How is the percentage of backorders calculated?

The calculation of the percentage of backorders involves determining how many line items are not available for fulfilling customer orders compared to the total number of line items that were requested. Therefore, the formula is based on the ratio of the number of line items on backorder to the total line items requested.

This metric is important as it helps organizations gauge their ability to meet customer demand effectively. A higher percentage indicates potential issues with supply chain management, inventory levels, or forecasting accuracy. Ensuring that inventory is adequately stocked to minimize backorders is critical for maintaining customer satisfaction and operational efficiency.

In contrast, the other options focus on different metrics that do not directly measure backorders. For instance, one looks at fulfilled orders relative to total orders, which assesses overall order fulfillment rather than specifically backordered items. Another option evaluates inventory against demand, while the last one relates sales to inventory levels, neither of which accurately reflects the status of backorders.