Managing your Inventory Performance Index or IPI score and keeping it healthy is a good way of measuring and balancing your performance, but it can be a little daunting.
A low IPI score isn’t good for your business because it’ll limit your IPI storage, cause overcharge fees, and pay more with fewer selling opportunities.
However, there are ways of making sure your IPI score is healthy and in this article, we’ll go over a few essentials to help you understand IPI scores better.
Inventory Performance Index: What is a Good IPI Score on Amazon?
You can score from 0 to 1000 in the Inventory Performance index. The Average Amazon IPI ranges from 400 to 800, ideally you’ll want to have a score of 550. It’s best to avoid having a score below 350 which will limit your IPI storage.
Having a limited IPI storage will restrict your ability to send more inventory while charging more for storage fees.
What is the Amazon IPI Score Actually & Why is it Important?
Amazon’s Inventory Performance Index is rolled out as a measure for sellers to efficiently and effectively manage their inventory on Amazon.
The health of your inventory relates to the number of units you have available. Having too few units for inventory results in out-of-stock items and lost sales.
On the other hand, having an abundance of units results in excess holding and storage costs. This is why having a healthy Amazon IPI score is important for sellers.
How to Check Your Amazon Inventory Performance Index Score?
Keeping track of your IPI is an essential part of maintaining a healthy score.
Typically the IPI score is updated weekly and updates every Monday. You can see all your key metrics on the Inventory Performance Dashboard; a login is required to view your dashboard.
Inventory Performance Index Factors: How is the IPI score Calculated?
1. Excess and Aged Inventory
Maintaining a healthy IPI balance means avoiding excess and aged inventory because this can significantly affect your profitability.
Excess units are stored units that cost more to keep than taking actions such as marking down the price or removing inventory. An item is considered excess if it has over 90 days of supply based on the forecasted demand.
The excess inventory percentage measures how well you’re managing your on-hand inventory in FBA. It’s a percentage showing how much of your total inventory is considered excess by Amazon.
Excess inventory (%) = no. of excess FBA inventory items total units in FBA inventory(100)
2. FBA Sell-Through Rate
FBA Sell-Through Rate represents the number of units sold compared to the initial inventory.
This metric is calculated by counting the total items and units shipped in the last 90 days and dividing it by the average number of items in stock at FBA during that same period.
Essentially, the FBA Sell-Through Rate measures how well you’re managing your inventory whether through selling or replenishing your items.
Sell-through Rate = total units shipped in the last 90 days saved. units in stock in FBA over the previous 90 days
3. Stranded Inventory
Stranded inventories are unsold items or stocks in FBA.
This percentage shows how much of one type of inventory you have compared to your total inventory across all ASINs.
There are instances when your inventory isn’t available for purchase because of listing problems. This can lead to losing sales while still paying storage costs. This happens when a listing doesn’t meet Amazon’s guidelines or if there are issues with a listing tool.
However, there are other possible reasons for stranded inventories such as ASIN restrictions, expired ASINs, deleted listing errors, etc.
Stranded Inventory (%) = total no. of FBA unavailable for purchase units total no. of FBA units (100)
4. In-Stock Inventory
In-Stock inventory dictates well you keep your popular inventory in stock and shows how much you currently have of a specific listing.
Amazon takes into account the amount of time your listings have been in stock during the past 30 days, with additional importance given to products that have been purchased more over the past 60 days.
In-stock (per SKU) = (% of days in stock in the last 30 days)*(60-day sales velocity) (60-day sales velocity)
How to improve your IPI score?
1. Improve your sell-through rate
Ideally, you’ll need to maintain a 90-day sell-through rate that gives you a heads-up in the IPI graph with the “green” color mark.
By running sponsored ad campaigns, enhancing your listing strategy, improving your keyword targeting, and doing research on the most trending products in your listing category you can vastly improve your sell-through rate.
2. Reduce overstocked inventory
There’s no need to hold onto old items that are no longer in demand or make any profits. Go to the “Manage Inventory Page” in your inventory dashboard to figure out how you can efficiently manage excess inventory.
3. Improve the in-stock quality for popular items
Keeping popular, replenishable products in-stock can help maximize your sales. Track your performance in this category using the FBA in-stock rate.
You can also use the Restock today button which shows the number of SKUs for the days when supply is less than the restock lead time. Orders from your supplier may need to be expedited to avoid going out of stock.
4. Prevent long-term storage fees
If you have an inventory that has been sitting in Amazon’s fulfillment center for more than 365 days you’ll be subjected to a hefty long-term storage fee.
You can avoid this by removing any inventory that has reached beyond 365 days. You can even make a removal order or allow Amazon to get rid of your inventory.
5. Be proactive with listing issues
Listing issues, deleted listing errors, ASIN restrictions, and expired ASINs, can greatly affect your sales and increase your stranded inventory. To avoid losing sales due to listing problems you need to stay on top of your listings. You can do this by:
- Monitoring your stranded inventory percentage
- Optimize inventory levels
- Remove excess inventory over a 90-days supply period
- Prioritize your popular inventory items – keep a 30 to 60-day supply period.
- Track your inventory dashboard frequently.
6. Monitor your shipment status daily
Monitoring your shipments daily and regularly creating shipments in advance can help you avoid going down the IPI’s minimum threshold. When you have restrictions placed on your account it will affect your ability to create inbound shipments.
However you can workaround this. As long as those shipments are already created, you can still send in that inventory.
- Why is an IPI score important for FBA Sellers?
- The IPI score can dictate which seller is capable of sending stocks and which ones should be prohibited or limited from selling. Having a low IPI score can lead to storage limits, excess inventory, and a loss of sales
- What is the Minimum IPI on Amazon?
- As of 2022, the IPI threshold for storage limits is 400, previously it was 450. This threshold can change from time to time depending on different factors such as seasonality, marketing events, etc.
- What if my IPI score dips below the threshold?
- If your IPI score falls below the minimum threshold, you will gain limits on your inventory storage.
- What is a good Amazon sell-through rate?
- The FBA considers an excellent sell-through rate to be 7+ units a day with an average time in stock of fewer than two weeks. Having a sell-through rate of 3-7 units a day with an average of 30 days in stock is also considered good.
- How often is IPI calculated?
- Amazon Calculates your IPI quarterly and 6 weeks prior to the quarter’s end. You can get penalized if your IPI is below 400 either at the quarter’s end and 6 weeks prior.
- Does FBA in stock Rate affect IPI?
- Yes, however, it does not affect your IPI negatively. Amazon tracks your performance based on how well you keep popular ASINs in stock.
Managing your Inventory Performance Index can be a confusing and daunting experience. But by properly managing and optimizing your inventory levels you can increase your overall profit margin. While it does take a good amount of time to understand how to properly manage and balance your IPI, the results will make it worth your while. Just make sure you have the right amount of inventory units for each ASIN and pay attention to the insights provided by your dashboard to avoid incurring a heavy storage fee.