Learn how to get Control over NetSuite Backorder Situations

This article is relevant if you want to better understand how NetSuite works with backorders and item commitments.


Now that we have created a system for more intelligent transaction management with our Record State Manager (RSM) framework, we are finding clients are asking better questions on how NetSuite works with backorders and item commitments. The most popular use case for the tool is the Sales Order. The general concern we see in our client organizations is the need to more intelligently release an order if it can really be fulfilled.

Most inventory concerns relate to the question, “do we have stock?”. A stock out situation is a backorder. Other situations are where we have more orders than we have inventory on hand and we can know we can’t fulfill all of them at once. This is the inventory allocation challenge.

NetSuite Item Commitment Settings

NetSuite offers a mechanism to manage orders including the capacity to produce inventory allocation based on different rules. The allocation capacity is driven by leveraging the item commitment feature. However, many times, especially for organizations that are developing better perpetual inventory practices, NetSuite item commitments may act too restrictive in the order flow. More often than not, when new clients as ask us to help evaluate their existing NetSuite implementation and business practices, we find that the Item Commitments preferences have been set in a loose fashion by configuring NetSuite to “Ignore Commitment”.

Discovering Backorders

I have seen other organizations approve sales orders before they are actually going to be shipped because they want to see NetSuite’s interpretation of Backordered so they can understand where they need to take action to get product in hand. That practice may be reasonable — however, I am a proponent of approving sales orders after you have carefully considered the order management and fulfillment narratives so that you can get NetSuite to behave appropriately. Now that our Record State Manager allows better visibility and granularity for sales order (and all transaction) processing, we can get more control over the process.

Learn About NetSuite Backorder and Item Commitment Visibility

To help you consider your inventory process flows, the following transaction state outline should reveal how information becomes available as you work the Sales Order. The focus is primarily on backorders which is a situation where you have a sale but you do not have stock to fulfill.

Sales Order Unapproved

A Sales Order’s default state is Unapproved when you enter an order. Because, many organizations want to ship complete, they may not want to release the order until they know they have available goods and no backorders. In some respects, it’s easier for people to understand that when a Sales Order is approved, it is “ready to be shipped”. However, it is important to understand what NetSuite does with unapproved sales orders with respect to backorders:

  1. Backorder Visibility: NetSuite does not consider the sales order committed and thus does not show information on backorders in default reports or via item searches. These sales orders are effectively invisible to NetSuite reports and item references.
  2. Item Commitments: No ability to commit an item to the order.
  3. Saved Search Visibility: A transaction search with main line equal to false can emulate a back order report by calculating the effect of unapproved sales order demand for goods. Accounting for assumptions based on location in your warehouse network will be necessary as your craft your search.

Sales Order Approved without Location Set

Once a sales order is approved, the location may not be set. We often create “fulfillment narratives” for our clients leveraging Record State Manager to determine which warehouse location should be responsible for fulfillment. Note, NetSuite now has an add-on module to do this as well — yet, many times, the algorithm can be simply implemented via some script. Once you are in this state, here is the situation:

  1. Backorder Visibility: NetSuite reports will see the back order. However, the back order information on the sales order line will not be available and you will also not be able to see the back order via an item search.
  2. Item Commitments: No ability to commit an item to the order.
  3. Saved Search Visibility: You will be able to see the backorder via transaction based saved search.

Sales Order Approved and Line Location Set

Now that the order is approved, if location is set at the line level, we can now target information about the specific warehouse.

  1. Backorder Visibility: NetSuite reports and item searches will see the back order.
  2. Item Commitments: We finally have the capacity to commit the item to the order. Thus, to perform allocation work using NetSuite methods, you need to get the order assigned to a location. NetSuite may commit the inventory automatically — but don’t assume this. The algorithm can be shaped based on priorities and other ordering rules.
  3. Saved Search Visibility: Full visibility is now offered via item and transaction saved search.

Get In Front of Backorders and Item Commitments

The key to designing a smooth running operation is to standardize your practice and produce coordination between the selling and fulfillment departments. With some care, you can get NetSuite to behave according to your demands. Confusion and missteps can be minimized by intentional configuration. Our Record State Manager is a capacity we give free of charge to our clients as we help them optimize their sales and fulfillment practices. If you assess that you can get better control over your transaction management environment, let’s have a conversation.

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Marty Zigman

Holding all three official certifications, Marty is Southern California's NetSuite expert and leads a team of senior professionals at Prolecto Resources, Inc. He is a former Deloitte & Touche CPA and has held CTO roles. For over 25 years, Marty has produced leadership in ERP, CRM and eCommerce business systems. Contact Marty to set up a conversation.

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