Amazon Inventory Performance Index (IPI) Guide

Amazon Inventory Performance Index (IPI) Guide
Table of Contents
If you are a seller on Amazon, surely you know the advantages of using the logistics that Amazon puts at your disposal: FBA. The Amazon FBA program (Fulfillment by Amazon) offers different services to the seller to facilitate the logistics management of shipments within Seller Central. Using the FBA program, the seller can send their products to Amazon warehouses so that Amazon manages the shipments. Although logistics management is facilitated through FBA, you must pay attention to some metrics to guarantee your space in Amazon warehouses, and Amazon IPI is one of them.
IPI, or the Inventory Performance Index, measures the stock you have in Amazon's warehouses and relates it to its turnover speed. This is a metric that you have to take into account whenever you use Amazon FBA. In this article, you can find out everything there is to know about the IPI score on Amazon.

What is the Inventory Performance Index?

According to Amazon, the IPI, or Inventory Performance Index, measures how effectively and productively you manage your FBA inventory. The IPI has a maximum score of 1,000, with performance above 500 considered good. Your IPI score will determine your storage capacity. That means the higher your IPI score, the more quantity of products you can send to Amazon warehouses.

This is especially important in times of high demand, such as Christmas, Prime Day, or Black Friday, when demand is expected to increase, so more stock is prepared than usual.

But how can you check your Amazon IPI score? Let’s find out! 

How to Check Amazon IPI Score?

You can check your IPI score where you check all the other metrics: the Amazon seller central. So, ensure you have an active Seller Central account before you check your IPI. If you already have one, follow the steps below: 

  1. Log in to your Seller Central account. 
  2. Click on Inventory, and from the drop-down menu, click Inventory Planning. 
  3. Go to the Performance tab to view your IPI score. 
  4. Click on EXPAND STORAGE MONITOR tab at the bottom of the page. 
Checking Amazon IPI Score from Amazon seller central

Your IPI score is updated weekly (every Monday) and based on your performance over the last three months. On the Inventory Performance Dashboard, you can find excess inventory recommendations for optimizing holding, storage, and carrying costs, restock suggestions for improving in-stock rate, and actionable insights on stranded inventory items to ensure the availability of product listings.

How is IPI Score Calculated?

There are certain things that Amazon is very secretive about, and the IPI formula is one of them. When asked how to calculate the IPI score, Amazon responded that they would not publish the calculation, just like they don’t publish the Buy Box algorithm. However, they have said that Amazon IPI points are not deducted for running out of stock, so this doesn’t negatively affect your score. 

On the other hand, stranded inventory may impact your IPI score, but there are ways to fix this. The key factors that increase your IPI are reducing excess stock at the Amazon warehouse and improving your sell-through rate. 

Affective Factors on Amazon IPI Score

As mentioned earlier, the exact formula for calculating the IPI score remains confidential. However, Amazon has informed sellers about the criteria that affect this score. They include: 

  • Sell-through rate – the number of units sold compared to the initial inventory- shows how well you manage inventory against sales. 
  • Stranded inventory percentage – unsold items you have in FBA warehouses. It compares the amount of this inventory to your total inventory across all ASINs. Listing problems (i.e., not meeting Amazon’s guidelines) can lead to the inventory not being available for purchase and losing sales even though you are still paying storage costs. Other reasons for stranded inventory are deleted listings, ASIN restrictions, expired ASINs, bulk upload template errors, etc. 
  • FBA in-stock rate – how well you keep your popular inventory in stock and how much inventory you have of a current listing. 
  • Excess inventory percentage – FBA inventory that exceeds a 90-day supply based on its forecasted demand. 

Read More: Ultimate Guide About Amazon Product Rank

Inventory Performance Index Challenges 

When it comes to keeping your Amazon IPI at a decent level, there are three main challenges you must face: 

  • Cost to sellers: If your IPI score decreases, it will leave a lot of costs on your hands, forcing you to either liquidate your inventory or remove them from Amazon to prevent additional storage costs. This can be a costly loss for many sellers. 
  • The IPI is Amazon-centric: the IPI does not account for lost sales in the multi-channel business. So, if you use FBA for selling on eBay, Shopify, or Walmart channels, the IPI will not provide reliable data about your inventory health. 
  • Amazon does not reveal the IPI formula: As a seller, you can check your IPI score on Amazon and take action, but you must understand how it is calculated fully. This can be frustrating, as it feels like getting a grade without knowing the rules. 

What Happens If You Have a Bad IPI Score?

The minimum threshold for Amazon IPI is 500, with 400-500 being considered poor scores.

The minimum threshold for Amazon IPI is 500, with 400-500 being considered poor scores. If your IPI score drops below the threshold, Amazon will subject you to inventory storage limits. Your new restock limits are found in “Inventory Performance” or “Manage FBA Shipments” on Amazon seller central. 

If your IPI score drops below 350, 6 weeks before or during the end of the quarter, Amazon will forbid you from stocking more inventory and impose a $10 fine on any excess units stored in the FBA warehouses. 

Therefore, the punishments for having a low IPI score are severe and may incur hefty storage fees or lead to losing sales. That is why it’s crucial to keep your IPI score in check and do everything you can to increase it.

Know More: What is Amazon Best Seller Rank?

How to Boost Your IPI Score on Amazon? 

It is common among sellers to neglect the IPI, but it is more convenient to control it so that you have enough guaranteed space in case you need to make a shipment larger than usual.

A decisive factor in having a refined IPI is making an approximation of your demand for each item as realistic as possible. In this way, you can send an adjusted number of units to FBA so that Amazon does not consider them as excess inventory but does not cause stockout. For this, monthly or quarterly sales data will be very useful. Analyse your products’ sales and the upward or downward trend they follow. This will give you clear clues about how many units you must send to FBA.

It is common among sellers to neglect the IPI, but it is more convenient to control it so that you have enough guaranteed space in case you need to make a shipment larger than usual.v

In case you have made an overestimate and have incurred an excess inventory, there are several ways to solve it. On the one hand, you can withdraw the excess units, which entails a cost. If you do not want to make this withdrawal and prefer to find a quick way to sell them on Amazon, you can create flash promotions, 7-day promotions, coupons, or outlet offers. With attractive prices, it will be easier to increase the turnover of products in surplus inventory.

If the problem with these products is the need for more visibility, you must increase the traffic to your listings. For this, advertising will be your great ally. Although you will indeed have to invest, the return in the medium term on the improvement of the Amazon IPI can be very profitable.

Suppose you have products in Amazon warehouses that are not active on Amazon (they have listing errors, for example). In that case, we recommend you withdraw as soon as possible to avoid worsening your IPI.  If the listing has been deleted due to breaking Amazon’s rules, you can try to apply to sell them again. Usually, these processes at Amazon take time, so we advise you to set a maximum period for resolving these incidents. If they are not resolved within your deadline, remove the products. If you decide on the incidents, you will have time to return them to FBA, having your Amazon Inventory Performance Index more refined.

Finally, you should always be aware of the status of your listings to detect items that are no longer active and thus withdraw them before your performance index decreases. Also, if you suffer a stock out, it is best to close the listings to avoid delays in shipments or cancellations.

Final Thoughts

The Amazon IPI or Inventory Performance Index is mostly a forgotten metric since it does not affect the account’s day-to-day management. However, you must pay attention to this metric, check it regularly, and keep it as high as possible. This way, you will avoid losing storage capacity in FBA when you need it most.

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