Customer Backorder Rate

Customer Backorder Rate

KPI Details

Customer Backorder Rate is an indicator of how well the company stocks products that are in demand from its customers. A high value for Customer Backorder Rate indicates that the company has inefficient demand planning and forecasting, poor inventory management, sub-par vendor management methods or inventory shrinkage issues. Low performers for this KPI not only experience slower order cycle times, but they also risk a dissatisfied customer base. These dissatisfied customers can lead to lost revenue to due attrition as well as lost revenue that stems from cancelling orders that are currently on backorder.

KPI Definition

The total number of customer orders delayed (backordered) due to the company being out of stock divided by the total number of customer orders placed over the same period of time, as a percentage.

KPI Best Practices

• Frequent and accurate updates to inventory demand forecasting
• Effective communication with vendors to anticipate their inventory availability
• Perform cycle counts on a regular basis to maintain accurate inventory levels

KPI Calculation Instructions Customer Backorder Rate?

Two values are used to calculate this KPI: (1) the number of customer orders that are delayed in shipment due to the company being out of stock, and (2) the total number of customer orders placed during the same measurement period. An order is defined as backordered or delayed if the order is held or shipped late due to a lack of inventory availability. Only include orders that are fulfilled in this calculation. Do not include orders that are cancelled due to being on backorder in this calculation. Only include orders that are filled entirely or backordered entirely in this calculation (i.e., do not include partially filled orders in this calculation).

KPI Formula :

(Number of Customer Orders Delayed due to Backorder / Total Number of Customer Orders Placed) * 100