Originally published on May 24, 2018, updated July 20, 2020
The Amazon Inventory Performance Index (IPI) is a metric that was added for FBA sellers in Q2 2018. It also referred to as Target Inventory Level within Seller Central.
Your IPI is a single number calculated based on four areas of inventory management:
You can see your IPI score on the Inventory performance dashboard in Seller Central. The higher you score, the better you’re performing. Alerts in your IPI dashboard will give you tips for reducing Amazon storage fees and carrying costs as well as notifications when it's time to restock. You may need to reduce excess inventory, fix stranded inventory, increase your FBA in-stock rate, or take other actions to improve your IPI score.
FBA sellers had several questions about this metric when it was introduced, which were addressed by an Amazon representative in this Seller Central forum.
Managing your inventory effectively can help you reduce costs, increase profitability and continue to grow your business. The IPI score measures your inventory management practices over time. A score above 500 means you are performing well. If your score is too low, it could result in overage fees and limits being placed on your FBA storage, including not being able to send items into the fulfillment centers. Effective August 16, 2020, Amazon has changed the IPI threshold for storage limits to 500. Storage limits for sellers will continue to be reviewed on a quarterly basis.
What does this mean for sellers? If your IPI score is below the target inventory level when your account is reviewed, you will receive a notification regarding possible storage limits for the next quarter. You'll be given six weeks to improve your IPI score; if it is still below the target level, storage limits will apply to your selling account for the next quarter. If you maintain an IPI score at the target level or higher throughout the current quarter, you will have unlimited FBA storage for standard and oversize items for the following quarter. (Note that monthly storage fees and long-term storage fees still apply.) You can learn more about FBA inventory storage limits and how your IPI score affects those limits here.
Make sure your inventory performance settings reflect your current business goals. If you don’t plan to replenish a SKU, mark it as non-replenishable inventory so it won’t affect your IPI score. (Want to watch a particular SKU or restock a seasonal item as the appropriate season approaches? Use RestockPro’s filters and notes to keep track of those items.)
It’s important to note that paying a higher percentage of your FBA revenue in fees can reduce your IPI score. The goal is to keep a good amount of inventory in stock at FBA and sell it quickly or steadily to avoid long term storage fees, which are now assessed monthly. A RestockPro user shared that his order session percentage has increased after removing several excess items and complete inventory of some SKUs that had zero sell-through. Even with significantly lower “offers” from the sales dashboard, his company’s daily sales have temporarily increased.
The goal is to keep a good amount of inventory in stock at FBA and sell it quickly or steadily to avoid long term storage fees, which are now assessed monthly.
In the Seller Central forum, Amazon states, “The best way to increase your IPI score and minimize your FBA storage fees is to reduce unproductive inventory and keep your productive inventory at lean levels while ensuring you have enough on hand to minimize lost sales.” Excess inventory can be reduced by removals (disposal or taking the items back). You could also try running Amazon sponsored ads (this will cut into your margins, but could increase sales) or updating older product listings with revised titles, keywords and images.
One seller has decided to adjust their company’s RestockPro settings to cut their days of inventory at Amazon or in transit in half. To increase the sell-through rate, the company has focused on higher priced items, determining that there is too much labor involved to manage lower priced or lower profit items with FBA. The company is also converting lower priced items to merchant fulfillment and will discontinue selling many of them after running out of stock. They are also trying to keep two weeks of inventory already prepped and using 8-9 day lead times to help maintain this.
IPI: Inventory Performance Index, a metric that is used to determine how your FBA business is performing over time.
Excess inventory percentage: This number can help you decide whether to lower your prices or remove your products. Reducing the number of excess units in your inventory can increase your IPI score. (Remember, the higher the score, the better.) Continuing to keep excess units in stock could decrease your IPI score.
FBA sell-through rate: Your sell-through rate can increase or decrease your IPI score. Your sales should maintain a good balance with your inventory volumes. In FBA inventory aging on Seller Central, there is a column that shows SKU level sell-through based on the past 90 days. Many sellers are taking advantage of the free removals.
Stranded inventory percentage: This is inventory with listing problems that incurs storage fees without the possibility of sales.
FBA in-stock rate: This number shows how much value you’re getting from your products by keeping replenishable ASINs in stock. It is calculated as the percentage of the past 30 days that a SKU was in stock times 60-day sales velocity (the number of units sold for each SKU over 60 days) divided by 60-day sales velocity.
RestockPro allows you to get a clear picture of where your FBA inventory is, when to restock, the best time to send more inventory to the fulfillment centers and much more. You can use filters, tags and statuses like “Watch” or “Ignore” to keep tabs on inventory that you’re considering restocking in the future. (This is especially useful for seasonal items.)
It’s extremely important to keep the right balance of items in stock without overstocking or stocking out. RestockPro is designed to help Amazon sellers manage FBA inventory effectively and determine the best time to ship to FBA from local inventory.Joe Hyatt
Restock Suggestions gives you a quick overview of how your inventory is performing, providing all the data you need to make informed inventory decisions in one place. With customizable filters and grids, you can set your Restock Suggestions to display the information that is most important to you. Best of all, different users can set different filters, so everyone in your company can see the data that is most relevant to their role. You can also apply filters and other options to customize your nightly report to deliver only the key information you need in your inbox.
RestockPro is a powerful inventory management tool that helps Amazon sellers maintain or improve their IPI scores. See how it can help your business today.
Originally published on May 24, 2018, updated July 20, 2020
This post is accurate as of the date of publication. Some features and information may have changed due to product updates or Amazon policy changes.