service level to evaluate performance.

Considerations and improvements: The definition choice (orders vs lines vs quantity) and data quality affect the rate. To reduce backorder rate, organizations adjust safety stock, reorder points, and supplier lead times; enhance demand forecasting; implement better inventory visibility; and communicate expected ship dates to customers. Backorder rate should be interpreted with related measures to provide a balanced view of availability and service.