Last updated on July 11th, 2024 at 08:20 am
Inventory management is a big part of how well you do as an Amazon seller. Effective inventory management leads to lower storage fees, inventory costs, and higher total profits.
Inventory Performance Index, or IPI, is a built-in measure on Amazon that helps sellers see how their stock is doing over time. The IPI is meant to help sellers comprehend the complete state of their stock, so they can work as efficiently and profitably as possible.
You may be wondering what the Inventory Performance Index score is, how it is calculated, and how it impacts your life. Yes, we will talk about all of this and more.
Where to Find IPI Score on Amazon
You need to know how to find the Amazon Inventory Performance Index Score because it’s very important. Amazon FBA sends out two IPI checks every three months.
If sellers fail any of these checks, they won’t be able to send any more things to FBA warehouses in the next quarter. But if you regularly pass the checks, you can store as much as you want in Amazon’s fulfillment centers.
These steps will make it easy for you to see your IPI score on your product performance dashboard:
- Sign in to Seller Central.
- Visit the ‘Inventory’ tab.
- Select “Inventory Planning.”
- Click “Performance” on the dashboard for details.
Assuming you know where to find your IPI score on Amazon, how do you know if it’s good?
What is a Good IPI Score on Amazon?
An unusually large difference exists between Amazon’s Inventory Performance Index score, which runs from 0 to 1000. The higher the IPI score on Amazon, the better for you. Still, the range from 0 to 1000 is very large, which makes it very hard to make accurate guesses. What’s a good Amazon IPI score to keep?
Like in Amazon, if you get an average score, you’ll be safe in most situations. So, between 400 and 500 is Amazon’s lowest acceptable performance index score. For example, anything over 500 is good. Plus there are penalties for falling below the standard.
Unfortunately, if you don’t meet the minimum number, Amazon FBA will limit the amount of space in your account until you can fix the problem.
Accounts with storage limits may damage your business because you’ll pay more in overage fees and have fewer chances to sell things. Therefore, you should always keep an eye on your inventory success score.
Additionally, the IPI score is generally refreshed regularly. In other words, it might not be great for the next check even if it was great for the last one.
However, if your IPI number ever drops below the required level, you have about six weeks before the next check to resolve the issue. What you need to know is how to fix a low IPI score. Watching the things that affect your score is the only way to do this. In the next part, we’ll talk more about these factors.
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Factors Affecting Amazon Inventory Performance Index Score
No one knows how the IPI score is determined because Amazon doesn’t make its rules and metrics public. But there are four things you should keep in mind if you want to learn how to figure out your IPI score or keep it high. These are them:
- Excess Inventory
- Amazon FBA Sell-through rate
- The amount of stranded inventory
- In-stock Inventory Levels
Excess Inventory
One main reason Amazon made the IPI score was to keep its stores from getting overly full. Amazon would rather store things that sell quickly than things that don’t sell quickly and take up room. There is a fee for storing items for a long time, but that’s not the point.
Amazon does not allow any extra products at all. By constantly having too many items in stock, you can annoy Amazon and get a low IPI score.
Amazon FBA marks your stock as “excess” if it’s more than 90 days’ worth of supply based on how much the market wants it. Keeping enough of your goods on hand for 30 to 60 days is the safest thing you can do.
Luckily, Amazon’s inventory dashboard lets buyers know when there is a lot of demand or when more stock is needed.
If you have extra products, Amazon will tell you how many units are overstocked. In addition, they will give you ideas on how to get rid of them.
Another way to find out how much of your product Amazon thinks is extra is to keep track of the excess inventory percentage. The percentage of extra inventory can be found in this way:
Excess inventory (%) = No. of excess FBA inventory items total units in FBA inventory(100)
Amazon FBA Sell-Through Rate
This measure tells you how well you’re keeping track of your stock versus your sales. To find out your rate of sales;
- Find the difference between the number of units sold in 90 days and the usual number of units that are in stock at a warehouse.
- Amazon FBA will let you know if your sell-through rate is low and show you how to raise it. You won’t have to pay long-term storage fees and will be able to keep track of how much you pay in storage costs.
- You will be taken to the “FBA Inventory Age” page if you click on “Improve sell-through.”
- Amazon will show items with a low sell-through rate along with the following metrics:
- Number of sales, number of sales in the last 90 days, rate of sell-through, number of items available, age of items in stock, and expected long-term holding fees.
- For Amazon’s tips on how to boost your sell-through rate, scroll to the right. Then, click on the drop-down menu to see more detailed ideas.
Stranded Inventory
“Stranded inventory” refers to items that are stored in Amazon’s warehouse but are not yet listed on the site because of a technology issue. Due to the lack of a listing, customers will not be able to place orders for these things, resulting in no sales and extra storage costs.
If you have stuck inventory that is harming your IPI score, Amazon FBA will let you know how many units are affected and what you can do to fix the problem. Check on your stranded goods in this way.
If you have stranded inventory, you’ll see an alert and a “Fix listings” button in your inventory performance summary. After clicking “Fix listings,” you’ll be taken to the “Fix stranded inventory” page.
At this point, the stranded things will be shown, along with how many units are stranded and whether they have an automatic removal date. Additionally, you’ll be able to see why they got stuck and whether you can relist the units.
Here are some other causes of stranded inventory:
- ASIN Limitations
- Outdated ASIN Errors with Bulk Upload Templates
- Brand Qualification Reasons
- Listing issues like deleted listings
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In-Stock Inventory
The number one factor that determines your inventory performance score is how well you keep popular or in-demand items in stock. There’s a chance that this measure will raise your score instead of lower it.
Online store Amazon likes to keep items in stock all the time. Since your products weren’t available for 30 days, they’ll generally give you an estimate of how many FBA sales you missed. If a product can’t be restocked, you can leave it out of your IPI score.
You can mark as “non-replenishable” limited-edition items, items that are no longer being made, or one-time retail arbitrage items to protect your IPI score. This choice can be found under “Restock Inventory.”
In-stock Rate (per SKU) = (% of days in stock in the last 30 days)*(60-day sales velocity)
How To Improve Your IPI Score
In case you didn’t know, these things affect your Amazon Inventory Performance Index number. You should work on improving each of these measures separately if you want to raise your IPI score on Amazon. We can help you with these suggestions:
Avoid Overstocking
Having too many products is bad for amazon fba because it doesn’t like its warehouses to be full. Certainly, see the “Manage Inventory” tab on your site to find out how to fix any extra inventory you may have.
If you want to quickly sell overstocked or out-of-season things, Amazon may also suggest that you use “Amazon Outlet.” Besides keeping an eye on your inventory amount, you can also
- To cut down on the extra costs that come with having too much inventory, use a pricing plan that makes money. You can set a smaller price that still lets you make a profit since having too much inventory makes prices go up.
- Base your demand estimate on how the market is moving. You can then plan how many things to make based on this information.
- Use a tool that can quickly make predictions about your supplies and let you know when you’re running low.
Improve Your Sell-through Rate
A high sell-through rate makes Amazon happy because it means they have more space in their stores. To get a better IPI score, you should have a sell-through rate that is good over 90 days.
The product category or niche you’re in and the goods you sell will usually determine the sell-through rate. We understand that sales may be lower at times.
In other words, if your goods aren’t moving quickly, you should think about how to get rid of some of the stock in the warehouse. Do that in any of these ways:
- To sell more things, make deals with discounts.
- To sell more things in a single transaction, put together bundles of products.
- Least-popular things should not be reordered as often.
- Do not forget to check the state of your checked-in inventory and take some items out of FBA warehouses if needed.
- If you keep things in FBA warehouses for more than 365 days, you’ll have to pay extra storage fees. So, take action—make a removal order ahead of time or ask Amazon to destroy your items if that describes the situation.
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Improve Your In-Stock Rate
Unfortunately, you should try to avoid having too much stuff. Keep as many of your famous items in stock as you can, though. Your IPI score could have gone up if you didn’t keep running out of your best-selling things.
If you want to raise your in-stock rate, you should
- Classify goods by how popular or in demand they are in the market.
- Regularly look at your stock to make sure you always have the most popular things on hand.
- Find out which products sell better at different times by using important sales data from management tools.
Reduce Stranded Inventory and Fix Listing Problems
If you have a product that isn’t moving, you should either get rid of some of it or fix any listing problems that may have caused it. Keeping inventory that is stuck or can’t be sold will cost money and won’t promise a profit, which can be bad for business.
Check your stranded inventory % often to find listing problems quickly and fix them before they cost you more money.
Also, keep standard stock levels (30–60 days’ worth) of your best-selling things, and make sure there is a balance between what you’ve sold and what you have available.
What If My Score Falls Below Amazon IPI?
Your account will not be able to hold any more items if your score drops below the minimum level. Under “Inventory performance” or “Manage FBA shipments” in your seller account, you can see the new storage and restocking limits.
At this point, Amazon has put limits on restocking based on the type of storage. In fulfillment, Amazon no longer caps the amount of FBA inventory you can keep by ASIN, but by your whole account. Limits on restocking apply to all types of storage, including standard-size, oversized, clothing, and shoe storage.
Take a close look at your storage limits now that Amazon has made this big change. A high IPI score will at least keep your storage costs low, even if you have refill limits in place.
Employing a third-party fulfillment center might be a good idea if your IPI score is below the level and your restock and storage limits are low.
Top Amazon Seller Metrics For Brand Success
The big box store wants sellers whose products make customers happy on their site. You need to keep an eye on your success metrics if you sell things on Amazon. Amazon ranks sellers in part based on account data. These aren’t the only rules sellers must follow to keep Amazon happy.
By learning about data, you can see how healthy your Amazon account is. They will help you figure out how to get the most out of your goods, prices, sales, and happy customers.
For people who sell on Amazon Seller Central, this blog will tell them which metrics have the most effect on their business and how to keep track of them.
Buy Box Eligibility
This is what the buyer sees when they go to Amazon and click “add to cart.” Multiple sellers can’t all have the “buy” box at the same time. Price is the main factor that determines whether a product is eligible for a Buy Box.
The buyer will choose the seller whose price is the lowest. Here are the most important Amazon data that the buy box algorithm looks at:
- Amazon guesses this percentage by looking at the number of A-Z claims (unsatisfactory/late sales), negative feedback, and credit card chargebacks. Next, the total number of orders in the last 60 days is divided by all of the above factors. Under 1% should be this metric.
- Amazon’s algorithm prefers products that customers can buy right away. For back-ordered things to get the Buy Box, the inventory should always be there.
- Sellers need to keep buyer feedback consistent and good. Inquiries from customers should be answered quickly by customer service. The things listed above will all change your chances of getting the Buy Box.
- Both FBA (Fulfilled by Amazon) and FBM (Fulfilled by Merchant) are workable business methods, but sellers have a better chance of getting the buy box if they choose FBA.
Inventory Performance Index
The only way to escape running out of stock is to keep your Amazon IPI score high. Your inventory management skills are measured by an IPI score, which is a number between 0 and 1000.
On the Inventory Performance Dashboard, you can find your IPI score on a bar that shows four types of performance:
- Dark green = Excellent
- Green = Good
- Yellow = Fair
- Red = Poor
If you stay on the right side of the bar, Amazon will give you unlimited storage. If your IPI score is low, you may have to limit the amount of storage you can use. Amazon says that if your IPI score is above 450, your Amazon FBA product is doing well, and if it’s above 550, it’s doing great.
Pre-Fulfillment Cancellation Rate (<2.5%)
What is the rate of cancellations before Amazon ships an order? Before an order is shipped, sellers can find out how many refunds there were compared to the total number of orders that were placed during a certain period.
Most of the time, high pre-fulfillment rejection rates are caused by bad inventory management. If you don’t meet the requirements for a pre-fulfillment refund rate, your account may be closed. Also, pre-fulfillment cancellation rates only apply to sales that are fulfilled by the seller.
What is the magic number for this measure for Amazon sellers? The PFC rate must be less than 2.5%. If this amount is exceeded, the account will be closed.
Keep your rate below 2.5% by keeping track of your goods well. Check your records to see how many units you have access to in Amazon’s stores. When you need to, restock to stop delays that you don’t want.
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Late Shipment Rate
Amazon shipping delays are the worst thing for customers. Amazon is famous for delivering packages very quickly and on time, and late orders don’t meet your company’s standards. You shouldn’t paint that picture of yourself, especially in front of Amazon or people who are paying you.
If an order has been late for three days or more, it is considered to be very late. Because of this, sellers are told to keep a late shipment rate of less than 4%. If you don’t reach the goal, your account could be punished, banned, or even deleted. Also, Late shipment rates only apply to orders that are met by the seller.
When a seller needs to meet buyers’ expectations, late shipments can lead to negative feedback from customers and more returns. Usually, sellers can keep their Late Dispatch Rate low by managing their product well and having a good logistics system in place.
PPC Metrics: ACoS, TACoS & RoAS
Anyone who sells things needs to know what PPC stands for: pay-per-click ads. You need to boost sales as your Amazon fba business grows to keep making money. Amazon pay-per-click (PPC) ads are what power you up.
Of course, as with everything linked to e-commerce, there are too many complicated acronyms (also called ECAs).
PPC campaigns are the way for all Amazon sellers to get more sales right away. You can see different data in the campaigns manager, such as CTR (click-through rates), conversion rates, impressions, clicks, sales, and more. They are ACoS, TACoS, and RoAS, which are the three most important ones.
How much money you made from an ad and how much you spent on it are shown by your Advertising Cost Of Sales (ACoS).
Order Defect Ratio (ODR) (<1%)
For this percentage, you add up all the A-Z claims (orders that were not delivered on time or were not acceptable), negative reviews, and credit card chargebacks. It’s divided by the total number of sales made in the last 60 days.
If more than 1% of your orders are broken, you will lose your favorite buy box. Assisting with delivery and providing Prime Shipping is the best way to handle ODR issues. Navigate to Performance and then to Account Health to see your ODR.
Amazon FBA provides a lot of attention to sellers’ ODR because it is a key KPI that has a big impact on how satisfied customers are. There are three kinds of it:
- A to Z Guaranteed Claims Rate
- Negative feedback rate
- Credit Card Chargeback Rate
Order defect rate (ODR) tells you how many items customers comment on negatively. Your account’s health is judged by it.
IP Complaints
It is against Amazon’s rules for ads to violate the intellectual property rights of brands. If someone has told you that your ad violates their rights, you need to fix this right away. Account Health has IP issues right next to Customer Service Performance.
Now you can see how many intellectual property violations are hurting the health of your account as a whole. Ignoring these violations can also get your information page taken down or your account suspended.
The breakdown of your policy compliance is right next to the customer service performance. This is where you can see how many intellectual property violations are currently affecting your account.
Buyer-Seller Contact Response Time (CRT)
The Buyer-Seller Contact Response Time shows how quickly you answer messages from customers. No matter what day of the week it is, Amazon wants you to answer buyer messages within 24 hours. If you don’t respond for more than 24 hours, your account metrics will go down.
To keep your customers and Amazon happy, you need to check your buyer-seller messaging area often. If you are too busy to answer texts from buyers and sellers, you can hire an Amazon expert to do it for you.
Not only will meeting Amazon’s goal CRT earn you points with Amazon, but it will also help build your brand as a business that cares about customers.
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Product Policy Compliance
Since Product Policy Compliance handles complaints from other sellers, you need to keep an eye on how your account is doing. You can quickly take care of problems that need your immediate attention by finding this metric in the Performance Section of Seller Central.
Your Account Health is where you can find the following information from the Performance section: Listing policy violations, complaints for intellectual property, product authenticity, product condition, and product safety were all looked into.
Bottom Line
Before you clean up or keep your Inventory Performance Index, remember that your score is taken into account. Even if you make changes to your account, your IPI score may still be behind. This happens a lot of the time. With consistent good inventory habits over a long length of time, your IPI should eventually rise above 500.
Struggling with your Amazon IPI? Find out what score to aim for and how to improve it. Optimize your inventory and increase profitability.
Keep your IPI score in the green with KenjiROI
