* Is High or Low Best: Lower is Better
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.
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.
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.
(Dollar Value of Orders Delayed in Shipment / Total Dollar Value of Orders Placed) * 100
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