Percentage of Backorder Dollars

Percentage of Backorder Dollars

KPI Details

Percentage of Backorder Dollars is an indicator of how well the company stocks products that are in demand from its customers. A high value for this KPI 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 dollar value of orders delayed in shipment due to the company being out of stock divided by the total dollar value of orders placed over the same period of time, as a percentage.

KPI Best Practices

• Set levels of safety stock that are high enough to last through increased demand
• Maintain a centralized pool of inventory rather than allocating stock to certain channels
• Analyze patterns and monitor past instances of stock-outs (day of week, time of month, etc.)

KPI Calculation Instructions Percentage of Backorder Dollars?

Two values are used to calculate this KPI: (1) the dollar value of customer orders that are delayed in shipment due to the company being out of stock, and (2) the total dollar value 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.

KPI Formula :

(Dollar Value of Orders Delayed in Shipment / Total Dollar Value of Orders Placed) * 100