In today’s fast-moving automotive industry, efficient parts management is critical to both customer satisfaction and operational profitability. Whether you're managing a dealership or an independent service center, you’ve likely encountered the frustrations of backorders—either from your supplier or from customers waiting on a part you don’t have in stock.

But backorders are more than just a minor inconvenience. They come with hidden costs and business risks that can quickly erode margins and damage customer relationships if not managed carefully.

What Is a Backorder?

A backorder occurs when an item is temporarily out of stock with your supplier, but they expect to replenish it and fulfill the order at a future date. In simple terms, the part is not available now, but it’s coming—eventually.

In practice, this means:

• A vendor tells you the part you need is backordered.
• You, in turn, must inform your customer that the repair or service they’re waiting for is delayed.

How Customers React to Backorders

When customers hear that a part is on backorder, they typically respond in one of three ways:

1. Wait it out – Some customers will continue with the transaction and wait for the part to arrive.
2. Delay the job – Others may leave and return later, hoping the part has been restocked.
3. Walk away – In the worst case, the customer cancels the job and takes their business to a competitor who can fulfill the request faster.

Each of these outcomes has a different impact on your business—but they all share one thing in common: they cost you money.

What Are Backorder Costs?

Backorder costs are the direct and indirect expenses associated with your inability to fulfill an order immediately. These can include:

Direct Costs:

• Interest on unsold inventory – Parts sitting in limbo still count toward carrying costs.
• Expedited shipping – To meet customer expectations, you may need to rush-order the part once it becomes available.
• Overtime pay – You may schedule technicians outside regular hours to install the part quickly once it arrives.

Indirect Costs:

• Decreased customer satisfaction – A delayed job means a frustrated customer, which impacts reviews, referrals, and return business.
• Lost sales – Customers may cancel the job entirely or choose a competitor with better availability.
• Inventory management issues – Too many backorders can throw off your reorder points and create further supply issues.

Over time, these costs add up, silently cutting into your profitability and eroding your reputation.

How to Minimize Backorders in Your Operation

The good news? Backorders are not inevitable. By improving your inventory practices and leveraging the right tools, you can significantly reduce their frequency and impact.

1. Use a Modern Inventory Management System

An outdated or manual system increases the risk of stockouts and errors. Invest in a modern inventory management platform that:

• Tracks inventory in real time
• Provides automated low-stock alerts
• Generates reorder reports
• Integrates with supplier catalogs and availability

These features help you act proactively instead of reactively.

2. Improve Your Forecasting Methods

Forecasting isn't just guesswork—it’s a critical component of operational planning. Use historical sales data, seasonal trends, and manufacturer lead times to make informed decisions about stocking levels.

Also, stay informed about supply chain disruptions (e.g., strikes, shipping delays, recalls, and global part shortages) that could affect delivery times. The earlier you detect a risk, the better positioned you’ll be to find alternatives or adjust customer timelines.

3. Conduct Regular Inventory Reconciliation

Your systems are only as accurate as the data you feed them. To maintain accuracy:

• Perform regular cycle counts (monthly or quarterly)
• Do full physical inventory checks annually or biannually
• Review discrepancies between recorded and actual stock

This helps you spot shrinkage, misplaced items, and data entry errors before they become bigger issues.

4. Build Strong Vendor Relationships

Your relationship with vendors matters. Suppliers may prioritize loyal, communicative partners when allocating scarce parts. Develop open lines of communication, share forecasting data when possible, and explore vendor-managed inventory (VMI) arrangements.

Backorders may be a common part of doing business in the automotive world, but that doesn’t mean they should be ignored. With proper systems, better forecasting, and disciplined inventory control, you can reduce both the frequency and the financial impact of backorders.

Minimizing these hidden costs not only improves your bottom line—it also helps you build a reputation for reliability, professionalism, and speed in an industry where customer loyalty is everything. Pro Count West's experienced automotive inventory professionals have the knowledge and industry-seasoned skills necessary to optimize inventory levels to help reduce back order costs. Get in touch with us today!