Back Order

DEFINITION of 'Back Order'

A customer order that has not been fulfilled. A back order generally indicates that customer demand for a product or service exceeds a company's capacity to supply it. Total back orders, also known as backlog, may be expressed in terms of units or dollar amount.

BREAKING DOWN 'Back Order'

Companies have to walk a fine line in managing their back orders. While consistently high levels of back orders indicate healthy demand for a company's product or service, there is also a risk that customers will cancel their orders if the waiting period for delivery is too long. This is less of a risk for innovative products with strong brand recognition in areas such as technology.

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