Inventory Performance Index: Maximize Amazon Sales

What does understanding Amazon’s Inventory Performance Index (IPI) mean?

The Amazon Inventory Performance Index, or IPI for short, helps track how well you’re managing your stock, including both too little and too much of it. It’s a win-win for both you and Amazon. This score is figured out by looking at sales, how much stock you have, and costs over the past three months, and it gets updated every week. Now, there are a few important things that can change your IPI score.

• Maintaining a balance between sold and available inventory, without excess stock

• Avoiding long-term storage fees

• Resolving problems with your listings

• Keeping popular products in stock to meet customer demand

The IPI score spans from 1 to 1000. It steers Amazon sellers toward better fulfillment. Typically, maintaining an index score over 400 signals sound inventory management practices.

What is the purpose of Inventory Performance Index?

The Inventory Performance Index Score is super important. It’s like a helper for sellers to figure out the right amount of stuff to have on hand, which also helps decide how much they can keep in storage. It’s super handy for keeping your inventory in check. It ensures that sellers always have just the right amount of items for their buyers, without ending up with too much.

The IPI provides benefits for new Amazon merchants.

• Identifying ideal inventory quantities

• Boosting fulfillment process productivity

• Effective management of FBA inventory as gauged by the performance index

• Curtailment of storage fees alongside reducing overall costs associated with maintaining inventory

• Influencing seller profit margins directly

What is the range of Inventory Performance Index scores?

The way Amazon looks at how you handle your stock is hugely shaped by your IPI score. If you’ve got a score over 550, it shows you’re doing a great job at keeping your inventory balanced and sorting out any listing problems. But if your score dips below 450, Amazon might put limits on how much you can store. 

Getting to grips with this scoring range is crucial. It reflects how well you’re managing your inventory and influences key aspects of your business, like how much you can store and what you pay for it. So, keeping your IPI score high is super important for Amazon sellers. 

What are the key factors that influence your IPI score?

The IPI score is a measured value, not just an arbitrary figure. It’s derived from essential factors such as:

• Surplus inventory

• The rate at which FBA inventory sells (sell-through rate)

• Inventory that’s stuck in storage without being listed for sale (stranded inventory)

• Levels of available stock within the FBA program

These elements are critical. 

Every part plays a different role in shaping your overall IPI score. For example, having too much stock, or what Amazon calls surplus inventory, really impacts your score. This means having more items than you can sell in 90 days, based on how things are currently going. How quickly your FBA products are selling, known as the sell-through rate, is also super important. It looks at your sales over the last 90 days compared to how much you have stored with FBA.

When products don’t sell and just sit around in Amazon’s warehouses, we call that “stranded inventory.” This can happen for lots of reasons, but it’s not good because it messes with your scores by taking up space with items that aren’t moving. Also, it’s really important to make sure you have just the right amount of stock with FBA. You don’t want too much because you could end up paying a lot for storage.

By staying on top of these things, you ensure that popular items are always available and your IPI score stays in a good place.

Excess Inventory Management

Handling too much stock well is super important for keeping your IPI (Inventory Performance Index) score healthy. When you have a lot of extra items, it usually means things aren’t being managed right. This can make your IPI score drop because you’ll have higher storage costs. Luckily, Amazon has some cool tools to help, like the FBA Liquidations Program. They also give personalized tips for your FBA inventory and ways to make outlet deals. These tools are great for helping you reduce extra stock and steer clear of those pesky long-term storage fees.

The dashboard shows key metrics. They include the quantity of surplus units and the cost of storing them. It also shows Amazon’s strategies for dealing with them. These strategies are based on expected demand beyond 90 days of supply. Facing long storage fees hurts profits. It also signals planning or popularity problems. These hurt a seller’s IPI score.

Optimizing FBA Sell-Through Rate

Your IPI score tells you how good you are at handling your stock. If you’re selling your FBA items quickly, it means you’re doing a great job at matching what you have with what customers want. This takes smart planning and guessing what will sell. But, if things aren’t selling fast, your IPI score can drop. This happens because it looks like your items are just sitting there, which can cost more for storage and take up valuable space.

The sell-through rate is found by dividing the units sold by the average available units. Both are calculated over 90 days. The units are in Amazon’s fulfillment centers during that time. This metric offers insights into how effectively products are moving through sales channels. Amazon characterizes varying ranges of selling efficiency as excellent (above 7), good (between 3 to 7), fair (from 1 to 2), or poor (less than one).

To do well on Amazon, sellers need to keep their FBA sell-through rates high. This boosts their Inventory Performance Index (IPI) score. Simply put, you want those rates to be in the ‘green zone’ on Amazon’s charts for every three-month period.

Resolving Stranded Inventory Issues

Items stuck in Amazon’s warehouse without being listed for sale are called stranded inventory. This usually happens because there’s an issue with the listings. If you have stranded inventory, it can lower your IPI scores because those items aren’t selling and just take up space. So, it’s really important to keep an eye on how much stranded inventory you have.

Amazon helps sellers with its ‘Fix Stranded Inventory’ tool. It provides a list of items lacking active offers and suggested actions for fixing any listing problems.

Maintaining In-Stock Inventory

Amazon vendors must carefully manage their inventory levels. Having too much stuff can backfire, leaving you with excess inventory that can drag down your IPI score. So, balancing your stock is super important.

Amazon analyzes lost FBA sales from the past 30 days. They compare them to predicted sales on days when products were unavailable. This shows that proper inventory management is about more than just quantity. 

The IPI assesses how well sellers manage their stock. It emphasizes the need to have popular products available consistently.