In the building materials industry, managing backorders and partial shipments is a critical component of maintaining customer satisfaction, efficient inventory control, and smooth operations. Backorders can cause delays, increase customer frustration, and disrupt project timelines. Meanwhile, partial shipments — when orders are shipped in segments — can lead to inefficiencies, confusion, and inventory discrepancies.
To manage backorders and partial shipments effectively, it’s essential to track specific key metrics that provide insights into your supply chain, order fulfillment processes, and customer expectations. This blog will outline the key metrics to track for backorder management and partial shipments, along with how an ERP (Enterprise Resource Planning) system can help optimize these areas.
Why Backorder and Partial Shipment Management Matters
In any construction or building materials business, a backorder occurs when a product is out of stock and cannot be delivered on the promised date. A partial shipment, on the other hand, is when an order is shipped in multiple deliveries instead of a single complete shipment, often due to stock availability or logistics constraints. Both situations can negatively impact customer satisfaction, delivery timelines, and operational efficiency.
Customer Satisfaction: Delays in fulfilling orders, whether due to backorders or partial shipments, can lead to dissatisfaction and even lost business.
Inventory Visibility: Managing backorders and partial shipments efficiently ensures that inventory is properly allocated, reducing the risk of stockouts and overstocking.
Operational Efficiency: Proper backorder management minimizes delays, reduces shipping errors, and ensures that the right materials are sent to the right place at the right time.
By tracking key metrics, businesses can gain valuable insights into their order fulfillment processes, make informed decisions about inventory management, and reduce the impact of backorders and partial shipments on their operations.
Key Metrics to Track for Backorder Management
Effective backorder management is about understanding the root causes of stockouts, tracking customer expectations, and optimizing your supply chain. Here are some of the most important metrics to track for managing backorders:
- Backorder Rate
The backorder rate is the percentage of orders that cannot be fulfilled on time due to inventory shortages. This metric is essential for understanding how often your customers experience delays and can indicate whether your inventory management practices are effective.
Formula:
Backorder Rate
=
Number of Backordered Items
Total Number of Items Ordered
×
100
Backorder Rate=
Total Number of Items Ordered
Number of Backordered Items
×100
How It Helps: A high backorder rate may indicate poor forecasting, inadequate stock levels, or delays in supply chain operations. By monitoring this metric, businesses can identify trends and take corrective actions to reduce backorders.
How ERP Software Helps:
An ERP system can track backorders in real-time, providing visibility into the status of each order, including whether a product is backordered and when it is expected to be available. This ensures that the right steps are taken to address delays, such as prioritizing backordered products or notifying customers.
- Backorder Lead Time
Backorder lead time refers to the amount of time it takes to fulfill a backorder from the moment the order is placed until the product is shipped. This metric is essential for understanding how long customers will have to wait for their backordered products to arrive.
Formula:
Backorder Lead Time
=
Date of Shipment
−
Date of Order Placement
Backorder Lead Time=Date of Shipment−Date of Order Placement
How It Helps: A long backorder lead time can negatively impact customer satisfaction and disrupt project schedules. By tracking backorder lead time, businesses can identify bottlenecks in the supply chain and work to reduce fulfillment delays.
How ERP Software Helps:
An ERP system can track backorder lead times automatically, providing detailed insights into how long it takes to process and fulfill backorders. This data can be used to optimize supplier relationships and improve inventory forecasting.
- Backorder Fill Rate
The backorder fill rate measures the percentage of backordered items that are eventually shipped to customers. This metric helps assess the effectiveness of efforts to fulfill backorders once inventory becomes available.
Formula:
Backorder Fill Rate
=
Items Shipped from Backorder
Total Backordered Items
×
100
Backorder Fill Rate=
Total Backordered Items
Items Shipped from Backorder
×100
How It Helps: A low backorder fill rate may indicate inventory imbalances or inefficiencies in managing backordered items. By monitoring this metric, businesses can assess how quickly they are able to fulfill backorders and take steps to improve their processes.
How ERP Software Helps:
ERP software can track backordered products throughout their lifecycle, from the moment an order is placed until it is fully fulfilled. This enables businesses to better manage customer expectations by providing accurate estimated shipping dates for backordered items.
- Customer Satisfaction Score (CSAT) for Backorders
Customer satisfaction is closely tied to the timely fulfillment of orders, and backorders are a critical factor that can negatively impact this. Tracking customer satisfaction specifically for backorders can help businesses gauge how well they’re meeting customer expectations.
How It Helps: A low CSAT score related to backorders may highlight issues with communication, delivery delays, or product availability. By regularly gathering feedback from customers about their backorder experiences, businesses can identify areas for improvement in their order fulfillment processes.
How ERP Software Helps:
ERP systems can integrate with customer service platforms to capture feedback and analyze customer satisfaction related to backorders. This data can be used to enhance customer communication and improve backorder management strategies.
Key Metrics to Track for Partial Shipments
Partial shipments can lead to operational inefficiencies and customer dissatisfaction, particularly when multiple deliveries are required for a single order. The following metrics are important for managing partial shipments effectively:
- Partial Shipment Rate
The partial shipment rate indicates the percentage of orders that are shipped in parts rather than as complete shipments. This metric helps businesses understand how often partial shipments occur and the reasons behind them.
Formula:
Partial Shipment Rate
=
Number of Partial Shipments
Total Number of Shipments
×
100
Partial Shipment Rate=
Total Number of Shipments
Number of Partial Shipments
×100
How It Helps: A high partial shipment rate can indicate inefficiencies in order fulfillment, such as stockouts, inadequate inventory planning, or logistical issues. Tracking this metric helps businesses identify areas where processes can be optimized to reduce the frequency of partial shipments.
How ERP Software Helps:
ERP systems track partial shipments automatically, providing visibility into how often they occur and the reasons for them. By analyzing this data, businesses can optimize stock levels, improve shipping logistics, and ensure that customers receive complete orders on time.
- Partial Shipment Lead Time
Partial shipment lead time refers to the total time it takes for all parts of a partial shipment to be delivered. This metric tracks how long customers have to wait for the remaining items in a partial shipment to arrive.
Formula:
Partial Shipment Lead Time
=
Time from First Shipment to Final Shipment
Partial Shipment Lead Time=Time from First Shipment to Final Shipment
How It Helps: Long lead times between partial shipments can frustrate customers and delay project timelines. By monitoring this metric, businesses can identify delays and take corrective actions to reduce the time between shipments.
How ERP Software Helps:
An ERP system can track partial shipment lead times in real-time, providing businesses with insights into how quickly they are fulfilling partial shipments and enabling them to optimize shipping schedules to reduce lead times.
- Customer Satisfaction Score (CSAT) for Partial Shipments
Just as with backorders, customer satisfaction related to partial shipments is an important metric to track. Partial shipments can be a point of frustration for customers if not managed properly.
How It Helps: Monitoring CSAT scores related to partial shipments provides insights into how customers feel about receiving incomplete orders. A high level of dissatisfaction may indicate that businesses need to improve communication, order fulfillment processes, or shipping coordination.
How ERP Software Helps:
ERP software can integrate with customer feedback systems to collect and analyze satisfaction data, allowing businesses to improve the customer experience when dealing with partial shipments.
How ERP Software Helps with Backorder and Partial Shipment Management
Tracking these key metrics is essential for optimizing backorder and partial shipment management. ERP software designed for the building materials industry offers several features that can streamline these processes:
Real-Time Inventory Tracking: ERP systems provide real-time updates on inventory levels across all locations, helping businesses manage backorders and partial shipments more effectively by ensuring the right stock is available at the right time.
Automated Order Management: ERP software can automate the order processing, tracking, and fulfillment process, reducing manual errors and ensuring that partial shipments and backorders are handled efficiently.
Customer Communication: ERP systems allow businesses to communicate effectively with customers about the status of their orders, including estimated shipping dates for backordered or partial shipment items.
Analytics and Reporting: ERP systems provide detailed reporting on key metrics, allowing businesses to track backorder rates, partial shipment rates, and customer satisfaction scores, helping them make data-driven decisions to improve their order fulfillment processes.
Conclusion
Effectively managing backorders and partial shipments is crucial to ensuring timely delivery, customer satisfaction, and efficient warehouse operations. By tracking key metrics like backorder rate, partial shipment rate, and customer satisfaction scores, businesses can optimize their supply chain and identify areas for improvement.
Using ERP software for building materials offers a powerful solution for tracking these metrics in real time, automating workflows, and enhancing communication across the supply chain. By leveraging ERP, businesses can reduce delays, improve operational efficiency, and ensure that customers receive their orders as quickly and accurately as possible
