Are you an Amazon seller looking to maximize your inventory performance index score? First, you must understand the Amazon Inventory Performance Index (IPI) score. The IPI score is a metric used by Amazon to measure how well sellers manage their inventory and can significantly impact sales and profitability.
In this comprehensive guide, we will explore the IPI score, how it works, and how sellers can use it to improve their business. By understanding the inventory performance index score and taking steps to improve it, sellers can unlock greater success on Amazon.
What is the Amazon Inventory Performance Index (IPI) Score?
An IPI, or Inventory Performance Index score, measures how well an Amazon seller manages their FBA inventory. It is calculated based on storage limits and how quickly an Amazon seller can restock inventory.
An IPI of 400 is the minimum threshold for avoiding higher storage fees, so businesses must stay aware of their IPI at all times, especially during peak selling seasons, so that inventory storage limits remain controlled. In addition, tracking the IPI score can allow Amazon sellers to control inventory holding costs while providing faster delivery options and a more pleasant shopping experience.
How to check the IPI score in Seller Central?
To review your inventory performance index or IPI score, open your seller central account, go to your Amazon Seller Central home page, and expand the IPI section. Click on the drop-down button to view the IPI scores of different marketplaces.
Then Click the IPI score next to the marketplace you want to review. You will be redirected to the ‘Inventory Performance’ page.
The ‘Inventory Performance’ page shows a snapshot of the seller’s weekly IPI score, the Top Influencing factors that affect your IPI score, and a summary of the percentage of your FBA sales revenue you spent on FBA storage fees over a given time frame.
You can also check here the “Ways to improve your performance.” Finally, you can tick the “Show more details” box for more details and information.
Click the drop-down arrow icons at the bottom of the inventory performance page to review the restock limits and storage volume.
The ‘Restock Limits’ section allows sellers to manage the quantities they add to their FBA inventory. Amazon calculates the restocking limits based on historical sales and forecasted demands. By improving the IPI score, Amazon sellers can get in the good books of Amazon and boost their FBA restock limit.
The ‘Storage Volume’ section lets the seller know the storage space the inventory occupies in the FBA fulfillment center against their storage limits. Improving your IPI score will lead to an increase in storage limits. Closely monitor the IPI score in the inventory performance dashboard and check Amazon’s recommendations for improving your IPI score.
How Does the IPI Score is calculated by Amazon?
IPI score measures how efficiently and productively an Amazon seller manages their FBA inventory. There have been multiple factors that could influence a seller’s inventory performance index score.
The most important factors, however, are based on the seller’s actions, such as maintaining a balanced inventory level between sold and available, avoiding excess units, and aged inventory.
Another one is how a seller avoids long-term storage fees, manages and fixes listings issues, and lastly, how a seller keeps its most popular products’ safety stock level to meet customer demand and maximize satisfaction rate.
An Amazon seller’s IPI score represents the overall inventory performance and considers the recent and long-term inventory performance. When taking action to improve inventory efficiency, the result might take some time to reflect.
The seller’s IPI is built to account for the seasonality or unexpected disturbance in a business, allowing the long-term inventory performance to serve as protection and prevent the IPI score from short-term fluctuations. This would allow more time to adjust and manage the inventory more efficiently.
Factors that affect IPI score
Although Amazon did not directly show how a seller’s IPI score is calculated, they identified four categories that directly impact the IPI score. The following are excess inventory, FBA sell-through rate, in-stock inventory, and stranded inventory.
The ‘Inventory Performance’ page shows a performance bar for each of the four categories:
The page also shows additional information for each category, which you can see by ticking the checkbox for “Show more details.” Ticking the checkbox will lead you to an inventory management tool that provides recommendations to improve performance.
FBA Excess Inventory
One category that Amazon identified as a contributing factor that affects the IPI score is excess inventory. Amazon will consider an item as an excess if it is over 90 days of supply based on the forecasted demand.
The excess inventory percentage is the percentage of your inventory units identified as excess. The image below shows a sample of the excess inventory percentage:
Aside from the Excess inventory percentage and performance bar, three other related pieces of information are displayed on the Excess inventory in the Inventory performance page.
- Excess units are the number of units for which it costs you more to do nothing and pay the storage fees instead of taking action, such as marking down the price or removing inventory. This value is based on the customer demand for your product and product costs (including fees and the cost of goods).
- Estimated total storage cost is the total costs you would incur if you took no action and left your inventory idle in the fulfillment center over three years. This includes monthly inventory storage fees and long-term storage fees.
- The Reduce excess inventory button shows how many SKUs you have with excess inventory. Click the button to go to Manage Inventory Health and take action on the inventory.
FBA Sell Through Rate
The sell-through rate is calculated as units shipped in the past 90 days divided by the average units on hand in the fulfillment center during a specific time frame. If Amazon identifies a low sell-through rate in one of its sellers, Amazon will show a step on how to improve this category.
This will help the seller control how much they pay in storage fees and will prevent them from getting hit with long-term storage fees.
In addition to the performance bar, two other related pieces of information are displayed in the FBA Sell Through Rate section on the Inventory performance page:
- Units sold (past 90 days) are the total FBA units sold and shipped in the past 90 days.
- The Improve sell-through button shows the number of ASINs that have an opportunity to improve sell-through. Click the button to go to Manage Inventory Health to see recommendations.
To maximize and avoid loss of sales, keep a safe stock level of your popular product. Track your performance using the FBA in-stock rate, which is the percent of the replenishable ASINs in stock during the last 30 days, weighted by the number of units per SKU in the last 60 days.
In addition to the performance bar, Amazon displayed two other related metrics under the FBA in-stock rate on the Inventory Performance page:
- Estimated FBA lost sales in the last 30 days equals the forecasted unit sales on days your products were out of stock multiplied by the average sales price.
- The Restock today button shows the number of SKUs for which the days of supply are less than the restock lead time. Orders from your supplier may need to be expedited to avoid going out of stock.
Listing issues can result in a stranded inventory and has a domino effect on the Amazon inventory performance index (IPI) score. If an inventory is unavailable for purchase and put to strand, sales and storage costs can be lost. The Strande Inventory Percentage is measured as – the percentage of the inventory units currently not available for sale on Amazon.
IIn addition to the performance bar, two other related metrics are shown with the stranded inventory percentage on the Inventory Performance page:
- Stranded units are your total count of units in a fulfillment center without an active listing.
- The Fix listings button shows how many SKUs have units in a fulfillment center but do not have an active listing. Click the button to go to Fix stranded inventory.
Steps to Improve Your IPI Score
Amazon recommends the following general guidelines to manage excess inventory to improve every seller’s inventory performance index (IPI).
Improve Sell Through Rate
An Amazon seller must improve its 90 days rolling sell-through rate by maintaining a sell-through that places them in the green “good” range or reduce unproductive inventory.
The following are some ways to improve the sell-through rate of a product:
- Improve SEO
- Drive for more good reviews.
- Avail the Amazon’s Sponsored Products Campaign
- Improve product photos, titles, and descriptions.
- Automate pricing with Amazon’s automated repricer
Reduce excess inventory in Amazon
Maintain inventory levels that can cover at least 30 days to 60 days as your expected sales only. Do not store excessive inventory levels in the fulfillment center when an item is not selling well. Instead, visit Manage Inventory Health to see Amazon’s recommended actions for aged products or overstock.
Another way to reduce excess stock is to sell overstock and out-of-season products in Amazon Outlet. To check which products are eligible for Amazon Outlet, go to Manage Inventory health and select the recommended filter Create Outlet deal.
Lastly, another way to reduce excess stock is to sell excess inventory in Multi-channel Fulfillment. This allows sellers to sell their products on other sales channels like websites.
Avoid long-term storage fees on Amazon
Remove inventories before it reaches 365 days in the Amazon fulfillment centers to avoid hefty storage fees on Amazon. Set up an account to remove aged inventory automatically.
Resolve listing issues immediately
Resolve listing problems promptly. Check regularly the Stranded inventory percentage. Stranded inventory is inventory without a buyable offer and requires the seller to either reactivate the listing or remove the inventory.
Inventories that incur fees without the possibility of sales can reduce the IPI score; thus, so important to fix the listing problems asap..
Benefits of a High IPI Score.
Because the IPI measures the efficiency and productivity of your FBA inventory over time, higher IPI scores usually indicate that you are managing your inventory more efficiently, thus optimizing your sales and minimizing your storage costs.
Amazon sellers with High Amazon Inventory Performance Index scores have the potential to reduce costs, increase inventory, and benefit from unlimited storage space. In addition, organizations can reduce excess inventory and invest in more cost-effective stocking solutions by ensuring accurate demand forecasting and an optimal replenishment cycle.
Improving an Amazon seller’s IPI score is essential to boost the FBA restock limits and reduce storage fees. This article explains how to check your IPI score, the key factors that affect it, and ways to improve it.
Sellers should closely monitor their IPI scores in Seller Central and take action when needed to maintain a high IPI score. By following the tips provided, you can improve your IPI score and take advantage of the benefits that come with it.
Frequently asks questions
What is an Amazon Inventory Performance Index (IPI)?
The IPI is a score that measures the efficiency and productivity of your FBA inventory over time.
How do I improve my IPI score?
Amazon recommends the following guidelines to manage excess inventory to improve every seller’s IPI score:
- Improve sell-through rate.
- Reduce excess inventory in Amazon.
- Avoid long-term storage fees on Amazon.
- Resolve listing issues immediately.
What are the benefits of a high IPI score?
Amazon sellers with high IPI scores have the potential to reduce costs, increase inventory, and benefit from unlimited storage space. Organizations can reduce excess inventory and invest in more cost-effective stocking solutions by ensuring accurate demand forecasting and an optimal replenishment cycle.