Procurement Glossary
Backorder rate: key figure for delivery capability and inventory management
November 19, 2025
The backorder rate is a key figure in procurement management that measures the proportion of orders that cannot be delivered immediately. It shows how often items are not available due to stock shortages or delivery delays. Find out below how this key figure is calculated, what trends shape it and how you can minimize risks.
Key Facts
- Measures the percentage of orders that cannot be fulfilled immediately
- Calculation: (number of back orders / total number of orders) × 100
- Typical target values are between 2-5% depending on the industry
- Direct indicator of customer satisfaction and delivery capability
- Significantly affects working capital and cash flow
Contents
Definition and meaning of backorder rate (key figure)
The backorder rate quantifies the frequency of delivery bottlenecks and is a critical indicator of the effectiveness of inventory management.
Basics and calculation
The backorder rate is calculated as the ratio between unfulfillable orders and the total number of all orders. It includes both complete and partially non-deliverable orders.
- Formula: (backorders / total orders) × 100
- Period-related measurement (daily, weekly, monthly)
- Differentiation by product category possible
Backorder rate vs. fill rate
While the fill rate measures the proportion of orders that can be fulfilled immediately, the backorder rate shows the opposite. Both key figures complement each other and should be considered together with On-Time Delivery.
Importance in Procurement
A high backorder rate signals weaknesses in demand planning and can lead to customer dissatisfaction. It has a direct impact on lead time and requires precise coordination between Procurement and suppliers.
Measurement, database and calculation
The systematic recording of the backorder rate requires precise data sources and standardized calculation methods.
Data acquisition and systems
ERP systems provide the basis for backorder measurement by automatically recording order status and delivery dates. Integration with supplier systems enables real-time monitoring.
- Automatic status update for incoming orders
- Categorization by urgency and product groups
- Historical trend analysis for forecasts
Calculation variants
Different calculation approaches can be used depending on the business model. The three-way match rate supports data quality.
Reporting and dashboards
Regular reports enable proactive management and early identification of critical trends. The link with service level measurements creates holistic transparency.
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Interpretation and target values for backorder rates
The correct interpretation of the backorder rate requires industry-specific benchmarks and contextual analysis.
Sector-specific target values
Typical backorder rates vary considerably between industries. While automotive suppliers often aim for less than 1%, retailers accept values of up to 5%.
- Automotive: 0.5-1.5%
- Retail: 2-5%
- Industrial goods: 1-3%
- Pharmaceuticals/medicine: less than 0.5%
Performance indicators
The backorder rate correlates strongly with on-time delivery and has a direct impact on customer satisfaction. Combined consideration with inventory turns optimizes working capital.
Continuous improvement
Monthly trend analyses and root cause analysis enable systematic optimization. Integration with schedule adherence measurements creates holistic transparency about supply chain performance.
Risks, dependencies and countermeasures
High backorder rates entail considerable business risks and require systematic risk minimization.
Operational risks
Production stoppages and delivery delays can lead to critical backorder situations. Dependence on individual suppliers significantly increases this vulnerability.
- Loss of customers due to unreliable deliveries
- Increased expediting costs and emergency procurement
- Reputational damage in the event of critical failures
Financial impact
Back orders have a negative impact on the cash-to-cash cycle and can lead to liquidity bottlenecks. The expedite rate increases in proportion to unresolved back orders.
Preventive measures
Diversified supplier structures and robust safety stocks reduce backorder risks. Regular supplier ratings enable early risk identification and proactive countermeasures.
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Practical example
A mechanical engineering company reduced its backorder rate from 8% to 2% through systematic supplier evaluation and improved demand forecasts. By implementing an automated early warning system, critical stocks are identified 14 days before they fall below the minimum quantity.
- Introduction of weekly supplier scorecards
- Automated order triggering at defined threshold values
- Quarterly review of safety stocks
Data and market trends on backorder rates
Current developments show the increasing importance of precise backorder forecasts in volatile markets.
Digitalization and AI integration
Artificial intelligence is revolutionizing backorder forecasting through machine learning and predictive analytics. Algorithms analyze historical patterns and external factors for more precise forecasts.
- Automated order triggering for critical stocks
- Supplier risk assessment in real time
- Seasonal and market-based adjustments
Supply Chain Resilience
Global supply chain disruptions are increasing the focus on robust backorder management strategies. Companies are diversifying supplier portfolios and implementing minimum order quantity optimizations.
Sustainability and efficiency
Environmental awareness drives the development of sustainable inventory strategies. The balance between low backorder rates and minimal overstocking is achieved through improved forecast accuracy.
Conclusion
The backorder rate is an indispensable key figure for successful procurement management and is directly linked to customer satisfaction. Modern technologies such as AI-based forecasting enable more precise predictions and proactive management. Companies should define industry-specific target values and establish continuous improvement processes in order to secure competitive advantages.
FAQ
What is an acceptable backorder rate?
An acceptable backorder rate depends on the industry. While critical industries such as medical technology aim for less than 0.5%, retailers can tolerate values of up to 5%. The balance between service level and inventory costs is crucial.
How does the backorder rate differ from the stockout rate?
The backorder rate measures unfulfillable orders, while the stockout rate indicates the frequency of empty stocks. Backorders can also occur with existing stock if the available quantity is insufficient.
Which systems support backorder measurement?
ERP systems such as SAP or Oracle offer integrated backorder tracking functions. Specialized supply chain management tools enable advanced analyses and forecasts for proactive inventory management.
How does the backorder rate influence customer satisfaction?
High backorder rates lead directly to delivery delays and significantly affect customer satisfaction. Studies show that even a 3% backorder rate can lead to measurable customer losses, especially in highly competitive markets.
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