What is a backorder in the context of inventory management?

A backorder refers specifically to an order for a product that is temporarily out of stock but is expected to be fulfilled in the future once the inventory is replenished. In inventory management, backorders provide a way to maintain customer satisfaction by allowing customers to place orders even when the products are not immediately available. This helps businesses manage demand without losing potential sales, as they can communicate anticipated ship dates to customers.

The concept of a backorder is crucial for efficient inventory management, as it reflects a balance between supply chain capabilities and customer service. When a backorder is processed, it signifies that the customer is willing to wait for the product to become available, ensuring that the business can keep track of demand for future planning and restocking efforts.