Get in Front of Your Backorders
Backorders can be a source of customer dissatisfaction and add cost to your order fulfillment process. The good news is your Exeter WMS provides multiple opportunities to control and reduce backorders to an absolute minimum.
What is a backorder?
A backorder is any part of an order that is not shipped. The percentage of items backordered and the number of backorder days are important measures of the quality of a company’s customer service and the effectiveness of its inventory management.
The first level of backorder control typically resides at the ERP (host). The host compares the order with the inventory on-hand and manages the order; it may permit backorders, or it may not. However, other anomalies downstream can result in backorders.
From a WMS perspective a backorder is any part of a shipping order (ATS or Authorization-To-Ship) that is not included in the shipment to a customer at the time of the last departure of the order. As a result, the ATS is shipped incomplete. When WMS determines an ATS is incomplete, it communicates both shipped and not-shipped information back to the host. The host system then decides whether an unshipped quantity becomes a backorder or is cancelled.
WMS processing steps that can result in backorders
Create Shippable Pool compares each ATS’s demand against current shippable inventory in the warehouse. Sometimes the needed inventory may be in expected receipts (ATR) but not yet received; or in a non-shippable inventory class. Delaying the selection and release of a partially shippable ATS until inventory becomes available will, in most cases, prevent a backorder.
Release Selected Orders (Wave Generation) looks only at inventory that is available in pick-able warehouse locations. Inventory in movement and staging cannot be release into picking directives. When WMS cannot find an addressable location for creation of a directive it returns the order quantity back to the open pool. That part of the order will most likely become a backorder unless further processing is stopped by cancelling the ATS picking assignments and re-planning/re-releasing the ATS after the inventory is put away into the warehouse location.
Occasionally, picking directives cannot be executed/confirmed due to a variety of reasons, like pending, replenishments, locked locations, inventory movements, and reclassifications. Proper research and transferring or adjusting inventory into picking locations could prevent a backorder.
WMS tools designed to prevent backorders
Multiple features have been engineered into WMS to automatically trigger system reactions when shortages are detected.
WMS baseline has a Fill Rate parameter that can be set by the host for each ATS. If the fill rate for the order is not satisfied the system will keep the order in the open pool preventing further processing.
WMS baseline Release 3.2 modified the ATS Backorder Flag which enables the host to control what happens to the order when it is entirely not shippable. This modification enables an order to remain in WMS awaiting inventory or to be sent back to be handled by the host.
WMSei’s Shipment Planning Module, through Order Selection filters, provides ways to exclude not fully shippable orders from the order release process. WMSei gives you an automated, systematic way to reduce the risk of releasing orders to the floor that have short quantities due to unavailable inventory.
WMS baseline Release 8.1 provides a report of exceptions during Release Selected Orders (Wave Generation). This report helps the shipment planner quickly identify “out of stock” SKUs and orders. When inventory conditions are cleared, ATS assignments can be cancelled and reprocessed.
Monitoring picking exceptions is essential as unresolved shortages have the potential of becoming backorders.
WMS baseline provides the final check of ATS completeness at Trailer Closing time. This baseline transaction is often customized. Reported exceptions vary – from showing only released but not loaded portions to any outstanding portion of the ATS.
What else can be done to prevent WMS backorders?
Visibility can be improved and research and response time reduced by:
- Monitoring shippable orders with outstanding open quantities
- List of short SKUs can trigger inventory research; especially expected receipt and inventory class changes
- List of ATRs with outstanding receipts of short SKUs
- List of all locations and containers in staging that contain short SKUs for all inventory classes
- List of ATSs with short SKUs can be used to prevent the selection of the ATS for release
- Facilitating the return of partially shippable orders to the Open Pool
- Monitoring Release Selected Orders results for additional shortages
- List of short SKUs can trigger research of inventory in movement and staging resulting in actions to complete targeted putaways
- List of containers in staging to be putaway for short SKUs
- List of ATSs with short SKUs can be used to cancel ATS assignments for reprocessing
- Monitoring of picking exceptions report
- List of SKUs and locations with picking exceptions can trigger inventory research, correcting inventory status in picking locations
- List of locations, containers, and replenishment directives for short SKUs
- List of assignments with directives that have exceptions can trigger the reopening of directives for execution
There are many ways to produce the above lists. Some may already be available in your system. There are also multiple ways to view and manage your data to provide the right data at the right time to minimize backorders. WMSei and Dashboards are a good examples.
Measuring warehouse performance – Ship Complete KPI
WMS baseline Release 10 provides new functionality to capture and store ATS statistics including Ship Complete information. This data is available for reporting and measuring your warehouse performance. Dashboards – ours or a dashboards product you already own – are an excellent tool for reporting those metrics in graphical form.
There are multiple ways for you to get in front of your backorders – from baseline functionality and reporting to the use of WMSei and Dashboard products. If backorders have become a bear for you, you have the ability to tame it.
Contact Us with your questions and comments.