Amazon Inventory Performance Index: What Is It and How to Improve It?
from Eva Guru Blog
One of Amazon’s economically well-to-do factors is inventory management. Inventory management has the power to make or ruin a business. For FBA sellers, good inventory management has been shown to lower expenses, increase profitability, and boost company development. Healthy inventory management may also speed up the receipt and delivery of your products to customers. It entails effective inventory management, storage use, and generality. To keep track of all of these, you should utilize the Amazon Inventory Performance Index.
The Inventory Performance Index, or IPI, is a statistic between 0 and 1000 used to track inventory health and identify low and excess inventory levels for your SKUs by Amazon. The term “IPI” refers to a container for information. Additionally, stock hardware reflects what is being reported in terms of profitability increases.
The state of your inventory is determined by whether you have too few or too many units. Out-of-stock products and missed sales are the effects of having too few inventory units. Having too many pieces of inventory, on the other hand, leads to excessive holding and storage expenses.
Now that we know what the Amazon Inventory Performance Index is, let’s look at how to improve the IPI score and what factors influence your IPI score.
🚀 Amazon Inventory Performance Index Influencing Factors
The formula underlying Amazon’s Inventory Performance Index is kept a secret. However, they provide the most critical issues that impact your score, as well as suggestions for how to solve them.
The quantity of surplus inventory you have, your sell-through rate, the amount of stranded stock you have, and your in-stock inventory levels are all essential aspects to consider.
1. Excessive Inventory
Excess inventory is the most critical element that influences your IPI score. Remember that Amazon wants to be a fulfillment center, not a long-term storage facility. Thus, FBA items should travel rapidly from the warehouse floor to consumers’ doorsteps.
If the amount of FBA inventory exceeds a 90-day supply based on projected demand, Amazon considers the item to be “excess” or “overstock.” To avoid overstocking, you should keep a 30-day supply on hand. In the Inventory Dashboard, Amazon provides merchants a clear idea of product demand and refill suggestions.
If you have excess inventory, Amazon will tell you how many units are overstocked and offer suggestions on how to dispose of them.
However, when looking for surplus stocks, you should be aware of the following metrics:
“Excess Units” are products for which it is more cost-effective to remove them from stock or decrease their price than to pay for storage.
“Estimated Overall Storage Cost”: This figure depicts the total expenditures that would be generated if Amazon warehouses were left unattended for three years.
2. FBA Sell-Through Rate
This number is calculated by dividing the average stock rates at FBA warehouses over the last 90 days.
If Amazon finds that the sales rate is slow, it suggests ways to enhance performance. For example, it saves merchants money on long-term storage.
3. Stranded Inventory
Inventory that is not accessible for purchase due to a listing problem resulting in inventory without a corresponding current offer is referred to as stranded inventory. Amazon offers a “Fix listing” option that explains why your inventory is stranded and how to fix it.
4. In-Stock Inventory for Stocked Products
Amazon estimates how many popular goods they have in stock based on the sellers’ performance. Therefore, products with an upward tendency in sales can increase the score, even if it has no negative impact on the “IPI” score.
If the product to be sold is a limited-edition or one-time stock item, it can be designated as “non-Replenishable,” and the “IPI” score will not be affected.
🚀 How Can You Improve Your IPI Score?
For maintaining a good inventory performance, Amazon provides a few broad recommendations.
1. Increase Your Conversion Rate
Amazon prefers sellers to have a solid 90-day rolling sell-through rate, putting them in the “green” on the IPI graph. Visit the “Inventory Age” tab in your inventory dashboard to see the sell-through rate for each of your active goods. You’ll be able to sort by lowest sell-through goods and see tips for how to improve it.
Have a sale to promote conversions, advertise your items, fine-tune your keyword targeting approach, and use more attractive listing photos to increase your sell-through rate.
2. Consider Reducing Overstocking
This one is obvious: Amazon does not want to keep unsold items. To view ideas on dealing with surplus inventory, go to the “Manage excess inventory” tab in your inventory dashboard. Amazon may also suggest that you create an “Amazon Outlet” offer to sell overstocked swiftly or out-of-season items.
3. Take the Initiative When It Comes to Listing Problems
Take care of any stranded inventory or other listing difficulties that are stopping buyers from buying.
- You should check your stranded inventory percentage on a regular basis so you can address the problem before incurring more storage costs.
- It would help if you had a balance of sales and unsold goods on hand.
- Excess inventory should be avoided at all costs (above a 90-day supply, based on your sales forecast)
- You should maintain adequate inventory levels for your most popular goods (between 30-60 days of supply)
Check your inventory dashboard on a regular basis to make sure you’re on track. In order not to be enmeshed in either overstocking or out of stock, you should manage your inventory wisely. Indeed, it is not a soft berth to keep track of the inventory level of each item. For Amazon sellers, Eva is of great use in managing inventory and avoiding undesirable situations with her ‘Replenishment’ page.
4. Maintain a Strong Inventory!
Businesses that manage their inventories well are more likely to succeed. For example, suppose you’re a new Amazon seller and aren’t sure how much demand for your items will be. In that case, it’s a good idea to start with a situation where supplies aren’t exceptionally high until demand is determined but can be replenished fast if demand drops.
🚀 Final Thoughts
The Inventory Performance Index is a metric that evaluates how effective and efficient you are at managing your Amazon FBA inventory. Many elements can influence your Inventory Performance Index, but the most significant are the actions you take:
- Maintain a balanced inventory level of sales and existing goods while avoiding surplus inventory.
- Save money on long-term storage fees.
- Resolve any listing issues.
- Keep your most popular goods stocked in the appropriate quantities to fulfill consumer demand and optimize the customer experience.
The Inventory Performance Index measures your total inventory performance that considers both recent and long-term inventory performance. As a result, the measures you take to improve your inventory efficiency may take some time to show up in your Inventory Performance Index. This is because it was created to account for changes in your business that occur regularly or unexpectedly. Your Inventory Performance Index is therefore protected against short-term diffraction to your long-term performance. As a result, you’ll have more time to adapt to changing business conditions and better manage your inventory.
Do you want to boost your Amazon IPI score? If yes, Eva can help you. Eva is an Amazon management platform that helps the Amazon sellers not only manage their inventory more effectively but also simplify and expedite their Amazon journey in every sense. To learn more, please don’t hesitate to get in touch with one of our specialists and Start a free trial now!
