What Is Backlog Inventory? Causes and How to Manage It (2026)

Backlog inventory, or the pileup of sold but unshipped units, is one of the fastest ways to turn strong demand into frustrated customers and shrinking margins. Without a plan, it quietly snowballs. Orders age, support tickets increase, packaging gets rushed, and refunds start creeping in. 

Efficient inventory management balances incoming order volume with pick and pack capacity, ensuring inventory that’s already committed leaves the building on time. It also means preventing a backlog caused by inventory that’s available but stuck in transit. 

This guide shares an inventory system to help teams clear the queue quickly and keep it from coming back, with steps for improving accuracy, setting reorder points, and optimizing routing. 

What is backlog inventory?

Backlog inventory is stock that is promised to a customer but still sitting on your shelf. These units have already been sold, yet have not been handed off to a carrier. It’s a work-in-progress queue that fluctuates with your warehouse’s throughput. 

A backlog grows when your team ships slower than orders arrive and shrinks when shipping outpaces new demand. Here is the math behind it:

• Day 1: 0 backlog + 120 orders − 60 shipped = 60 units in backlog
• Day 2: 60 backlog + 80 orders − 110 shipped = 30 units in backlog
• Day 3: 30 backlog + 50 orders − 40 shipped = 40 units in backlog

Why does a backlog exist even when you have inventory? Well, retail operations are getting more complex. Some 78% of brands sell on two or more sales channels as of 2025. 

Omnichannel volume increases queue pressure and creates edge cases in inventory allocation. For example, you may have global availability, but if the location assigned to the order is empty, the order stalls in the queue. Units might also be physically on-hand, but stuck in receiving, set aside for quality control, or reserved for draft orders.

Backlog inventory vs. back order vs. order backlog

It’s easy to confuse these concepts, but they point to different problems with distinct fixes. 

• Back order is an availability problem. You cannot fulfill the order because the sellable inventory isn’t there right now. 
• Inventory backlog is a capacity issue. You have inventory committed to orders, but your operations team cannot ship it fast enough. 
• Order backlog is the total queue of unfulfilled orders, including both available and unavailable stock scenarios. 

Don’t know which problem you’re facing? Use this checklist to figure it out:

Backlog inventory

• Customers ordered? ✅
• Units exist in the warehouse? ✅
• Shipped? ❌
• Status: Inventory is committed to open orders but hasn’t left the building.

Back order

• Customers ordered? ✅
• Units available to fulfill? ❌ 
• Shipped? ❌
• Status: The promise is made, but the goods aren’t available yet.

Order backlog

• Customers ordered? ✅
• Units available? ❓ 
• Shipped? ❌
• Status: The total count of orders waiting in the queue.

It’s important to prioritize the right fix. Customers will forgive a backlog delay if you communicate clearly and shipping costs are low (or free). However, they are less forgiving of back orders that come as a surprise. 

What causes backlog inventory?

Inventory backlog happens when orders arrive faster than your team can ship them. It’s not always a bad thing, as it’s often a side effect of growth or high demand, like a Black Friday and Cyber Monday (BFCM) sales peak.

However, if your queue of unfilled orders keeps growing after the rush ends, you’ve got a bottleneck in the supply chain management system that needs fixing. The most common causes of backlog inventory fall into four categories:

• Demand spikes. Viral promos or preorders create a throughput gap, where order volume exceeds your daily picking and packing capacity.
• Supply delays. Inventory might be physically on the dock but stuck in an incoming state, meaning it hasn’t been received in the system and cannot be fulfilled.
• Operational issues. Labor shortages, inefficient warehouse flows, or missed carrier cutoffs prevent ready-to-ship packages from leaving the building.
• Routing errors. Poor multilocation routing and inventory tracking errors can trap orders at a location with no stock while inventory sits idle at another warehouse.

To fix your backlog and meet customer expectations, you’ll need better data. Shopify helps solve this by tracking inventory states, separating what is committed to existing orders from what is available to sell. Using smart order routing, you can assign shipments to the right facilities and automate your back order policies to ensure faster delivery times. 

Why backlog inventory is a business risk

A backlog isn’t always a red flag—queues are normal. The real danger is in order aging. Once a backlog starts slipping past promised handling windows, teams get pulled in a spiral. 

They receive more “Where is my order?” messages, more manual fixes, more rushed packing, all things that drain time and make the backlog worse. That’s when backlog becomes an operational risk, leading to:

• Customer churn from poor delivery experiences. When backlog pushes shipments late, customers disown your brand. A 2025 consumer survey from Sifted reported that nearly half of consumers stop buying from a brand after poor delivery or packaging.
• Higher warehousing and inventory costs. The longer inventory and orders are in process, the higher your carrying costs are. A 2025 survey of more than 600 warehouses found the reported minimum monthly spend rose from $337.50 in 2024, to $517 in 2025, and 48.6% of warehouses charge long-term storage fees.
• Revenue risk from cancellations and refunds. If orders go unshipped for too long, customers are more likely to cancel, ask for a refund, or dispute the change. 

How to reduce backlog inventory

There are a few key steps you can take to fix backlog inventory and prevent it from happening again.

1. Fix inventory accuracy first

Fixing a backlog starts with knowing what inventory you have. Backlogs can masquerade as a demand problem — but it’s often a data problem. The system believes stock is in the wrong place or does not exist at all, leading to orders that cannot be physically filled. 

Start with a seven-day accuracy sprint focused on the top 20 SKUs causing the most unfulfilled orders. In your Shopify admin, verify that products aren’t assigned to extra locations accidentally. 

If you use Shopify POS, enforce a barcode scanning rule for all receiving and transfers. Industry data suggests that moving from manual counting to item-level scanning can boost accuracy from roughly 70% to 99%.

Accuracy checklist:

• Always scan incoming items and verify quantities against the purchase order or packing slip.
• Place returns in a quarantine bin first, and scan them back into a sellable location only after a quality check.
• Use ABC analysis and count A items (top sellers) weekly, B items monthly, and C items quarterly.
• Use barcode scanners at every physical touchpoint, such as receiving, transfers, and stocktakes.
• Move stock between locations using formal transfers in Shopify, never via manual inventory adjustments.

2. Set reorder points and safety stock

Backlog also builds when replenishment happens too late. The most effective fix is setting clear reorder points (ROP) and safety stock levels so you purchase inventory before you run out.

Use Stocky to access the low stock report. It will automatically calculate a recommended ROP based on your lead times and sales velocity. For a manual check, use the formula ROP = (daily sales × lead time) + safety stock. If you sell five units a day and restocking takes 10 days, reorder when you hit 50 units remaining.

Here are some tips for setting ROPs:

• Ensure vendor lead times are accurate. If the system thinks a supplier takes five days but they actually take 15, the math will fail.
• When creating a purchase order in Shopify, use the demand forecasting feature to populate suggested quantities based on recent history.
• Make the low stock report a mandatory Monday morning review.

3. Improve fulfillment throughput 

Now that your inventory is accurate and replenished, it’s time to focus on throughput. Backlog comes down to a capacity equation: orders coming in versus orders shipping out. 

If you generate 500 orders a day but can only pack 400, your backlog grows by 100 orders daily, no matter how much stock you have. Clear your backlog within the next week with these quick tips:

• Split fulfillment into a morning and afternoon wave to keep the flow continuous.
• Group orders by SKU or zone to reduce walker travel time.
• Tighten your two-day shipping cut-off to a realistic time your team can hit.
• Move your top 20% bestselling SKUs to the shelves closest to the packing tables to shave seconds off every order. 
• Use smart order routing to ensure orders are fulfilled from a single location whenever possible. Shipping one package instead of two cuts your packing labor in half.

If your team cannot scale to meet customer demand, it’s a sign to consider outsourcing to a 3PL partner via the Shopify Fulfillment Network. 

Compare trusted partners for pricing estimates and performance metrics, then connect your choice to your store admin. You can monitor shipments, inventory levels, returns, deliveries, and more right on Shopify. 

4. Optimize multilocation routing

If you manage inventory across multiple warehouses or retail stores, back orders can occur when the system sends orders to the wrong location. An order might sit unfulfilled in a warehouse that is out of stock, while the same item is collecting dust on a store shelf. 

Use Shopify’s smart order routing to direct orders to the location best equipped to fill them. This prevents an artificial backlog, where you have stock but the order can’t find it.

Set your rules to prioritize efficiency: 

• Minimize split fulfillments. If an order with three items is split into three shipments from different locations, you have tripled the labor required for picking and packing. Prioritize locations that can ship the entire order at once.
• Use ranked locations. If your main warehouse is overwhelmed and facing a backlog, adjust your routing rules to prioritize retail locations or secondary warehouses to relieve the pressure.
• Stay within the destination market. Ensure international orders aren’t routed to a domestic warehouse that lacks the required customs paperwork, as this can stall those orders.

5. Automate backlog prevention with Shopify Flow

Backlogs can build up because teams rely on humans to spot patterns like fast-selling SKUs or stuck transfers. But while humans get tired, automated systems don’t. Use Shopify Flow to build a warning system to catch these issues before they escalate. 

The idea isn’t to automate the fixing, but to automate the noticing. When you set up workflows that trigger based on inventory changes or order age, there is less need for manual reporting. 

Some examples of no-code workflows to run in Shopify Flow are:

• Low stock alert. Send a Slack message or email to the buying team when a variant drops below its threshold.
• Velocity watch. Auto-tag products as “risk_of_stockout” if inventory decreases by X% in a single week.
• Stuck transfer. Create an internal task for the warehouse lead if an inventory transfer remains “In Transit” for more than five days.

6. Use back orders strategically

Not all backlog is bad. When it’s intentional, like with preorders or back orders, it can be a strategic choice to preserve revenue. But when you allow back orders on items with unknown lead times, customers will become frustrated and that hurts your brand reputation. 

“In this day and age in the consumer psyche, you are battling against Amazon and how they’ve shifted consumers to think you should have a product at your door in two days,” says Marcus Milione, founder of Minted New York. 

“But the consumer, when they purchase a product on my website, regardless of how small I am, they think a product should be delivered, you know, within seven days, generally in two days.”

Marcus says that for preorders, added delays in production runs can risk damaging your relationship with your customers.

In Shopify, the setting “continue selling when out of stock” controls this. Enable this only for SKUs with a confirmed inbound purchase order and a stable supplier. 

Customers are generally fine waiting if they know they are waiting. They are not fine buying an item they think is in stock, only to receive a delayed email three days later.