Backorder Management on Shopify

Inventory errors cost Shopify merchants in two directions simultaneously — stockouts lose sales while dead stock drains cash. Getting inventory management right transforms your operation from reactive to proactive. This guide covers backorder management on shopify with practical systems you can implement today.

The Real Cost of Poor Inventory Management

• Stockouts: You lose the sale to a competitor. Research shows 43% of stockout shoppers never return.
• Overstock: Capital tied up in slow-moving inventory that depreciates, takes warehouse space, and may expire or go out of trend
• Inventory inaccuracies: Selling products you do not have generates orders you cannot fulfill — leading to refunds, negative reviews, and potentially account issues

Shopify Inventory Basics

Set up the foundation correctly in Shopify Admin:

1. Enable “Track quantity” on every product in the Inventory section
2. Set accurate opening stock quantities — inaccurate starting counts compound into bigger errors
3. Configure locations correctly (Settings → Locations) — each warehouse or store should be a separate location
4. Decide per product whether to “Continue selling when out of stock” (for pre-orders) or block sales
5. Set up low inventory alerts in Settings → Notifications

Key Inventory Metrics

• Sell-through rate: Units sold / Units received × 100. Target 70-80% for fashion, 80-90% for fast-moving consumer goods
• Days of inventory on hand: Current stock / Daily sales rate. Should cover your supplier lead time plus safety stock
• Inventory turnover: COGS / Average inventory value. Target 4-8x annually for most product categories
• Reorder point: The stock level at which you place a new purchase order = (average daily sales × lead time days) + safety stock

Safety Stock Formula

Safety stock prevents stockouts when demand spikes or suppliers are delayed:

Safety Stock = (Max daily sales - Average daily sales) x Maximum lead time days

Example:
Average daily sales: 10 units
Maximum daily sales: 18 units
Supplier maximum lead time: 14 days

Safety Stock = (18 - 10) x 14 = 112 units

Inventory Management Apps for Shopify

• Inventory Planner: Best demand forecasting, automatically recommends reorder quantities and timing — pays for itself in reduced stockouts and overstock
• Cin7: Full-featured with warehouse management, B2B, multi-channel sync, manufacturing — for complex operations
• Linnworks: Enterprise multichannel inventory — great for stores selling on Shopify + Amazon + eBay simultaneously
• DEAR Inventory: Good mid-market option with manufacturing support and strong Shopify integration

ABC Analysis for Backorder Management on Shopify

Prioritise your inventory management attention using ABC classification:

• A items: Top 20% of products that generate 80% of revenue — monitor daily, keep highest safety stock, never let these stock out
• B items: Next 30% — monitor weekly, maintain moderate safety stock
• C items: Remaining 50% — monitor monthly, minimal safety stock, consider discontinuing slowest movers

Focus your reorder attention and safety stock budget heavily on A items — a stockout on your top seller costs dramatically more than a stockout on a slow-moving SKU.