What is the Amazon Inventory Performance Index (IPI)? A Beginner’s Guide

If you’ve not been the most efficient Amazon seller during your time on the platform, you might have a bad IPI score.

The problem? Amazon doesn’t make it easy to understand what this is, or how it works. So if you are concerned about your IPI score or want to ensure that you never have a bad score… continue reading!

Amazon IPI Score

The Amazon Inventory Performance Index (IPI) is a score that Amazon uses to measure how well sellers are managing their inventory.

The IPI ranges from 0 to 1000 and is an essential metric for sellers who use Amazon’s Fulfillment by Amazon (FBA) program. Amazon’s IPI is designed to help sellers optimize their inventory, reduce storage costs, and improve customer satisfaction.

The IPI is calculated based on three factors: excess inventory, sell-through rate, and stranded inventory. Excess inventory refers to inventory that is not selling fast enough and is taking up valuable storage space. Sell-through rate measures how quickly inventory is selling, and stranded inventory refers to inventory that is not available for sale due to listing errors or other issues.

By tracking these metrics, Amazon can determine how well sellers are managing their inventory and provide guidance on how to improve their IPI score.

Overall, the IPI is an essential metric for any seller using Amazon’s FBA program.

By optimizing their inventory and improving their IPI score, sellers can reduce storage costs, improve customer satisfaction, and increase their sales on Amazon’s platform.

What is the Amazon Inventory Performance Index?

The Amazon Inventory Performance Index (IPI) is a metric used by Amazon to measure the efficiency of a seller’s inventory management. The IPI is a score between 0 and 1000, with a higher score indicating better inventory management efficiency. The IPI is calculated based on several factors, including excess inventory levels, sell-through rates, and stranded inventory.

Definition

The Amazon Inventory Performance Index (IPI) is a performance metric that measures a seller’s inventory management efficiency on Amazon. The IPI score ranges from 0 to 1000, with a higher score indicating better inventory management efficiency. The IPI is updated weekly on Mondays, and Amazon conducts an IPI review twice before the start of every business quarter.

Purpose

The purpose of the Amazon Inventory Performance Index (IPI) is to encourage sellers to manage their inventory more efficiently. A higher IPI score can lead to benefits such as increased storage limits, reduced fees, and improved search visibility. On the other hand, a low IPI score can result in penalties such as storage limits, increased fees, and even account suspension.

To maintain a high IPI score, sellers should focus on managing their inventory levels, improving their sell-through rates, and reducing stranded inventory. They should also consider using tools such as Amazon’s Inventory Performance Dashboard to monitor their IPI score and identify areas for improvement.

In conclusion, the Amazon Inventory Performance Index (IPI) is a critical metric for sellers on Amazon. By managing their inventory efficiently and maintaining a high IPI score, sellers can benefit from increased storage limits, reduced fees, and improved search visibility.

How is the Amazon IPI calculated?

The Amazon Inventory Performance Index (IPI) is a score that measures the efficiency of an FBA (Fulfillment by Amazon) seller’s inventory management. The score ranges from 0 to 1000, with 1000 being the best possible score. Amazon calculates the IPI based on several factors, including the seller’s sell-through rate, inventory levels, storage costs, and profitability.

Factors that influence the Amazon IPI score

Several factors influence the Amazon IPI score, including:

  • Sell-through rate: The percentage of a seller’s in-stock inventory that sells within a given period.
  • Inventory levels: The amount of inventory a seller has in stock.
  • Storage costs: The cost of storing inventory in Amazon’s fulfillment centers.
  • Profitability: The profit a seller makes from their sales.

Formula to calculate the Amazon IPI score

Amazon calculates the IPI score based on a rolling metric that evaluates a seller’s inventory management over time. The formula to calculate the Amazon IPI score is:

IPI score = (In-stock inventory measure + Excess inventory percentage measure + Stranded inventory percentage measure) x Sell-through rate measure

The In-stock inventory measure is the percentage of a seller’s SKUs that are in stock and available for purchase. The Excess inventory percentage measure is the percentage of a seller’s storage space that is occupied by non-replenishable SKUs. The Stranded inventory percentage measure is the percentage of a seller’s SKUs that are currently unavailable for purchase due to listing problems.

The Sell-through rate measure is the seller’s FBA sell-through rate, which is the percentage of their in-stock inventory that sells within a given period.

Guidelines to improve the Amazon IPI score

To improve their Amazon IPI score, FBA sellers should focus on maintaining a balance between their inventory levels and sales. They should also monitor their in-stock inventory and fix any listing problems that make their inventory unavailable for purchase. Additionally, FBA sellers should keep popular products in stock and liquidate excess inventory to avoid overstocking.

Amazon provides several tools and processes to help FBA sellers improve their IPI score, such as the restock tool and quantity limits. FBA sellers should also follow Amazon’s guidelines and rules to ensure their inventory management is acceptable and efficient.

In summary, the Amazon IPI score is an essential performance metric for FBA sellers. By monitoring their inventory levels, sell-through rate, and storage costs, FBA sellers can improve their IPI score and avoid overage fees and other expenses.

Why is the Amazon IPI important for sellers?

As an FBA seller on Amazon, your Inventory Performance Index (IPI) score is a critical metric that you should monitor closely. The IPI score measures how well you manage your inventory over time, including your ability to balance inventory levels and sales, fix listing problems that make your inventory unavailable for purchase, and keep popular products in stock.

Benefits of maintaining a high Amazon IPI score

Maintaining a high Amazon IPI score has several benefits for FBA sellers. Firstly, it can help improve your sales by ensuring that your products are always in stock and available for purchase. This can lead to increased visibility and higher conversion rates, ultimately resulting in higher profits.

Secondly, a high IPI score can help you avoid excess inventory and stranded inventory, which can be costly for FBA sellers. By keeping your inventory levels in check, you can reduce storage costs and avoid having to pay overage fees or long-term storage fees.

Finally, a high IPI score can help you avoid restrictions on your account, such as limits on the quantity of products you can send to Amazon’s fulfillment centers or restrictions on the types of products you can sell. By maintaining a high IPI score, you can ensure that you have the flexibility to scale your business and sell a wide range of products.

Consequences of a low Amazon IPI score

On the other hand, a low Amazon IPI score can have serious consequences for FBA sellers. If your IPI score falls below the minimum threshold (currently set at 450), you may face restrictions on your account, such as limits on the quantity of products you can send to Amazon’s fulfillment centers or restrictions on the types of products you can sell.

Furthermore, a low IPI score can lead to lost sales, as your products may be out of stock or unavailable for purchase. This can have a negative impact on your sales rank and buy box eligibility, ultimately resulting in lower profits and reduced visibility on Amazon’s platform.

In addition, a low IPI score can result in higher expenses, as you may be forced to pay overage fees or long-term storage fees for excess inventory. You may also be required to liquidate non-replenishable inventory, which can be costly and time-consuming.

In summary, maintaining a high Amazon IPI score is critical for FBA sellers who want to improve their sales, reduce their expenses, and avoid restrictions on their account. By monitoring your IPI score and adhering to Amazon’s guidelines for inventory management, you can improve your efficiency, profitability, and overall performance on Amazon’s platform.

How can sellers improve their Amazon IPI score?

Managing inventory is one of the most critical aspects of running a successful Amazon business. Your Amazon Inventory Performance Index (IPI) score is a metric that measures how well you manage your inventory. A high IPI score indicates that you are managing your inventory well, which can result in lower storage fees and increased storage capacity in Amazon fulfillment centers. Here are some tips and tools to improve your Amazon IPI score.

Tips to increase the Amazon IPI score

  1. Keep your inventory levels balanced: Amazon rewards sellers who maintain a balanced inventory level. Make sure you have enough inventory to meet customer demand without overstocking.
  2. Monitor your sell-through rate: Your sell-through rate is the percentage of inventory you sell within a given time frame. A high sell-through rate indicates that you are selling your inventory quickly, which can lead to a higher IPI score.
  3. Remove slow-moving inventory: Slow-moving inventory can negatively impact your IPI score. Consider removing slow-moving inventory to improve your IPI score.
  4. Optimize your listings: Optimizing your listings can improve your sales and reduce the amount of time your inventory sits in Amazon’s warehouses. Use high-quality images, clear product descriptions, and competitive pricing to attract more customers.

Tools to manage inventory and improve the Amazon IPI score

  1. InventoryLab: InventoryLab is an all-in-one inventory management tool that can help you manage your inventory more efficiently. It provides real-time data on your inventory levels, sales, and profitability, allowing you to make informed decisions about your inventory.
  2. Sellbrite: Sellbrite is a multichannel inventory management tool that can help you manage your inventory across multiple sales channels. It provides real-time inventory syncing, order management, and reporting, allowing you to streamline your inventory management process.
  3. RestockPro: RestockPro is an inventory management tool that can help you optimize your inventory levels and improve your IPI score. It provides real-time data on your inventory levels, sales, and profitability, allowing you to make informed restocking decisions.

In conclusion, managing your inventory is crucial to running a successful Amazon business. By following these tips and using these tools, you can improve your Amazon IPI score and optimize your inventory management process.

Frequently Asked Questions

What is the Amazon IPI?

The Amazon Inventory Performance Index (IPI) is a metric that measures the efficiency of a seller’s inventory management. The IPI score ranges from 0 to 1,000, with a higher score indicating better inventory management.

How is the IPI score calculated on Amazon?

The IPI score is calculated based on a seller’s inventory levels, sales, and fulfilment methods. Amazon takes into account the amount of excess inventory, sell-through rate, and stranded inventory when calculating the IPI score.

What is a good IPI score on Amazon?

A good IPI score on Amazon is 450 or above. A score below 450 indicates that a seller needs to improve their inventory management to avoid potential penalties or restrictions.

How can I improve my IPI score on Amazon?

To improve your IPI score on Amazon, you can focus on maintaining appropriate inventory levels, improving your sell-through rate, and reducing stranded inventory. You can also consider using Amazon’s Fulfilled by Amazon (FBA) service to improve your fulfilment efficiency.

What is the IPI threshold for Amazon?

The IPI threshold for Amazon is 350. Sellers with an IPI score below 350 may face potential penalties or restrictions on their account.

What is the formula for calculating the inventory index on Amazon?

The formula for calculating the inventory index on Amazon is:

IPI = (Excess Inventory Units + Stranded Inventory Units) / (Monthly Sales Units x 30)

Where:

  • Excess Inventory Units = the number of units of inventory that exceed the seller’s sales velocity
  • Stranded Inventory Units = the number of units of inventory that are unavailable for sale due to listing or fulfilment issues
  • Monthly Sales Units = the average number of units sold per month
Author
Tom P
Hi, I'm Tom Paddock! An Amazon & eBay seller, who has helped over 10,000 people start their own online business. I provide cutting-edge techniques to help sellers with Online Arbitrage, Retail Arbitrage & Wholesale on Amazon.
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