We’re reviewing Amazon inventory management strategies to improve your IPI score and increase your restock limits.
What is Your IPI Score and Why Does it Matter?
The Inventory Performance Index is a metric Amazon uses to gauge your inventory performance over time. You can track your IPI score on the Inventory Performance dashboard in Seller Central. Your IPI score is typically calculated weekly on Monday.
Amazon has stated that the metric is based on “how well you drive sales by stocking popular products and efficiently managing on-hand inventory”. IPI scores are calculated on a scale of 0 to 1000. Generally, a score below 500 indicates that your business is experiencing major inventory management issues that should be addressed in order to improve your score. A score above 500 indicates that you are on the right track, and the higher the IPI score the better. Why? One reason to improve your IPI score is to increase your storage limits. Your IPI score relates directly to the amount of warehouse storage space Amazon will allow you as an FBA seller.
How Storage Limits Affect You
If Amazon gives you a storage limit, you will no longer be able to create shipments for a storage type until your inventory drops below the limit for that storage type. If you send more inventory to the warehouse than your storage limit allows, Amazon may refuse your inventory. Also, inventory over the storage limits will be charged an Inventory Storage Overage Fee of $10 per cubic foot for the amount over your limit, along with any applicable monthly or long-term storage fees.
You can view your most up-to-date restock limits by storage type and maximum shipment quantity from the Inventory performance dashboard or Shipping Queue, by expanding your restock limits monitor at the bottom of the page. Amazon updates restock limits regularly, with new updates usually occurring weekly on Monday or Tuesday. After expanding your restock limits monitor, you can determine how much inventory you can send by reviewing your maximum shipment quantity by storage type.
How to Improve Your Inventory Performance Index (IPI) Score
Your IPI score is a reflection of how efficient and productive you are in managing your FBA inventory. There are multiple actions you can take as a seller to improve your IPI score…
- Improve Your Sell-Through Rate
Your sell-through rate is your units sold and shipped over the past 90 days divided by the average number of units on-hand in Amazon fulfillment centers during that time period. Improve your 90-day rolling sell-through rate by maintaining the right balance of inventory over the same time period. Only send in inventory that you can quickly sell and restock later. For example, send in a month’s supply of inventory that you can consistently replenish every 30 days.
- Reduce Excess Inventory
Maintain a balanced inventory level between sold and on-hand inventory and avoid overstock. Sell excess inventory as soon as possible! Do everything you can to make sure you don’t have stale inventory just sitting at Amazon’s warehouse taking up space for extended periods of time. Amazon expects sellers to either reduce their inventory relative to sales OR change the pricing strategy for inventory at their warehouses. Lower prices to get rid of inventory and remove any excess you’re not able to sell. Read our post on Amazon liquidation options to learn more about handling excess inventory.
- Fix Stranded Inventory
It is crucial that you fix all of your stranded inventory immediately. Keep tabs on your stranded inventory page daily and ensure your inventory is buyable by fixing listings that are stranded.
- Don’t Launch New Products Until You Have Enough Inventory
When launching new products on Amazon, improve your IPI by being aggressive in your launch strategy. Keep your sell-through rates high by driving external traffic to Amazon and running coupons.
- Prioritize Your Most Profitable and Best-Selling Products
In April, Amazon announced the removal of individual ASIN limits and instead enacted overall account ASIN limits. Now that it is an overall account level limit, sellers can decrease inventory levels for their least profitable and least popular products and increase it in other, most profitable, or best-selling products.
Get Assistance with Inventory Forecasting and Fulfillment Recommendations
Clients of Envision Horizons have access to our team of account analysts who have expertise in Amazon inventory management. Envision Horizons will provide FBA replenishment reports and when requested, will create forward-looking inventory demand planning reports. Our account analysts also create actionable plans to improve and maintain high IPI scores. The case study below outlines how Envision Horizons implemented various strategies to increase our client’s IPI score by 41 points in 3 months.
Amazon Inventory Management Software
If you don’t have an agency with a team of account analysts to make inventory recommendations, we suggest subscribing to software with Amazon inventory management tools. Our Amazon analytics and diagnostic platform, myHorizons, provides multiple tools to support you in taking control of your Amazon inventory strategy. Learn more about myHorizons inventory forecasting and inventory management tools by watching our video demo. Or, reach out to tristan@envisionhorizons.com to schedule your own personal myHorizons demo.
In Conclusion
Consider teaming up with an agency like Envision Horizons which can help you navigate the continuously changing eCommerce and Amazon space.
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