What is Backorder Rate?

Why It Matters

This rate exposes a real, customer-facing consequence of poor inventory planning, every backordered order is a customer waiting longer than expected or potentially canceling and buying elsewhere. A rising backorder rate on top-selling products, in particular, usually means demand forecasting or reorder timing has fallen behind actual sales velocity, which makes this a leading indicator worth catching before it damages customer trust at scale. Reviewing it alongside stockout rate and days sales of inventory is what actually diagnoses the root cause, whether the problem is forecasting accuracy, supplier lead time, or both, since backorder rate alone tells you something is wrong without saying exactly where. Ignoring it means inventory problems only surface through customer complaints or lost sales rather than through a metric a team can act on proactively.

Example

A retailer receives 5,000 orders in a month and 150 of them cannot ship immediately due to stockouts. Backorder Rate is 150 divided by 5,000, times 100, which equals 3%. If that rate climbs to 8% the following month for the same set of top-selling products, it usually means demand forecasting or reorder timing has fallen behind actual sales velocity, and it is typically reviewed alongside stockout rate and days sales of inventory to pinpoint whether the problem is forecasting, supplier lead time, or both.

Frequently Asked Questions

• How is Backorder Rate different from Stockout Rate?

  Stockout rate typically measures how often a product is simply unavailable, while backorder rate measures the share of actual customer orders that get placed against out-of-stock inventory and delayed as a result. Backorder rate is the more order-centric, customer-facing version.

• What's an acceptable backorder rate?

  It varies by industry and how tolerant customers are of delayed shipping, but a rate climbing over time on the same set of products, as in the example rising from 3% to 8%, is a clearer warning sign than any single static number.

• How often should backorder rate be tracked?

  Most retailers monitor it monthly at minimum, and often weekly for top-selling products, since a rising trend on high-velocity items needs to be caught before it affects a large share of orders.

• What causes backorder rate to rise?

  Demand forecasting or reorder timing falling behind actual sales velocity is the most common cause, though supplier lead time delays can also drive it up even when forecasting itself is accurate.

• How do you reduce backorder rate?

  Tightening demand forecasting, adjusting reorder points and safety stock levels for top-selling products, and working with suppliers to shorten lead times are the primary levers for bringing backorder rate down.