Everything There Is to Know About Amazon IPI Score

Amazon seller success is determined by how skillfully you manage inventory. The Amazon Inventory Performance Index (IPI) is a crucial indicator that helps you understand and master inventory management. Amazon IPI and its corresponding score are beneficial to both sellers and Amazon.

Seller guide to Amazon Inventory Performance Index (amazon IPI) and how to increase your Amazon IPI score.

This article covers everything you need to know about Amazon Inventory Performance Index, how to improve your IPI score, what factors influence it, and everything else in between.

What Is Amazon IPI?

Amazon IPI is a measure of inventory health, and it is rated as a number between 0-1000. It captures low and excess inventory levels for your stock-keeping unit (SKU). Amazon's IPI is the first step in setting a standard on inventory performance. Amazon IPI began as an initiative to enable sellers to monitor their Amazon inventory effectively.

Amazon IPI measures your inventory's health. Inventory health refers to having few or enough items or products that a seller has in stock on Amazon. Amazon IPI is simply a way of ensuring Amazon stock performance and Amazon inventory management. For sellers, having too few stock units results in the seller running out-of-stock quickly and eventually sales loss. It may also cause Amazon to split your shipments. Conversely, excessive stock on inventory results in increased storage costs and excess holding.

Amazon's IPI is designed to benefit both parties (sellers and Amazon). An optimized inventory reduces loss in sales and the cost of holding inventory for sellers. This will also help Amazon by guaranteeing that sellers are stocking its warehouses with the proper products in appropriate quantities, ensuring that Amazon's extensive warehouse network is increasingly utilized.

An Amazon IPI score above 500 (previously 350 and 400) indicates that your business is excelling and adequately stocked. In contrast, an IPI score below 450 is problematic and requires immediate action to improve the score. Amazon intends to limit storage access for sellers with an IPI below the minimum requirement. However, sellers maintaining an IPI score of 500 or greater will have unlimited storage for items and products.

Amazon's Inventory Performance Dashboard

Amazon's Inventory Performance dashboard helps you identify opportunities to grow sales, reduce costs, and track key performance metrics. The IPI dashboard also has a display feature performance bar for each of the four categories:

Seller guide to Amazon Inventory Performance Index (IPI)
  • Excellent (dark green)
  • Good (light green)
  • Fair (yellow)
  • Poor (red)

Four Elements That Influence Your Amazon IPI

1. Excess Inventory Percentage

An item is considered overstock if it has more than a 90-day supply based on the predicted demand. Therefore, you should aspire to properly track your overstock inventory percentage, which is the percentage of your excess FBA inventory units. Three related measurement standards of interest are shown with the excess inventory percentage on the Amazon inventory performance dashboard:

  • Excess units are the number of units that cost you more doing nothing and paying storage fees instead of reducing the price or removing inventory. This value is based on the product demand and costs (including fees and goods).
  • Estimated gross storage cost is the value of estimated costs you would incur by taking no action and allowing your inventory to remain idle in the fulfillment center for above three years. This is inclusive of monthly storage fees and long-term storage fees.
  • The Reduce excess inventory button shows how many stock-keeping units (SKUs) are available with excess inventory. By clicking the button, you can view the “manage excess inventory” page and take appropriate action on the inventory.

2. Stranded Inventory Percentage

When the stock is unavailable due to a listing problem, it will lose sales and increase storage costs. This stock is referred to as stranded inventory. Stranded inventory percentage is calculated by the percentage of your FBA inventory units unavailable for purchase on Amazon. Two other related measurement standards of interest are displayed with the Stranded inventory percentage along with the performance index on the Amazon Inventory Performance Dashboard:

  • Total units counted in a fulfillment center without an active listing are counted as stranded units.
  • SKUs with units in a fulfillment center that are not currently on an active listing can be viewed by clicking the fix listing button on your performance dashboard.
Amazon Inventory Performance Dashboard and Amazon IPI score.

3. FBA Sell-Through Rate

With your 90-day rolling FBA sell-through rate, you can maintain the right balance of inventory. The FBA sell-through rate is the total number of units sold and shipped over the previous 90 days divided by the number of units available in fulfillment centers during that period. Two related metrics are shown with your FBA sell-through rate on the Inventory Performance Dashboard:

  • Units sold (over the previous 90 days) are the total FBA units sold and shipped over the last 90 days.
  • The "improve sell-through" button displays the amount of Amazon Standard Identification Number (ASINs) with an opportunity to improve sell-through.

4. FBA In-Stock Rate

Having replenishable, in-demand items in stock helps to maximize and increase sales. Moreover, tracking your performance in this area can be done using the FBA in-stock rate. It is the amount of time your replenishable FBA ASINs have been available in stock in a previous 30-day period, weighted by the number of units sold for each SKU during the last 60 days.

An SKU can be indicated as non-replenishable in restock inventory by going to the "action" column drop-down menu and choosing "hide recommendation." Hiding all SKUs linked with an ASIN prevents the ASIN from your FBA in-stock rate and approximates FBA lost sales.

The performance bar also has two related metrics of interest showed under the replenishable FBA in-stock rate percentage on the Inventory Performance Dashboard:

  • First, estimated FBA loss sales in the previous 30 days equal the estimated unit sales on days your products were unavailable multiplied by the average price of items.
  • Secondly, the "restock today" button displays SKUs' volume where the restock lead time is lower than the supply days. A supplier's order must be expedited to prevent products from being unavailable.
Seller Guide to Amazon Inventory Performance Index

Top Factors That Influence Your Amazon IPI Score

Amazon's IPI is a measurement standard used to gauge your Amazon inventory performance period. The IPI score measures your efficiency and productivity in managing your fulfillment by Amazon (FBA) inventory. Several factors influence your IPI score, and the top-most ones are based on your actions:

  1. Inventory levels should be balanced between sold and available inventory and avoid excess stock, i.e., ensure proper Amazon inventory management.
  2. Ensure you are not paying long-term storage fees due to overstocking or poor sales, i.e., ensure good Amazon stock performance.
  3. Solve all associated listing problems.
  4. Ensure good Amazon inventory performance by keeping your most in-demand products in stock at sufficient levels.

How to Improve Your Amazon IPI Score 

Four factors can improve sellers' Amazon IPI scores: managing stranded inventory, eliminating excess inventory, enhancing sell-through rates, and maintaining stock.

1. Manage Stranded Inventory

The first way to obtain a higher Amazon IPI score is to manage stranded inventory. Stranded inventory are stocks stored in an Amazon fulfillment center without active listings, negatively impacting your IPI score. To deal with this, sellers can either relist it or remove it.

2. Eliminate Excess Inventory

Excess inventory refers to storing more inventory than you should at a fulfillment center. It is simply keeping more than the product forecasted demand. Slow-moving products may end up creating an excess inventory scenario. Managing this situation can be done by removal orders. However, act cautiously as disposing of your inventory or shipping it back to your warehouse requires paying a per-unit cost, which quickly mounts up. Improving your Amazon IPI score enables you to keep your fast-selling products in stock, so doing away with slow-moving products might be worth it. Consider the option that would be best before you make a decision. DataHawk's Inventory Management Software helps sellers deal with surplus stock issues. Its sophisticated software allows you to set your transfer schedule and order schedule as needed. It also enables you to check your Amazon stock performance and input your target maximum inventory value.

3. Enhance Sell-Through Rates

Sell-through compares the ratio of a product's stock sold to the average number of products available at an Amazon fulfillment center. This is calculated continuously over the previous 90 days. The sell-through rate is enhanced by increasing sales. The sales increase is usually done by improving your listings and increasing sponsored ads. A good listing is vital to increasing your sales. Good copywriting can help you increase traffic and improve lead conversion, increasing your sell-through and improving your IPI. You can also adjust your logistics systems by reducing your Amazon inventory and using third-party logistics (3PL).

Using a 3PL option ensures that your high MOQ (Minimum Order Quantity) for a slow-moving product is received instead of going to your Amazon fulfillment center. Utilizing a 3PL ensures your IPI does not suffer, and though it may not seem worthy initially, its value is unprecedented. Amazon uses the IPI score as a monitoring and rating tool to urge sellers to adopt better Amazon inventory management practices. Products with very poor sell-through or slow-moving rates should be liquidated and not restocked. It is more profitable to stock products with quick sales but less profit margin than stock items with high-profit margins but slow sales.

4. Maintain Stock

You can perform better on Amazon's "in-stock" metric simply by maintaining healthy stock. Over the past couple of months, sellers have not been able to get their inventory to Amazon, resulting in many being out of stock. As a result of Amazon's delay with pick-ups and check-ins, sellers have endured several weeks, resulting in reduced in-stock inventory metric performance, negatively impacting the IPI score.

One good Amazon inventory management technique to prevent stock-outs is to have a system of buffer stock. Sellers need to have a restocking delivery come in a few days before your stock runs out. Therefore, it is important to have a defense against anything going wrong.

A safeguard Amazon stock performance system will alert you to send in inventory before running out. This ensures that you will be okay even if Amazon has delays with checking in your shipment. In addition, you can keep a buffer stock at your 3PL warehouse.

Amazon IPI 2021 updates and FAQs.

Amazon IPI Updates (2022)

As of January 1, 2022, Amazon has changed its IPI threshold requirement to 400 (previously 450) to help sellers effectively manage storage space. Amazon also announced that it had increased the number of products Amazon sellers could send during the holidays to enable sellers' business success.

How to Find and Calculate Your Amazon IPI Score on Seller Central

Within Seller Central, there is a dashboard with all of your key performance measurement standards. Simply log in and go to the seller central dashboard. Your IPI score is calculated weekly, typically on Mondays.

Amazon IPI FAQs

Q: Why have I seen my IPI score go down even though I recently improved my influencing factors?

A: Your IPI score combines the past three months of sales, inventory levels, and costs into a single rolling metric updated weekly. You may have seen your score decline coming out of the holiday season. Typically, when sales are high, as they often are during December, it is easier to maintain healthy inventory levels. But if sales start to drop off, you still need to continue to manage your inventory levels, using the four influencing factors as guidance.

If, for example, you removed some inventory last week, you may not see an immediate change in your IPI since that is only one week out of the three months that factor into your score. However, by maintaining good to excellent influencing factors daily, you should see your IPI score improve over time.

Q: How is the FBA in-stock rate calculated?

A: FBA in-stock rate is the percentage of time replenishable FBA products have been in stock for the past 30 days, weighted by the number of units sold in the past 60 days.

Q: What are the consequences of not hitting the target score?

A: There are a lot of reasons, other than the IPI score, to maintain a healthy inventory. When you have firm control over your inventory, it is easier to grow sales, find ways to reduce costs, and generally improve profitability. And the hard truth is that sellers and brand owners who fail to meet the minimum IPI score dictated by Amazon will face stock limitations, associated storage fees, and additional fees. Let us dive into how the IPI is calculated so you can start taking steps towards improving your inventory management and planning.

Amazon IPI helps with proper Amazon inventory management and helps monitor your Amazon stock performance.

Conclusion

A significant portion of success on Amazon is allocated to sellers' IPI scores. In short, IPI helps sellers properly manage Amazon inventory and monitor their stock performance. To improve Amazon's IPI index score, sellers should regularly survey their Amazon Inventory Dashboard to prevent potential lost sales and implement any suggestions Amazon offers.

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