Boost your Amazon IPI Score quickly by managing inventory smartly with Amazon's FBA program. Aim for a high score—it means less storage cost and more room for your products.
A low IPI score can put limits on your business and increase costs. To avoid this, keep the right amount of stock, sell it fast, and know your product lead times well. This helps you keep your inventory fresh and your costs down.
Want to get better at selling on Amazon and improve your IPI score? Read on for more and learn the ins and outs of efficient inventory management!
What is the Inventory Performance Index Score?
As an Amazon seller, your Inventory Performance Index (IPI) score significantly impacts your ability to effectively manage and streamline your inventory on the platform.
IPI, or the Inventory Performance Index Score, is a metric used by Amazon to evaluate how well you manage your inventory as a seller.
This score is calculated on a scale from 0 to 1,000; a higher IPI reflects greater efficiency in your inventory management.
Amazon determines your IPI score by examining several aspects of your inventory performance, including how well you balance inventory levels and sales.
Factors Influencing Your IPI Score
Several key factors contribute to your IPI score:
Sell-Through Rate: This is the ratio of the number of units sold and shipped over a given period to the number of units available at the start of that period. A higher sell-through rate can indicate effective inventory management.
Excess Inventory: Holding too much stock can negatively impact your score. Excess inventory ties up capital and can incur higher storage fees.
Stranded Inventory: Inventory that isn't listed for sale can harm your score. Ensuring all inventory is available for purchase helps improve your IPI.
In-Stock Rate: Regularly stocking popular items that are frequently sold can boost your IPI score. This ensures you meet customer demand without overstocking.
Strategies to Boost Your IPI Score
To optimize your Amazon Inventory Performance Index (IPI) score, you need to focus on maintaining a healthy balance between demand and inventory levels. This not only ensures a good IPI score but also minimizes storage costs and maximizes sales efficiency.
1. Improving Sell-Through Rate
To improve your sell-through rate, keep a close eye on your FBA sell-through rate by monitoring past three months' sales data.
Increase your sell-through by:
Aligning inventory stock with sales velocity.
Running targeted promotions to increase product visibility.
2. Reducing Excess Inventory
Excess inventory can hurt your IPI score by tying up valuable space and resources.
Reduce excess inventory by:
Regularly reviewing your excess inventory percentage and excess inventory units.
Adjusting your restock frequency and volume based on anticipated demand.
3. Preventing Long-Term Storage Fees
To prevent long-term storage fees, which can escalate your storage costs, you should:
Track your inventory age and sell-through for FBA inventory.
Clear out aged inventory before long-term storage fees apply.
Learn more about Amazon storage fees here: Amazon FBA Seller Size Tiers and FBA Fees Explained
4. Proactive Listing Issue Management
Stay proactive with listing issues to ensure your inventory is always saleable.
Timely addressing listing problems can:
Help prevent and quickly resolve any listing issues.
Keep your inventory active and avoid losing potential sales.
Also read our guide: How to Utilize the Amazon Listing Quality Dashboard for Improved Product Rankings
Managing IPI Threshold Concerns
If your IPI (Inventory Performance Index) score dips below the set threshold on Amazon's Inventory Performance Dashboard, you could face strict storage limits which can impact your business negatively. Regular score checks and proactive management are essential to maintain a favorable IPI score.
Implications of Falling Below the IPI Threshold
Amazon's IPI threshold is important for your FBA (Fulfillment by Amazon) account.
If your score falls below this critical point—previously 400 in 2023 and earlier—an array of consequences come into effect:
Storage Limitations: A low IPI score leads to reduced storage capacity at Amazon's fulfillment centers. This can restrict the volume of inventory you can send and store, affecting your ability to meet customer demand effectively.
Excess Inventory Fees: Amazon may charge higher storage fees for excess inventory if your score is below the threshold. These fees compound over time, leading to a significant financial burden.
By regularly monitoring your IPI score through the Inventory Performance Dashboard, you can take timely action to address any issues.
Strive to strike a balance between sold and available inventory to ensure optimal performance, reduce carrying costs, and prevent stock outs or overstock scenarios.
Amazon's Updated FBA Storage Capacity System
Amazon's recent update to its Fulfillment by Amazon (FBA) Storage Capacity System provides you, the seller, with enhanced control and predictability regarding your storage requirements. Here is an overview to help you understand the alterations and adjust accordingly:
Monthly Capacity Limits
Set Monthly: Your FBA storage limits are now established in the third week of each month, allowing you to plan ahead effectively.
Type-Specific Limits: Each storage type in your inventory has individual capacity limits (e.g., standard size, oversize, etc.), tailored to your logistical needs.
IPI Score Impact
Your FBA storage capacity is intrinsically linked to your Inventory Performance Index (IPI) score.
An IPI below 500 could mean restricted storage space, compelling you to optimize inventory turnover.
Increased Visibility and Tools
Amazon has introduced tools for better capacity management, giving you the ability to monitor and forecast your inventory levels with more precision.
Action Steps to Prepare
Regularly Check Your IPI Score: Access your Inventory Performance Dashboard frequently to avoid surprises.
Adjust Inventory: Balance your sold and available stock to keep within capacity limits, reducing the risk of overage fees.
Utilize New Features: Explore the new capacity management tools provided by Amazon to ensure optimal inventory performance.
How 3PL Services Can Help With Your IPI Score
3PL (third-party logistics) services can assist with improving your Amazon Inventory Performance Index (IPI). Here’s how they can have a positive impact:
1. Inventory Management: 3PL providers are experts in inventory management and can help you maintain optimal stock levels, avoiding both overstocking and understocking, which can affect your IPI score.
2. Warehousing Solutions: With additional warehousing options, 3PLs can store excess inventory that doesn't need to be immediately sent to Amazon, thereby reducing your storage footprint and costs within the Amazon FBA system.
3. Efficient Replenishment: They can streamline the replenishment process by ensuring that inventory is restocked in Amazon's warehouses just in time, preventing stockouts and excess inventory.
4. Improved Shipping Times: By leveraging their distribution networks, 3PL services can often improve shipping times, leading to better customer satisfaction and potentially higher IPI scores.
5. Return Management: Efficient handling of returns and managing unsellable inventory can also contribute to a healthier IPI score, and this is an area where 3PL services excel.
6. Data Analytics: They provide valuable data and analytics to forecast demand more accurately, plan inventory levels effectively, and make smarter restocking decisions.
7. Scalability: As your business grows, 3PLs can help scale your logistics operations without the need for you to invest heavily in additional space or resources, ensuring that your IPI remains strong as you expand.
3PL services can help keep your Amazon IPI score high by managing your inventory and shipping efficiently. Want to worry less about stock levels and focus more on growing your business? Check out our 3PL services to streamline your Amazon operations!
Conclusion
Your IPI score is more than a number; it's a reflection of your proficiency as an Amazon seller.
Strive for a high IPI score by optimizing inventory levels, enhancing sell-through rates, and swiftly dealing with inventory that is not effectively contributing to sales.
Remember that IPI is a dynamic measure—frequent analysis and adjustments are your keys to sustaining a favorable position within Amazon's FBA system.
Frequently Asked Questions About Amazon IPI
What determines my Amazon IPI score?
Your IPI score is influenced by several factors including excess inventory, sell-through rates, stranded inventory, and in-stock inventory. To maintain an optimal score, regulate these components with diligence.
How can I avoid excess inventory affecting my score?
Monitor your inventory levels closely. If necessary, initiate a removal order to clear out unsold stock, thus minimizing storage costs and improving your IPI score.
What happens if my IPI score is too low?
Amazon may restrict your ability to send new products to their fulfillment centers and impose additional storage fees. Maintaining an efficient inventory system is essential to prevent such restrictions.
Can I recover from a low IPI score?
Absolutely. By adjusting your inventory practices—such as reducing excess inventory and addressing stranded stock—you can improve your score over time.