Inventory & Logistics
December 27, 2023
If you are an Amazon FBA seller looking to boost your business, you need to pay attention to your Inventory Performance Index (IPI) score. Having a strong IPI score can have a significant impact on your performance on Amazon's platform. In this article, we will dive into what exactly an IPI score is and why it matters for your Amazon business.
The Amazon Inventory Performance Index (IPI) score is a metric that measures how well, as an FBA Seller, you manage your inventory on Amazon's platform. Amazon refuses to explain how it is calculated, but it is known that it takes into account factors such as excess inventory, sell-through rates, and stranded inventory.
The IPI score ranges from 0 to 1,000, with a higher score indicating better inventory management. The IPI is calculates based on the last 90 days of your inventory performance. The score is updated weekly, typically every Monday.
To check your Amazon IPI Score :
Achieving and maintaining a strong Inventory Performance Index (IPI) score is paramount for the success and growth of your Amazon business. A higher IPI score can result in numerous benefits, including improved rankings, increased visibility, and more sales. Here are some key reasons why a strong IPI score matters:
A strong IPI score is a key determinant in Amazon's algorithm for product rankings. The platform considers IPI as one of the factors when displaying search results. By maintaining a high IPI score, your products are more likely to appear at the top of search results, increasing the chances of potential customers discovering and purchasing them.
With better rankings comes increased visibility. When your products appear higher in search results, more potential customers will see them, leading to increased traffic and potential sales.
The IPI score considers factors such as excess inventory and stranded inventory. Effectively managing these aspects not only contributes to a strong IPI score but also helps in reducing storage costs. By optimizing your inventory levels based on demand and sales trends, you ensure a streamlined and cost-effective storage strategy.
Winning the Buy Box is crucial for maximizing sales on Amazon. A robust IPI score enhances your eligibility for the Buy Box, as Amazon recognizes and rewards sellers who effectively manage their inventory. Securing the Buy Box increases the likelihood of customers choosing your product for a quick and seamless purchase.
Efficient inventory management leads to faster and more reliable order fulfillment. By consistently meeting customer expectations regarding product availability and delivery times, you enhance the overall customer experience. Positive experiences result in satisfied customers who are more likely to leave positive reviews, contributing to the growth of your brand and increased sales.
Amazon reviews the IPI scores of professional sellers every quarter. If your Inventory Performance Index falls below 400 six weeks before the end of the quarter, you will receive a notification from Amazon warning you of potential storage limits.
If your Inventory Performance Index score is still below the 400 IPI threshold by the end of the quarter, Amazon will impose storage limits in the following quarter. Before applying the storage limit, Amazon considers three key factors: your historical IPI scores, fulfillment center capacity, and sales volume.
Several factors contribute to your IPI score on Amazon. Understanding these factors can help you identify areas for improvement and take the necessary steps to optimize your inventory management. Here are the key factors that impact your IPI score:
One of the biggest aspects that influences your IPI score is your excess inventory. As it is already known that Amazon prefers to be the fulfillment center for sellers and not the storage space facilitator. Therefore, its first priority is to move inventory items from warehouses to customers’ doorsteps quickly.
Excess inventory refers to the stock that is not selling as quickly as expected. It can tie up your capital and increase storage costs. Minimizing excess inventory is crucial for maintaining a strong IPI score.Amazon considers a product to have excess inventory if it has:
A smart step would be to maintain an inventory of approximately 30-60 days’ worth of supply to prevent overstocking. Amazon provides sellers with actionable insights into product demand and restocks on their Inventory Dashboard.
For example, if your inventory stock is way more than what it should be, Amazon will tell you the number of excess units your inventory has and what you must do with that excess inventory.
Amazon also provides you a detailed insight on three other metrics to further understand your excess inventory condition:
The sell-through rate measures how quickly you sell your inventory. A higher sell-through rate indicates that you are effectively managing your inventory and meeting customer demand.
Omny offers sellers an inventory dashboard that provides useful insights to improve their sell-through rate and reduce long-term storage fees.
Stranded inventory refers to products that are not available for sale due to listing issues or other reasons. This issue can cause sellers to incur higher storage fees and lose sales since customers won't be able to purchase the items. It is important to resolve any stranded inventory issues promptly to maintain a strong IPI score.
Timely and accurate fulfillment is critical for maintaining a strong IPI score. Late shipments, cancellations, and other fulfillment-related issues can negatively impact your score.
The in-stock rate measures the percentage of time your products are in stock and available for purchase. While this metric won't negatively affect your IPI score, it can still improve it. Maintaining a high in-stock rate is essential for meeting customer demand and maximizing your IPI score.
Now that you understand the importance of a strong IPI score and the factors that impact it, let's explore some practical strategies to improve your score and boost your Amazon business:
Analyze your sales data and historical trends to determine the optimal inventory levels for your products. Avoid overstocking or understocking by adjusting your inventory levels accordingly.
Identify slow-moving or stagnant products and take steps to liquidate them. Offer promotions, bundle deals, or discounts to encourage sales and clear out excess inventory.
Amazon encourages sellers to maintain a robust 90-day rolling sell-through rate, positioning them in the "green" on the IPI graph. To assess the sell-through rate for individual products, navigate to the "FBA Inventory" page within Seller Central. Here, you can conveniently sort products based on their sell-through performance and access recommendations for enhancement.
You can improve your sell-through rate by :
By implementing these strategies and continuously optimizing your inventory management, you can improve your IPI score and unlock the full potential of your Amazon business.
Boosting your Amazon business with a strong IPI score is crucial for maximizing your success on the platform. By understanding the importance of the IPI score, the factors that impact it, and implementing the strategies mentioned in this article, you can optimize your inventory management and unlock the full potential of your Amazon business.
Regular vigilance over your IPI score, facilitated by the Inventory Performance Dashboard, is imperative. Remember to regularly monitor and track your IPI score through the Inventory Performance Dashboard, and take immediate action if you notice any issues or areas for improvement. With a strong IPI score, you can improve your rankings, increase visibility, reduce storage costs, enhance the customer experience, and ultimately boost your sales on Amazon's platform. So, prioritize your IPI score and take your Amazon business to new heights of success.
