Back orders are orders placed for goods that are not yet in stock. They are filled as soon as a replenishment arrives and are often good candidates for cross docking. Backorders are common in captive markets, in government operations, and when there are exclusive distributors for items. Backorder costs include backorder processing, incremental freight and expediting charges, and lost customer goodwill.
In backordering the quantity requested by the customer is placed on a separate order called a backorder and the special order is filled as soon as the product is available from internal and/or external sources. In some cases the backorder is shipped directly from its original source to the customer. Typically received stock is allocated first to back orders. These orders are then available to be fulfilled in the normal way.