Chris Aiello Backorder management is more than just keeping parts flowing
I recently attended MHEDA’s Parts and Service Management Conference, and as is often the case with these industry events, I came away inspired with content for this month’s edition. One of the presenters was an industry colleague who gave an insightful presentation on backorder management and building processes for unforeseen delays. As she noted, a phrase that is all too common for parts and service managers is, “We’re just waiting on parts…” Let’s take a closer look at this topic and explore how you can strategically minimize the negative impacts of backorders.
Your customers have grown accustomed to same-day delivery and rapid fulfillment, and the pressure to meet high expectations is greater than ever. Backorders are not a matter of if but when, and when they occur, they can create significant disruption throughout the supply chain. The key to handling these challenges effectively is preparation — building processes and teams that can respond proactively rather than reactively.
When a backorder occurs, it affects more than just inventory levels. The impact ripples through your entire organization. A low parts fill rate can cause service work-in-progress (WIP) to back up, technicians may become idle, and customer satisfaction can suffer. Uptime is crucial to your customer’s operation, so even minor delays can lead to significant financial loss for your customers, resulting in frustration and potentially damaged relationships.
Strategies to reduce the impact of backorders
The first step in managing backorders effectively is to have strategies in place that minimize their impact on daily operations and customer experience. Several key approaches to consider are prioritizing communication, optimizing inventory, being flexible in sourcing, and leveraging technology.
Clear communication with suppliers and customers is essential. Build strong relationships with your suppliers and maintain open communication to anticipate delays and adjust as needed. Be transparent about delays and expected timelines to maintain customer trust and loyalty.
Optimizing inventory is also crucial. Analyze historical data to identify back ordered parts and adjust stock levels accordingly frequently. Use predictive analytics to forecast demand and implement a dynamic safety stock strategy that adjusts based on lead times and demand variability, ensuring sufficient inventory without overstocking.
Diversify your supplier base to reduce dependency on a single source. Establish multiple supplier relationships or alternative sources to create backup options and increase flexibility during supply chain disruptions with primary suppliers.
Invest in technology that enhances supply chain visibility. Real-time data analytics can help identify potential issues before they escalate, while automated ordering systems keep you informed about orders and priorities. Discuss API services with your ERP provider and suppliers to enable real-time access to pricing, availability, order submissions, and shipment notifications.
Developing adaptable team members
Beyond strategy and technology, the people managing the backorder process in your organization are critical to its success. A well-prepared team can make all the difference in minimizing the negative effects of backorders.
Regular training sessions can empower your team members to handle backorder situations with confidence and agility. Equip your staff with the knowledge and tools they need to make quick decisions, understand alternative options, and find creative solutions to supply chain issues.
Cross-training is equally essential. When team members understand multiple roles, they can step in where needed, maintaining workflow continuity. For instance, a parts manager should understand service scheduling well, and a service coordinator should be familiar with the parts ordering process. This flexibility ensures that operations run smoothly, even when key personnel are unavailable.
Create an environment where collaboration is encouraged and problem-solving is celebrated. Regular team meetings to discuss backorder challenges and share ideas can foster a culture of continuous improvement. Recognize and reward innovative solutions that improve backorder management processes, reinforcing a proactive approach. When team members feel empowered to contribute ideas and solve problems, they are more likely to take ownership of the issues at hand, leading to quicker and more effective resolutions.
Standardizing backorder processes
Consistency is key in any operational process, and backorder management is no exception. Standardized processes help ensure that every team member understands their role in managing backorders, which leads to more predictable outcomes and better customer satisfaction.
Start by developing and documenting clear procedures for managing backorders. These procedures should cover every process step, from identifying a potential delay to communicating with the customer. Standardized workflows help reduce confusion, minimize errors, and provide a framework for continuous improvement.
As mentioned earlier, technology can play a significant role in standardizing processes. Use software tools that provide real-time updates on inventory levels, track supplier performance, and automatically generate alerts for potential delays. Automated communication tools can streamline the process of informing customers about backorders, providing consistent and accurate information without the need for manual intervention.
Establish key performance indicators (KPIs) that track important metrics such as backorder duration, parts fill rate, customer satisfaction scores, and service WIP levels to ensure your backorder management processes are effective. Regularly review these KPIs to identify areas for improvement and adjust your strategies accordingly.
Creating stability for your customers
Backorder management is about more than just keeping parts flowing; it’s about creating a sense of reliability and stability for your customers. When customers trust that you manage unforeseen delays professionally and transparently, they are more likely to remain loyal, even when challenges arise.
Focus on building a reputation for dependability. By implementing effective backorder strategies, developing adaptable team members, and standardizing processes, you create an environment where backorders become less of a disruption and more of an opportunity to demonstrate your commitment to customer satisfaction.
Remember, backorders are inevitable, but with the right strategies and processes in place, you can ensure they are just a temporary bump in the road, not a detour.
About the Author:
Chris Aiello is the Business Development Manager at TVH Parts Co. He has been in the equipment business for 17-plus years as a service manager, quality assurance manager, and business development manager. Chris now manages a national outside sales team that sells replacement parts and accessories in various equipment markets, such as material handling, equipment rental, and construction/earthmoving dealerships.
