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Backlog

Customer orders received but not yet completed — a key indicator of demand health and capacity planning needs.

Formula

Open orders (value, units, or days of production)

Benchmarks

World-class: Stable at 2–4 weeks of production Good: Manageable and trending predictably Typical: Variable but tracked Poor: Growing uncontrollably or unknown

What Is Backlog?

Backlog measures the total customer orders that have been received but not yet completed. It can be expressed as a monetary value, number of units, or number of production days.

The Formula

Backlog = Sum of all open orders (value or units)
Backlog Days = Backlog Value ÷ Average Daily Sales

Typical Values

2–8 weeks of production is typical, varying widely by industry and business model.

Data Requirements

SourceRequiredWhat You Need
ERPYesOpen orders, order values, dates

Backlog is a Phase 3 metric — it requires ERP order management data.

Why It Matters

  • Capacity planning — validates whether current equipment and staffing levels are sufficient
  • Revenue forecasting — represents committed future revenue
  • Customer communication — enables realistic delivery promises based on current workload
  • Business health indicator — a growing backlog signals strong demand; a shrinking one may signal trouble

The Balance

Too little backlog risks idle capacity and lost revenue. Too much backlog means long lead times and dissatisfied customers. The goal is a stable backlog that keeps the operation fully utilised without pushing lead times beyond customer tolerance.

Best Practices

  • Monitor backlog trends — growing versus shrinking tells you about demand trajectory
  • Maintain backlog at 2–4 weeks for operational stability where possible
  • Use backlog data to adjust capacity (staffing, shifts, equipment)
  • Communicate expected delivery dates based on current backlog, not theoretical lead time