![]() For example, an electronics retailer could place an indent order for 5,000 Sony Playstation 5s, and Sony would be obligated to hold the 5,000 for the electronics retailer even if other customers would pay more. What makes indent orders unique, is that the product seller contractually commits to holding stock for the buyer even if other customers are passionately seeking to buy the same stock. This helps them foray into new markets without taking unnecessary risks. For example, an apparel company that also offers merchandise such as coffee mugs, may not necessarily produce the mugs themselves.Īll they do is ask another company to manufacture the mugs and sell them to the apparel company so that the same could be offered to the customers.īy placing indent orders, companies can expand their product catalogs without necessarily producing all the products themselves. Some of these products aren’t necessarily produced by them. Many brands offer a wide range of products to their customers. Such orders are common while dealing with trading companies who don’t manufacture or store products but simply trade them. Indent orders are orders where a customer places an order with a company and the company purchases the product from a third party, due to a variety of reasons. And the publishing company gets a significant sum of money without even releasing the product. This way, the readers make sure that they receive one of the first few copies of the book. However, a few weeks before the book hits the stores, the publishing house allows the readers to pre-order the book. When a publishing company signs a successful author, they announce the likely date of arrival of the book into the markets. One of the best examples of pre-orders is books. For example, Sony pre-sold Playstation 5 gaming machine so that customers that wanted a new Playstation could buy it before it was available and receive it very quickly after it became available. Pre-orders also help product sellers plan the sales and distribution of new products with pent up demand. ![]() Customers who place pre-orders have an edge over those who place normal orders, as pre-orders are fulfilled before the rest. It is a way for the manufacturer to gauge the demand for the product before releasing it. This way, the manufacturer gets to keep the contract, while the retail store gets the shoes, albeit slightly later than expected.Ī pre-order is a type of order that is placed before the product is released into the market. The company converts the rest into backorders of 4000 pairs to be delivered each month. Instead of refusing, the shoe manufacturer asks the retail store if they can start with 12,000 pairs. However, their current inventory as well as their two-month production capacity only allows them to supply 12,000 pairs. Example of a BackorderĪ shoe manufacturer in Arizona receives an order from a Los Angeles-based retail chain, to deliver 20,000 pairs of shoes within 2 months. The possibilities are endless, provided there is clear communication between the company and the customers. If a company receives an order that is larger than their fulfillment capacity, they can break it down into smaller pieces and deliver a few immediately while converting the rest into backorders. They free companies from the false binary of yes and no, and provide a lucrative third option. It assures them that their order will be fulfilled, although the delivery may be slightly delayed.īackorders help companies walk the tightrope of timely order fulfillment and profitability. In such a scenario, the company communicates the situation to the customer with clarity. The reason for the delay could be anything from lack of resources and raw materials to an unexpected labor strike or a sudden spike in customer demand. Not all companies, especially small and middle-sized ones, can afford to have their inventories full all the time.Īnd so, time and again, these companies run into situations where they have to inform the customer about their inability to deliver the goods within the stipulated time. Keeping a fully stocked inventory is one of the riskiest elements of running a product-based business. In other words, backorders are orders that cannot be fulfilled immediately but are sure to be fulfilled at a later date. A backorder is when a customer or a client places an order for a product that cannot be delivered immediately due to no available stock at the present time.
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