When you become an Amazon FBA seller, there are a lot of things to keep track of. One metric that can be easy to forget about is your Inventory Performance Index, or IPI, score. In this article, we’ll define what the IPI score is, describe how it’s calculated, explain why it’s important to your Amazon business, and recommend specific actions you can take to raise your score if it’s too low.
Table of Contents:
- What Is an IPI Score?
- How Is the IPI Score Calculated?
- How Can You Improve Your IPI Score If It’s Low?
- FAQ’s Relating to Your IPI Score
- Conclusion
What Is an IPI Score?
An IPI score is a number between 1 and 1000 that Amazon gives you based on your inventory management performance as a seller. The higher your IPI score, the better you’re managing your inventory levels at Amazon.
If you want to see what your IPI score is right now, you can find it Seller Central under the “Inventory” menu. You can click on either “Dashboard” to see a chart showing your score over time, or “Inventory Planning” to see your score on a line from 0 to 1000.
Key Takeaway: An IPI score is a number that Amazon gives you based on your inventory performance as a seller. A high IPI score is important because it can help you maintain proper inventory levels at Amazon, which can lead to more sales.
How Is the IPI Score Calculated?
Amazon says your IPI score is calculated based on a number of factors, the most important being:
- Maintaining a balance between sold and on-hand inventory.
- Avoiding excess and aged inventory.
- Avoiding long-term storage fees.
- Fixing listing problems.
- Keeping your most popular products in stock at the right levels to meet customer demand and maximize customer satisfaction.
As shown in the screenshot below, you can see Amazon labels these 4 elements as “Top Influencing Factors” in determining your IPI score:
- Excess inventory percentage
- FBA sell-through rate
- FBA in-stock rate
- Stranded inventory percentage
Let’s review each of these elements in detail so you can get a better understanding of how your IPI score is calculated.
Excess Inventory Percentage
Amazon consider a product to have excess inventory if it has over 90 days of supply based on the forecasted demand. Therefore, it’s a simple calculation (that Amazon does for you) to figure out how many units of a product to cover 90 days of sales.
To find out how many units your product has sold in the past 90 days, go to “Manage Inventory” in Seller Central:
Enter your product name in the search field:
Then click on the SKU link to the left of the product name:
This opens a window showing you the sales history of the product in numerical and graph forms. You can see the 90 day sales rate at the top. I’ve outlined it in red in the screenshot below:
Given a sales rate of 160 units in 90 days, you should strive to have no more than 160 units at Amazon’s warehouses.
FBA Sell-Through Rate
Your sell-through rate is a measurement of how fast your products sell. Specifically, Amazon provides the following definition of FBA sell-through rate:
Sell-through rate is updated daily, and looks at the past 90 days of shipped units and average inventory levels over that same period.
Your FBA sell-through rate is your sold and shipped units over the past 90 days divided by the average number of units in stock in Amazon’s fulfillment centers during that period. Your available average units is determined by taking a snapshot of your inventory levels today and 30, 60, and 90 days ago.
For example, let’s say you shipped 120 units in the past 90 days and had an average of 80 units available during that period. Your sell-through rate would be 120 divided by 80, which equals 1.5, as shown below.
FBA In-Stock Rate
Your FBA in-stock rate is the percent of time your replenishable products have been in stock during the last 30 days, weighted by the number of units sold for each SKU in the last 60 days.
I put replenishable in italics because some people, like me, sell products that aren’t always replenishable, and they therefore shouldn’t count against you if you can’t get more of them.
To set a product as non-replenishable, go to the Inventory Dashboard screen in Seller Central, click on the button “Restock inventory” link as shown below:
Then pick the product from the list or enter your SKU to search for the item. On the far right, there is a drop-down menu under the “Action” heading where you can choose the “Customize SKU Settings” menu item:
In the upper left of this screen, you’ll see the option to set the product as replenishable with a “Yes” or “No” radio button. Choose “No” as shown below to make it non-replenishable and therefore not count towards your FBA in-stock rate.
Stranded Inventory Percentage
Stranded inventory is inventory that Amazon thinks is sellable but doesn’t have an active listing. If the product doesn’t have an active listing, it can’t be sold. Stranded inventory can lower your sell-through rate because it can’t ever be sold to a customer.
Unless either you or Amazon support can fix the problem with the stranded inventory, you’ll have to recall your inventory so you can address the issue and, if possible, send the inventory back to Amazon.
What Does Your IPI Score Mean for Your Business on Amazon?
A high IPI score means that you are managing your inventory levels well, and Amazon will continue to accept shipments of your products. A high IPI score also implies you’re optimizing your sales rate and minimizing your storage costs.
A low IPI score, on the other hand, means that Amazon may stop accepting shipments of your products. If you have a low IPI score, it is important to take action to improve your score so you can keep your inventory levels up and be more efficient with your inventory sales rate and storage costs.
Key Takeaway: A high IPI score means you’re managing your inventory to Amazon’s satisfaction, and they will continue to accept your shipments to their warehouses. A low IPI score means Amazon may stop accepting your shipments.
How Can You Improve Your IPI Score If It’s Low?
We know that if your IPI score is too low, Amazon may not accept your shipments. So, what can you do to improve your IPI score to keep this from happening?
There are a number of ways to increase your IPI score, including:
- Reducing your excess inventory percentage
- Increasing your FBA sell-through rate
- Increasing your FBA in-stock rate
- Reducing your stranded inventory percentage
Let’s take a closer look at each of these so you can understand how to improve your IPI score.
Excess Inventory Percentage
Since Amazon specifically defines excess inventory as inventory over 90 days of supply based on the forecasted demand, the easiest way to reduce your excess inventory percentage is to remove units of inventory greater than the 90-day forecasted threshold. Be careful doing this, however, because the cost in time and money to remove and then later re-send inventory to Amazon may be more than whatever gains you get by increasing in your IPI score.
I recommend taking this step only if you have an IPI score below 400 and you absolutely have to send more inventory to Amazon.
FBA Sell-Through Rate
There are a umber of things you can do to increase your sell-through rate, depending on what kind of seller you are.
If you only sell your own (private label) products, you can:
- improve your product pages with better pictures or video to increase your conversion rates
- increase your advertising to get your product in front of more prospective customers
- stop selling slower-selling products
If you are a reseller of wholesale or arbitrage products, you can:
- lower your product price to get more buy box exposure
- sell more fast-selling products
- stop selling slower-selling products
You should be taking the above steps as part of your regular activities of selling on Amazon, so they are are good actions to take whether your IPI score is low or not.
FBA In-Stock Rate
Just like Amazon doesn’t want you to have too much inventory, they also don’t want you to have too little. To see which products Amazon says you should restock, click on the IPI score button on the Inventory dashboard.
The next screen shows a breakdown of the 4 categories of your inventory performance, with the bottom category being your FBA in-stock rate. If you have inventory Amazon wants you to restock, you’ll have a button like the one below that says “Restock today”.
Click that button, and you’ll be taken to the Restock Inventory page, which lists the products Amazon thinks you should restock, how many units have sold in the past 30 days, and the recommended replenishment quantity.
Staying on top of inventory to restock will increase your Amazon earnings as well as your IPI score, so you should regularly review your products that need restocking and keep sending inventory as needed.
Stranded Inventory Percentage
Addressing this problem is easy: just remove your stranded inventory! You can do this from the Inventory dashboard in Seller Central. If you have any stranded inventory, there will be a notification on the right side of the dashboard with a button that says “Fix stranded inventory”, as shown below.
Click the “Fix stranded inventory” button and you’ll be shown a list of your stranded inventory. On the far right of the list of stranded inventory is a drop-down menu with the option to remove stranded inventory. Follow the instructions on the next screen to have the inventory either disposed of or returned to you.
Removing stranded inventory is the easiest of the 4 categories to improve, so do this whenever you have stranded inventory.
Key Takeaway: If your IPI score is low, make sure to remove excess and stranded inventory, and take actions to improve your sell-through and in-stock rates.
FAQ’s Relating to Your IPI Score
What is a good IPI score?
You want your IPI score to be 400 or higher. Why? This is the level explicitly stated by Amazon that if you fall below, you’ll have limits placed on the amount of inventory you can send to Amazon. If you score is above 400, you won’t have any restrictions on the amount lf inventory you can send.
What is the best IPI score?
The best score you can have is 1000, but most sellers have scores between 400 and 800.
Why is IPI score important?
IPI score is important because Amazon uses it to measure how well a seller is managing their inventory.
A high IPI score indicates that a seller is keeping their inventory levels balanced by not overstocking or running out of stock, and also by removing slow-selling or stranded inventory. A low IPI score can lead to restrictions from Amazon in the amount of inventory you can send to them.
Conclusion
If your IPI score is low, it’s an indication that you need to improve your inventory management practices.
Some things you can do to raise your IPI score include removing stranded or slow-selling inventory, regularly reviewing your sales data to understand which products are slow sellers, and setting up alerts so that you know when inventory levels get low so you can restock.
Want to know how much inventory you need for Amazon FBA? See this post.
To read more about how to improve your product’s sell-through rate, see this page.