Inventory Performance Index (IPI): The Ultimate Guide to Improvement

Improve IPI for Better FBA Results

Inventory Performance Index (IPI) plays a crucial role in Amazon FBA (Fulfilled by Amazon), as it evaluates how well you manage your inventory. Effective inventory management is essential for maintaining profitability and staying ahead of the competition on Amazon.

The Inventory Performance Index (IPI) is a score that helps Amazon assess how efficiently sellers are managing their inventory within Amazon’s Fulfillment Centers. A higher IPI score means you are balancing in-stock inventory levels effectively, optimizing storage space, and reducing excess stock that Amazon deems inefficient.

At FBA Brigade, we understand how critical it is for sellers to maintain a healthy IPI score, as it directly impacts your storage limits, costs, and overall performance on Amazon. In this comprehensive guide, we will explore what the IPI score is, how it’s calculated, the factors that influence it, and most importantly, how you can improve your IPI score to ensure your success as an Amazon seller.

What Is the Inventory Performance Index (IPI)?

The Inventory Performance Index (IPI) is a metric Amazon uses to evaluate how well sellers manage their FBA inventory. This score ranges from 0 to 1000, with higher scores indicating better inventory management. It takes into account various factors, such as inventory levels, sales velocity, and how effectively you manage inventory issues like stranded stock or excess inventory.

Amazon introduced the IPI score to help sellers improve their inventory management practices, reduce storage costs, and enhance sales performance. A good IPI score ensures that your inventory is optimized for maximum profitability and visibility on Amazon’s platform, which is a key aspect of effective Amazon account management.

Why Is Inventory Performance Index Score Important for Amazon Sellers?

The IPI score is not just a number it’s a key indicator of how well you are managing your inventory in Amazon’s ecosystem.

Here’s why it’s important

Storage Limits If your IPI score falls below a certain threshold (currently 450), Amazon imposes storage limits, restricting how much inventory you can send to their fulfillment centers. These limits can hinder your ability to restock products or manage seasonal fluctuations effectively.

Storage Fees Sellers with poor IPI scores are more likely to incur higher long-term storage fees. Amazon penalizes sellers for holding onto slow-moving inventory, which can significantly cut into your profit margins.

Sell-Through Rate A healthy IPI ensures that your best-selling products remain in stock, maximizing sales opportunities and helping you maintain a strong presence in the marketplace.

How Is the Inventory Performance Index (IPI) Score Calculated?

While Amazon doesn’t reveal the exact formula behind the IPI score, we know that it’s based on several key factors related to your inventory management:

Excess Inventory This is one of the most influential factors. Amazon penalizes sellers who store excess inventory in their fulfillment centers, as it takes up valuable space and incurs storage costs. Keeping an appropriate inventory level—between 30-60 days of expected sales—ensures you avoid excess inventory charges.

Sell-Through Rate This is calculated based on how quickly your inventory sells relative to the amount of stock you have available. A high sell-through rate means your products are moving efficiently, which in turn helps improve your IPI score.

Formula for Sell-Through Rate

Sell-through rate = Units Sold over 90 days/Average Units in Stock over 90 days

Amazon generally considers a sell-through rate of 3 or higher as good. Sellers with higher rates are rewarded with better IPI scores.

Stranded Inventory Stranded inventory occurs when you have products in Amazon’s fulfillment centers but they are not available for sale. This can happen due to listing issues, pricing errors, or other technical glitches. Amazon penalizes sellers for having too much stranded inventory, so it’s important to resolve these issues quickly.

In-Stock Inventory Amazon tracks how often your products are in stock. A high in-stock rate means your products are readily available to meet customer demand. If you frequently run out of stock, it signals poor inventory planning and can negatively impact your IPI score.

Factors That Influence Your Inventory Performance Index (IPI) Score

While the IPI score is influenced by multiple factors, the four primary ones are:

Excess Inventory

Excess inventory refers to products that are not selling quickly enough and are sitting in Amazon’s fulfillment centers for extended periods. Amazon defines excess inventory as stock that covers more than 90 days of expected sales.

How to manage

1. Regularly monitor your inventory to avoid overstocking.
2. Utilize Amazon’s Inventory Health Dashboard to identify slow-moving inventory and take action (e.g., remove or discount items).
3. Keep your inventory level between 30-60 days of expected sales to avoid overstocking.

Sell-Through Rate

A higher sell-through rate indicates that your inventory is moving efficiently. Amazon favors sellers whose products are selling at a fast rate relative to their stock levels.

How to improve

1. Use Amazon PPC (Pay-Per-Click) campaigns to boost sales.
2. Regularly review product listings for optimization opportunities.
3. Ensure you are targeting the right keywords and using high-quality product images to attract more customers.

Stranded Inventory

Stranded inventory consists of products that are physically in Amazon’s fulfillment centers but are not available for sale due to issues with the product listing.

How to manage

1. Regularly check your Stranded Inventory Dashboard and fix any listing issues promptly.
2. If the listing is inactive or missing, relist the product to ensure it’s available for sale.

In-Stock Inventory

Maintaining an adequate stock level ensures that your products are available to meet customer demand, especially during peak seasons.

How to improve

1. Avoid stockouts by replenishing inventory ahead of time.
2. Use Amazon’s Restock Inventory Tool to determine how much inventory you need to send based on sales velocity.

How to Find Your Inventory Performance Index (IPI) Score

To check your IPI score on Amazon Seller Central, follow these steps: This is an essential part of optimizing your Amazon supply chain management, ensuring that your inventory is well-managed and aligned with Amazon’s performance metrics.

1. Log into your Amazon Seller Central account.
2. Hover over the Inventory tab and select Inventory Planning.
3. Click on Inventory Dashboard to see a snapshot of your IPI score and other key metrics.

You can also find recommendations on how to improve your IPI score in the Ways to Improve Your Performance section. Amazon provides actionable insights into optimizing your inventory management, including restocking suggestions, excess inventory removal, and handling stranded inventory.

How to Improve Your Inventory Performance Index (IPI) Score

Improving your IPI score takes consistent effort in inventory management. Here are some actionable strategies to boost your IPI score:

Keep Inventory Balanced

Aim to maintain inventory levels that cover 30-60 days of sales. This helps you avoid overstocking while ensuring you meet customer demand without running out of stock.

Improve Sell-Through Rate

Boost your sell-through rate by promoting products through Amazon’s advertising tools, optimizing product listings, and ensuring your products are competitively priced.

Remove Excess Inventory

Regularly review your inventory to identify slow-moving products. Use Amazon’s Inventory Health tool to remove products that are taking up valuable space and incurring storage fees.

Fix Stranded Inventory

Fix any stranded inventory issues by reviewing your Stranded Inventory Dashboard in Seller Central. Address listing issues,
re-enable inactive listings, and remove products that are no longer viable.

Stay on Top of Inventory Restocks

Use Amazon’s Restock Inventory Tool to ensure you are sending the right amount of inventory to fulfill customer demand. This tool provides insights into how many units you need to send based on your sales velocity.

Common Misconceptions About IPI Scores

New Products Hurt Your IPI

New products don’t impact your IPI score until they’ve been live for at least 90 days. This gives you time to test new products without worrying about their effect on your score.

Running Out of Stock Hurts Your IPI

Amazon does not penalize you for running out of stock. However, consistent stockouts can negatively impact your sales velocity and hurt your future inventory restocking opportunities.

Marking Products as Non-Replenishable Helps Your IPI

Marking products as non-replenishable does not improve your IPI score. It’s important to focus on managing your inventory levels properly rather than relying on this feature.

About FBA Brigade: Your Professional Partner in Amazon FBA Success

At FBA Brigade, we specialize in helping Amazon sellers optimize their inventory management, maximize their Inventory Performance Index (IPI), and ultimately drive business growth. As a full-service, professional Amazon FBA agency, we offer tailored solutions for every aspect of your FBA business. Whether you’re looking to improve your IPI score, resolve inventory issues, or streamline your fulfillment process, our team of experts is here to guide you.

Our approach is highly collaborative working closely with each client to develop personalized strategies that align with their specific goals. We believe in building strong, long-term partnerships, providing you with ongoing support and insights to ensure your Amazon business thrives.

Why Choose FBA Brigade?

Professional Expertise With years of experience, we have a deep understanding of Amazon’s algorithms, best practices, and strategies for optimizing IPI scores and overall inventory management.

Comprehensive Solutions From inventory planning to troubleshooting IPI-related issues, we offer end-to-end services that address every aspect of your FBA needs.

Client-Focused Approach We value our clients’ success and provide consistent, transparent communication throughout the process.

Free Audit We offer a free audit to evaluate your current FBA setup and identify opportunities for improvement.

Book a Meeting Today Let us help you take your Amazon business to the next level. Contact us to schedule a meeting or get your free audit. We’re here to solve your FBA challenges and help you achieve measurable success.

Contact Us Ready to optimize your FBA business? Don’t wait reach out to us today and take advantage of our free audit. Our team at FBA Brigade is here to support your growth every step of the way.

Conclusion

The Inventory Performance Index (IPI) is a crucial metric for Amazon sellers using FBA. A healthy IPI score not only helps you maintain efficient inventory management but also unlocks greater storage capacity, reduces storage fees, and maximizes sales potential. By following best practices for inventory management such as optimizing your sell-through rate, removing excess inventory, and fixing stranded listings you can improve your IPI score and ensure success on Amazon.

At FBA Brigade, we understand the complexities of Amazon’s inventory management system, and we’re here to help you navigate through it. Whether you need help with optimizing your IPI score, managing your FBA logistics, or improving your sales, we’re dedicated to supporting you in scaling your Amazon business.