What is Amazon Inventory Performance Index? How to improve it?

What is Amazon Inventory Performance Index? How to improve it?

Amazon Policies, Amazon Inventory Management

What is the Amazon inventory performance index?

The Inventory Performance Index (IPI) is a score Amazon assesses to determine how well sellers are managing their inventory. You can score between 0 and 1000. 

Amazon updates about IPI

Amazon launched the Amazon Inventory Performance Index in the fall of 2017. Initially, the Inventory Performance Index (IPI) score of Amazon.com was 350, then adjusted to 400, and then adjusted to the current 500.

  • In July 2020, Amazon announced that sellers selling on Amazon.com with an IPI score below 500 will be subject to storage limits from August 16 until December 31.
  • In the same way, in July 2020, Amazon announced that the Inventory Performance Index threshold for UK/EU sellers will change to 500 from 1 September 2020 until the end of the year.

Hence, make sure to continue sending inventory to Amazon FBA without restrictions, your minimum score must reach 500. If your inventory performance index drops below 500 points, Amazon will limit your inventory until your performance is above 500 points.

How is the IPI calculated?

“The calculation is proprietary and will not be published, just as we do not publish the Buy Box algorithm.” 

Amazon has not disclosed the IPI calculation method. Amazon claims that it is private and will not be published, just like the Buy Box algorithm. Regarding how to increase IPI, Amazon only gave an explanation without much reference value: the best way to increase your IPI score and minimize your FBA storage fee is to reduce worthless inventory and keep valuable inventory at Lean level while ensuring that you have enough inventory to minimize sales losses.

What are the factors affecting IPI?

There are 4 factors that can affect the IPI score.

1. Sell-through rate

Sell through rate= Units sold over the past 90 days/ number of units available at fulfillment centers of the past 90 days.

This indicator measures how quickly your inventory is sold, or how long your inventory stays in the FBA warehouse. If your inventory is not sold quickly, you will be deducted your IPI score. Amazon will send you notifications through the seller center and encourage you to participate in promotional activities to expedite inventory sales. If you find that the inventory of a particular product is not available, you may need to create a removal order to avoid greater damage to your IPI. 

2. In-stock rate

 This metric measures how often your inventory is out of stock. If you do not replenish it in time, Amazon will deduct your IPI score.

Because Amazon likes stability and wants to ensure that its prime members can always buy the products they want. In this way, if you have a popular product but it’s out of stock, it may upset Prime members, who may eventually leave Amazon and buy it elsewhere. Therefore, the most important thing is not to be out of stock.

What’s more, if you find that the product is indeed out of stock and you cannot replenish it quickly, it is best to mark the product as non-replenishable, turn off listing or change it to FBM.

3. Excess inventory percentage

At least one item in the inventory has been stored for more than 90 days, and the cost of keeping the inventory without taking any measures is higher than the cost of taking corresponding measures (such as lowering the price to increase sales or removing redundant products), or The product can be available for more than 90 days.

4. Stranded inventory percentage

The stranded inventory refers to the inventory that is not actively listing on Amazon in the FBA. For example, if you have converted your listing to FBM and you still have FBA inventory, it will show as stranded. Inventory will be stranded for various reasons.

For example, the listing of the product may have been canceled or never created, causing the stored inventory to accumulate storage costs, but it cannot be sold because the listing is not activated.

You can check your current score in your Inventory Dashboard within Seller Central.

How to check your IPI score?

You can log into your seller center to check your IPI score, step by step to check your IPI score.

  1. Log in to Seller Central.
  2. Go to Inventory and click Manage Inventory/Manage FBA Inventory.
  3. Click view Inventory Dashboard.
  4. Then, you can click on the Performance tab.
  5. Lastly, click on EXPAND STORAGE MONITOR at the bottom of the page.
How to Check Your IPI score

How to Improve Your Amazon IPI Score?

Once we know the factors affecting IPI, it is easy for us to find a way to improve your IPI score.

1. Improve sell-through rate

If your sell-through rate is not well, we can consider that there is a problem with your product. Maybe you have not chosen the right keyword for your product, or your product can not meet customers’ needs.

Find your product performance by monitoring your product keyword ranking and reviews, better analyze your sales, and get your sales report. In this way, you can easily target the problem of the product and change your strategies timely.

 Improve sell-through rate with Captain BI

2. Keep your inventory in stock

Taking use of the inventory manager to better manage your inventory well. It makes it clear to check your FBA inventory, you can quickly assess when and how much stock you should reorder. Keep your sale by easily preventing stockouts. Just restock with more intelligence!

3. Manage your excess inventory

Generally, you can deal with the excess inventory by providing promotion for the product, making removal orders, and looking for other sales channels.

Click here to check the 2020 complete guide to moving excess inventory.

Of course, these methods cannot solve the problem fundamentally. The best solution to solve the problem is to make an accurate forecast of the replenishment volume based on the sales situation of the product.

4. Timely repair your listings

For products that FBA has inventory but the listing is not available, just modify the listing timely.

Final

Managing your inventory is always important for your Amazon business. You have to better manage and deal with your inventory to maintain a good IPI score. However, you need to consider as many aspects as possible on how to better manage inventory, it is not an easy thing. Using intelligent software to help you find and deal with these problems is a good solution.

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