In terms of inventory management, what is a backorder?

A backorder is defined as an order that cannot be filled at the current time due to insufficient inventory. This situation arises when a customer places an order for a product, but that particular item is temporarily out of stock. The company takes the order and records it, indicating that the item will be shipped once it becomes available, thereby allowing the customer to secure the desired product despite the immediate lack of inventory.

This practice is essential in inventory management as it helps maintain customer satisfaction and ensures that businesses can accurately track future inventory needs and demand. Efficient management of backorders can also enhance customer relationships by demonstrating responsiveness and reliability in meeting their needs, even when facing stock shortages.