Inventory planning
Backorder
By the Supply Chain Manager team · Updated October 16, 2026
A backorder is customer demand accepted while the item is out of stock and promised for later shipment once stock arrives.
Backorders keep the sale, unlike lost sales, but they still cost money: a second pick and shipment, customer service time and a less happy customer. They also reduce your inventory position, because incoming stock is already spoken for.
In wholesale, many customers would rather have the rest of their order now and the missing line later than wait for everything. That makes backorders common and often accepted, but each one still means a second pick, a second delivery and a customer service touch. Recording the reason for each backorder helps separate supplier delays from planning gaps.
How to calculate backorder
Inventory Position = On Hand + On Order − Backorders
Backorder example
Illustrative numbers: 0 on hand, 500 on order, 180 units backordered. Inventory position is 320, not 500. Planning from the 500 on order would underestimate how soon you need the next PO.
Why backorder matters for distributors
In wholesale, many customers accept backorders on routine lines, which makes them easy to normalize. Tracking backorder volume and age by SKU shows which items are chronically under-stocked.
Common backorder mistakes
- Leaving backorders out of inventory position.
- Letting old backorders sit unreviewed after the customer has sourced elsewhere.
Examples on this page use made-up round numbers to show the calculation. They are not benchmarks or results from real businesses.