Last updated: May 29, 2026
Backorder rate is the percentage of customer orders that cannot be fulfilled immediately because the requested item is out of stock but expected to be available. It measures how well inventory keeps pace with demand and signals gaps in forecasting, replenishment, or supplier reliability.
Alternate names: Backorder ratioFormula: Backorder Rate = (Number of delayed orders due to backorders / Total number of orders placed) × 100
Scenario: A retailer receives 1,200 orders in a month. Of those, 96 cannot be fulfilled immediately because the items are backordered.
Backorder Rate = (96 / 1,200) × 100 = 8%
This means 8% of orders placed that month were delayed due to out-of-stock inventory. For most retail contexts, a rate this high warrants a closer look at forecasting and reorder processes.
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Standard industry benchmarks suggest maintaining a backorder rate of less than 5%. According to data from Alexander Jarvis, rates exceeding this threshold generally indicate inefficiencies in inventory management, poor demand forecasting, or underlying supply chain issues.
Backorder rate is a lagging indicator. It captures a problem after it has already affected a customer's order. By the time the metric rises, demand has already outpaced supply.
That makes it most useful as a diagnostic tool rather than a preventive one. A rising backorder rate prompts questions: Was this a forecasting failure? A supplier delay? An unexpected demand spike? The metric points you toward the problem; it doesn't explain it on its own.
Pair backorder rate with leading indicators to get the full picture:
Inventory turnover — high turnover can precede stockouts if reorder points aren't adjusted
Days of supply — how long current stock will last at the current demand rate
Forecast accuracy — systematic over- or under-forecasting often drives backorder patterns
Supplier lead time — longer lead times increase the window in which a stockout can occur
Together, these metrics help you anticipate backorder risk rather than just measure it after the fact.
Backorder rate increases when demand outpaces supply. The most common causes include:
Demand spikes: Seasonal surges, promotions, or external events can deplete stock faster than replenishment cycles allow.
Inaccurate forecasting: Underestimating demand leads to insufficient safety stock and delayed reorders.
Long or unreliable supplier lead times: The longer the gap between placing a purchase order and receiving goods, the larger the window for a stockout.
Supplier disruptions: Factory shutdowns, raw material shortages, or logistics failures can halt supply regardless of how well you planned.
Manual reorder processes: When purchase orders require manual review and approval, restocking delays accumulate, especially during high-demand periods.
Data errors: Inventory miscounts, system lags, or data entry mistakes can make stock appear available when it isn't.
There is no universal benchmark for backorder rate. What's acceptable depends on your industry, product category, and customer expectations.
| Context | Typical tolerance | Notes |
|---|---|---|
| Consumer electronics | Low | Customers have many alternatives; high backorder rate accelerates churn |
| Industrial / B2B parts | Moderate | Buyers may accept longer lead times if the supplier relationship is strong |
| Seasonal or limited-run products | Higher | Demand is harder to predict; some backorders are expected |
| Marketplace sellers (e.g., Amazon) | Very low | Platform rules often require fulfilment within 30 days or penalties apply |
| Drop-ship models | Variable | Backorder rate depends heavily on supplier visibility and communication |
For most general retail contexts, a backorder rate above 5–10% is worth investigating.
Set reorder points based on lead time and demand variability. A reorder point that doesn't account for supplier lead time or demand fluctuation will consistently result in stockouts. Recalculate reorder points regularly as lead times or sales velocity change.
Increase safety stock selectively. Not every SKU warrants higher safety stock. Prioritize items with high demand, long lead times, or low substitutability.
Diversify your supplier base. Relying on a single supplier for critical SKUs creates concentration risk. Having an alternative supplier on standby means you can respond faster when a primary supplier faces disruption.
Use real-time inventory data. Delayed or inaccurate inventory data is one of the most common causes of avoidable backorders. Systems that update stock levels in real time allow faster reorder decisions and more accurate customer-facing availability information.
Communicate proactively with customers. When a backorder does occur, notify the customer promptly with a realistic fulfilment timeline. Customers who are informed early are more likely to wait.
Review backorder rate by SKU, not just in aggregate. An overall rate of 3% might mask a 40% backorder rate on your top-selling product. Segment the metric by product category, supplier, and sales channel.
Counting cancelled orders as fulfilled. If a customer cancels a backordered order and the cancellation isn't tracked separately, your backorder rate may appear lower than it actually is.
Using order lines instead of orders. Some teams calculate backorder rate at the order line level rather than the order level. Neither is wrong, but mixing the two methods across reporting periods makes trends unreliable.
Ignoring partial fulfilment. An order that ships 9 of 10 items may be counted as fulfilled even though one item is backordered. Tracking partial fulfilment separately gives a more accurate picture of the customer experience.
Conflating backorders with out-of-stock items. A backordered item has a known restock date and is expected to be available within a reasonable timeframe. An out-of-stock item has no confirmed availability. Mixing the two in your reporting obscures the actual backorder situation.